In his latest Globe and Mail column, MLI’s Managing Director Brian Lee Crowley talks about why new technology will grant city dwellers relief from poor taxi service and escalating prices. Crowley discusses the way new ride-sharing apps will revolutionize transport options in Canada’s cities, regardless of the objections of the antediluvian taxi industry and its regulators.

Trip-sharing is giving cabs a rough ride

Brian Lee Crowley, Special to the Globe and Mail, January 25, 2013

Canada’s taxi industry enriches a tiny minority, exploits drivers and provides expensive and spotty services for many people highly dependent on cabs, such as women and the poor. It increases the rate of car ownership, as people who might otherwise rely on cabs find poor availability and high fares work against them. Finally, it prevents us getting full value from the millions of privately owned cars on the road. Fortunately, help is on the way.

That help is not coming from regulators. The kings of the taxi industry – those few lucky enough to hold the much-coveted taxi licences issued in inadequate numbers by municipal authorities – are far too effective a lobby for that. Relief will come from technology allowing willing riders and drivers to connect outside the control of local regulators. It can’t happen soon enough.

Most people’s thinking about the taxi industry stops at wondering whether they can catch a cab as they step into the street. In fact, it is a vital way of getting around, especially in big cities. It is also of particular value to the poor – who cannot afford cars and for whom public transit is often inadequate – and to women, who rely on it to provide safe door-to-door transport in risky areas and at night.

Many city dwellers know it would be cheaper for them to rely on cabs plus the occasional car rental than it would be to own a car and pay all the costs, including parking, insurance, licence, fuel and maintenance, for a vehicle they hardly use.

But all these benefits depend on cabs actually being available and at a reasonable cost. The theoretical benefits of cabs are useless if you can never find one when you need it. Surveys in city after city show that people wait too long or can’t get cabs at all. Yet one recent university study showed that taxi fares in Winnipeg, to pick just one example, have been rising faster than the actual costs of operating a cab for years.

Service levels are poor and prices high because we don’t allow supply and demand to determine the number of cabs. Wider availability and lower costs for consumers appear to count for nothing compared to the benefit to the taxi industry of keeping out competitors.

In this they are aided and abetted by local governments that use countless improbable justifications to defend a system that issues far too few licences. Otherwise, why would a taxi permit that the City of Vancouver issues for a few hundred dollars trade on the open market for about $800,000? Because that is the value of having protected and therefore highly profitable access to a captive market.

Craven municipal politicians, however, are already being elbowed aside in major U.S. cities by technology that allows taxi clients to be matched directly and immediately to willing drivers through their mobile phones. These ride-sharing services, like Lyft, Sidecar and Uber, ensure their drivers undergo suitable background checks and have the same level of insurance as taxis. The fees vary widely.

In Uber’s case, fares are determined by time and distance and can cost more than a standard cab for a ride in a luxury vehicle. Lyft, which bills itself as a peer-to-peer ride-sharing service, recommends passengers make a donation based on the length of the journey.

As always when new technology threatens a cozy arrangement that exploits consumers for the benefit of incumbent suppliers and politicians, the industry and its regulators are outraged. Cease-and-desist letters are flying in cities such as Los Angeles and New York, but these new services may not fall under their regulatory control. Moreover the new services have powerful friends. Not only have progressive municipalities like Cambridge, Mass., approved them, but some state agencies and Washington’s Federal Trade Commission have given these powerful new competitors their regulatory seal of approval, pointing out that increased competition in the industry can only benefit consumers.

Here in Canada, services like Uber and Live Rides are still rather embryonic, but will swiftly catch up if they help provide the level of service that consumers have been looking for but have been denied by collusion between incumbents and regulators.

A side benefit would be to increase the ability of the existing fleet of cars to move more people, as the cost of matching cars to riders falls to zero.

Statistic Canada’s recent report on commuting in Canada showed that public transit’s entire recent increase in ridership was achieved through a fall in multi-passenger car trips (the number of car trips rose, but the number of people in each car fell). It would be cheaper and more effective to sweep away the barriers to people efficiently sharing the privately financed cars that move every day on our roads.

In the meantime, would you like me to call you a cab? Didn’t think so.

Brian Lee Crowley is the managing director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa.