Toronto is right about Uber, wrong about regulating it

If we regulated taxis for valid reasons, we may regulate differently.

This is Part 2 of a 2 part series.  Read Part 1 here.

Before it tries to untangle Toronto’s chaotic taxicab industry, City Council would be smart to consider why it regulates the industry in the first place.  The industry has accumulated a morass of regulation designed to achieve various and sundry objectives.  Some of the regulations serve valid purposes.  Some don't.  Determining which is which, is impossible unless you know what the purpose is.  That should be Council's first task.  The rest will be easier as a result.

For example, I would argue these are some good reasons to regulate the taxi industry (or any other activity):

  • To ensure public safety.  To reduce the risk of accidents, injuries, criminal activity etc. to passengers, pedestrians, taxi drivers and other drivers.
  • To protect the city’s reputation. To ensure the Toronto taxi experience reflects well on Toronto as a global city attractive to visitors, investors and residents.
  • To achieve the city’s strategic/public policy goals.  To encourage people to use taxis for “last mile” access to/from the public rapid transit system, to help reduce private vehicle traffic, etc.  For this to work, the city would want to ensure there are enough cabs to meet demand in a timely manner – and to affect pricing to encourage customer adoption.

There are likely other valid reasons, such as revenue generation for example (but that's kind of illegal apparently) or accessibility for people with disabilities, etc.  However, I'll focus on three.

Protecting Public Safety

I think there's a fair role for government to put in place reasonable regulations to improve public safety.  So, I think it makes sense to regulate who can drive a cab: dangerous people should not be allowed to drive taxis.  Drivers should know how to operate and navigate their vehicles safely, and they should do so.  Vehicles should be in good repair so failures are unlikely and don't put passengers or others at risk, etc.  Regulations that address these purposes make sense to me.

Protecting the City's Reputation

Dirty cabs, rude cabbies who can't find the address you're looking for, drivers who run up your fare, etc. leave a bad taste in your mouth wherever you find them.  You shouldn't ever find them in Toronto.  So, I think it makes sense to regulate some of the key conditions of the customer experience.  Drivers should know how to find key landmarks, tourist destinations, hotels, hospitals, etc.  Vehicles (which should be in good repair for public safety reasons) should be clean.  Reasonable regulations that address these considerations make sense to me.

Achieving public policy goals

Toronto has a backbone rapid transit system in its subway lines and anyone whose trip begins and ends at or near a subway station will naturally choose the subway because it's convenient, fast, reliable, affordable and reasonably comfortable.  The further their starting or ending point is from a station, the less attractive the public transit choice is – particularly in bad weather.  Taxis could be part of the transportation ecosystem to increase the "catchment area" around subway stations, except that they are prohibitively expensive.  One public policy goal could be to encourage low taxi fares as an incentive to use cabs to access rapid transit.  Another public policy goal could be to ensure there are always enough taxis conveniently available for people so they can rely on taxis as a personal transportation alternative to private cars.  Reasonable regulations designed to achieve these objectives by controlling the number of taxis on streets, what hours they can/must operate, where they may pick up rides, etc. make sense.

Do current regulations meet these objectives?

Many of Toronto's current taxi regulations meet the "why regulate?" test.  Others, though, do not.  None of the three reasons I've outlined explains why the city currently regulates who can and cannot "dispatch" or "broker" cab rides.  So, why then is this practice regulated?

Drivers and vehicles are directly regulated by the city, meeting its safety, reputational and public policy goals.  What is the public safety, reputational or policy argument for regulating brokerages as well?  I can't see one.  So, why do it?

What value do brokerages provide the consumer?  Not long ago, there were only two ways to hail a taxi:  by flagging one down on the street, or by calling a broker who would dispatch the closest available cab to your location by radio. In fact, the brokerage may provide little more than a phone number to call to get access to a ride.  But, every cabbie now has a phone in her pocket.  You could call the driver yourself – but that would be inefficient.  Enter technology.

Although they vehemently deny it, there is no doubt in my mind that Uber and similar companies are de facto  brokers; they broker rides between consumers and drivers – just as traditional brokerages such as Beck's, Diamond, Co-Op, etc. do.  Uber, however, does it faster, cheaper and with less overhead.  This has the potential to strip out a layer of middle men and leave more money in the pockets of both consumers and drivers.

The City of Toronto is absolutely right when it argues Uber is a taxi brokerage, essentially like every other.  But there is no evident reason for the City to be in the business of regulating taxi brokerages in the first place.