The Uber war is over — Uber won
In the bitter war over transportation for hire, victory for Uber is in sight.
On Sunday, the Legislature voted to legitimize Uber and Lyft, another Bay Area upstart, over the objections of locally owned, existentially threatened taxi firms. The bill didn’t require that ride-hailing drivers be fingerprinted, didn’t prohibit them from picking up passengers at Logan Airport, and didn’t allow individual cities to impose more stringent rules on them. The bill was a rout, and Governor Charlie Baker’s office announced Thursday that he’ll sign it.
Meanwhile, on Tuesday, Boston cab magnate Edward Tutunjian pleaded guilty to federal tax and fraud charges. The Globe later reported that Boston police let Tutunjian give his wife 362 (!) medallions, yet again exposing the unseemly coziness between taxi bigwigs and their regulators — which is what screwed up the cab industry so badly to begin with.
The final skirmishes aren’t yet over. There’s still federal litigation. But after this climactic week, there’s no going back to the prewar status quo. Uber’s impending victory has major implications for politics, transportation, and the new economy. Here are some of them:
Fake altruism has its limits. Interest groups always feign concern about the general public’s well-being. But even with Boston Police Commissioner William Evans on their side, the taxi industry couldn’t persuade lawmakers of the need to collect fingerprints from Uber drivers. Such a rule would slow the company down but can’t be essential to passenger safety. After all these years, Boston only started fingerprinting cabbies in February, just as the legislative battle intensified.
Marty Walsh lucked out. This issue pitted younger Bostonians, an Uber-friendly demographic that the mayor has tried to cultivate, against the city’s taxi drivers, a natural constituency for a labor-friendly politician. Walsh hung back and let events play out. He’ll be lucky if a state law takes the matter out of his hands.
Behold the emerging postwar landscape. The advent of cheap, quick private transportation for people who don’t own cars could change where new housing gets built and new businesses pop up. Suddenly, “B-minus locations,” as restaurant consultant Ed Doyle puts it, look more appealing. Until now, it would have been crazy to base a major investment decision on the availability of Uber and Lyft, because who knew whether they’d even be legal in a few years? The Legislature sent a signal: Invest away.
Bratty disruptors should grow up. If they’re an accepted part of the transportation system, ride-hailing companies need to answer for whether they treat drivers fairly and serve disabled customers well. Legal status carries costs that, one way or another, will be priced into fares.
Compromises are weird. The bill includes a temporary 20-cent surcharge for every Uber or Lyft ride, of which 15 cents would pay for state and local transportation improvements. To help legislators feel better about stiffing the cab industry, the remaining 5 cents will generate money to help taxi firms adapt. This is bizarre: It won’t raise much money for aggrieved cabbies, and it made the bill a harder sell to Baker, who’s “pretty much” ruled out raising taxes or fees. By vetoing the bill over the surcharge, though, he could have reopened the entire issue, extending the uncertainty around the kind of free-market innovation that a Republican governor ought to like. If the people at Uber could roll their eyes and accept the fee, so could Baker.
The taxi industry needs a new business model. Some people still don’t like getting in strangers’ cars, so there remains a distinct niche for full-time, well-marked taxis that can pick up street hails. It’s the $700,000 medallion that made the industry uncompetitive. Uber popped that bubble, giving taxi diehards a chance to create a more equitable system.
Cabs are a cautionary tale. If the ongoing plunge in medallion values hurts big taxi companies such as Tutunjian’s, or banks that make medallion loans, who cares? But individual owner-operators suffer, too. Representative Aaron Michlewitz,the House’s point person on the Uber bill, says lawmakers looked into measures such as a medallion buyback, but that could cost tens of millions of dollars or more. “Who would pay for that?” he says.
Lawmakers deserve credit for not holding innovation hostage to prop up failed regulatory schemes. Still, there are other areas, such as liquor licenses, in which an artificial shortage of licenses distorts the market. The plight of taxi medallion holders offers a lesson to others: Submitting to incremental reforms over time is better than being caught by surprise and then wiped out.