Uber, Lyft force soul-searching about regulation
Commuters, tourists, and restaurant-goers may not notice municipal borders, but local taxi regulators certainly do. Every Massachusetts municipality has its own rules. And the downside of splitting the state up into 351 taxi fiefdoms reveals itself in the streets every day.
Long before car-hailing apps came to town, Boston cabbies were fretting over out-of-town cabs illegally picking up fares. A Cambridge driver who brings passengers through traffic-choked streets to dinner in downtown Boston gets the benefit of a long ride with the meter running — but can’t pick up a street hail on the way back. Meanwhile, if a taxi company in Salem also wants to do business in two neighboring towns, it has to get its cabs inspected and licensed three times.
Recently, Governor Charlie Baker, with the support of mayors Marty Walsh of Boston and Joe Curtatone of Somerville, proposed a law under which car-hailing apps such as Uber and Lyft would be regulated primarily by the state, not by local governments. An obvious question arises: Why not regulate traditional cabs in a similar way?
Uber, Lyft, and similar apps are getting lots of press for the chaos they’ve visited upon the taxi industry, and for the near-cultic enthusiasm they inspire among users and investors. But their insurgent business models also raise deeper questions about how government should respond to the pressures of an accelerated era. The advent of so-called transportation network companies challenges an entire philosophy of regulation in Massachusetts, where a “better safe than sorry” ethos prevails and the prerogatives of cities and towns are sacrosanct.
“We’re not sympathetic to the idea that these companies will come in and say, ‘[We’re] not a taxi service, and now you have to build a much lighter regulatory system around us because we’re already here,’ ” says Massachusetts Municipal Association executive director Geoff Beckwith, the state’s most visible advocate for local governments.
Decades ago, when local taxi rules were first being written, the industry benefited from some micromanagement from cities and towns. Municipal governments might have been in a better position than anyone else to estimate how many taxis a community needed. A fixed rate schedule might have been necessary to keep customers from being fleeced.
But these aren’t unchanging laws of nature. They’re testable propositions — ones that, even if true in the past, may prove false over time.
Today, for instance, Boston’s decision to limit the number of cab licenses, or medallions, to 1,825 looks more like force of habit than an honest assessment of consumer demand on a rainy Saturday night. At moments when Boston needs thousands of additional cars, Uber’s complex variable-pricing algorithm does a better job of getting the right number of cars on the road than any local regulation. Baker’s legislation implicitly accepts this; it would require that transportation network companies be forthcoming about their pricing systems at the beginning of a ride, but the bill doesn’t ban surge pricing.
Much of the pushback against Uber and Lyft comes from indignation at how they barged into the marketplace without asking first and have persuaded Baker and others to accommodate them. “If the rules don’t fit your model, you basically petition for a change, then you enter the market,” says Stephen Regan, spokesman for the Massachusetts Regional Taxi Advocacy group. To some ears, Uber’s assault on the taxi industry echoes one of the defining narratives of our times: Billion-dollar corporations outmaneuver established local businesses, cart off money by the bucketload, and leave lots of uncertainty behind.
Yet shoring up city-by-city taxi rules isn’t the way to fight that battle. In Boston, existing rules enshrine inequality rather than preventing it. The city’s stiff taxi rates were designed to account for the price of taxi medallions, not just to cover the actual cost of operating a cab. This system put the squeeze on consumers and left slim margins for taxi drivers, even as a medallion became a surefire investment for anyone with $700,000 to spare.
With the value of medallions now falling, there’s an opportunity to streamline decades-old rules, experiment with new forms of taxi ownership, and let taxis from communities across the Boston area operate freely across the area. Regionwide or statewide regulation, along with a cheaper rate structure, would make traditional taxis more competitive.
Conversely, if Uber and Lyft become a permanent part of the transportation system, they’ll have to take on the associated costs and responsibilities. By some accounts, the companies may need to pay higher rates to retain drivers. They’re subject to litigation about the employment status of those drivers. New state regulators should and will demand that the companies help achieve broader social goals, such as ensuring reliable transportation for disabled passengers.
Baker’s bill doesn’t preclude communities from imposing stiffer regulations on Uber and Lyft than the state does, and some surely will. But a little soul-searching might push local governments in a different direction — toward a realization that changes in technology have blown past age-old rules, and that there are some jobs that individual cities and towns no longer need to do.