Thoughts on Taxis, Flat-Rate For-Hires and App-Based Car Services

The intensity of the debate about regulations for taxis, flat-rate for-hire vehicles and app-based services like UberX and Lyft has been rivalled only by its complexity. With a meeting this morning on this issue, and a final vote coming soon, I wanted to share my position in more detail.

Let’s start with the basic question that many have asked: why regulate this industry at all? Why not just let the free market take control?

Through regulation, the taxi industry provides transportation options to users who may not be well served by the free market. This population includes those in wheelchairs, individuals without smartphones or credit cards, or fixed-income folks who want to take a short trip, like a quick trip to the neighborhood grocery store. It makes sense to provide mobility options for these groups—many of whom are from traditionally marginalized populations—through the city government’s regulatory authority. And, in order to service these passengers, the City has an obligation to ensure that the taxi industry is economically viable.

One of the ways we ensure a quality level of service to all taxi customers is to vigorously protect the taxis’ right to the “walk-up” market, which includes street hails and taxi stands. The walk-up market accounts for approximately two-thirds of taxi revenues. While taxis may face competition in the dispatch market from app-based Transportation Network Companies (TNCs), such as Uber, I believe they will be able to weather this competition because their financial foundation is in the protected walk-up market. In fact, local taxi industry gross revenue has increased the past couple years despite the burgeoning TNC presence. I’m also confident taxis can use their entrepreneurial spirit to adapt to the latest technologies and further protect their financial base.

We’ve learned from history that it makes sense to regulate and cap supply in the “walk-up” market.

At the same time, we know we face a supply problem in the dispatch market as there are data and anecdotes about long waits for taxis, or taxis that never arrive. The walk-up market needs caps on supply, the dispatch market needs more supply. This distinction makes a strong case for regulating the two differently.

Moreover, the TNCs have quickly changed what’s possible in the dispatch market and have done so with much higher customer satisfaction rates, according to a City-sponsored survey.

Make no mistake, the TNCs have done so to-date by ignoring and violating City laws. This sets a dangerous precedent and is a lesson for the executive branch of City government to address these issues as soon as they emerge. The story reported in the Seattle Times about one group being discouraged to use an app simply because they asked permission—when subsequently others are left to operate at will—is disturbing.

That being said, the question before the Council today is what to do now. What is the appropriate policy approach for the City as regulators of this industry? Owners and drivers of myriad backgrounds now depend on income from their taxis, their flat-rate for-hire vehicles, their TNC vehicles or some combination of the three.

Given the market dynamics discussed above, I favor removing limits on vehicles and drivers in the dispatch market for the two-year pilot program being proposed. If the majority of my colleagues favor a cap, I could support Councilmember Clark’s amendment to raise the current limit of 300 to 600 private vehicles available for TNCs.

This does not mean we deregulate. We require sufficient vehicle inspections and driver licensing to ensure customer safety. TNC companies must file their rate structure with the City and provide insurance to drivers whenever they are logged into their system cruising for passengers. This is not an insignificant requirement.

The Council acted this morning to eliminate the proposed 16-hour limitation on TNC drivers by choosing not to segment drivers between part-time and full-time licenses. No matter how much time they spend on the road, we will have the same standards for safety and driver quality. All for-hire drivers will be treated the same: same licensing, same training, same insurance requirements.

I understand the City’s current licensing standards, which include a two-day course, may prove too burdensome for some drivers. The City will look for ways to streamline this process moving forward, but when you’re making a living behind the wheel, safety must come first. All drivers must get a for-hire driver’s license; those who want to drive their own vehicle for a TNC would have an extra vehicle endorsement on this license.

For current taxi drivers, we should increase the number of licensed taxicabs that can operate in Seattle. This will give an opportunity for those drivers who have paid to lease taxis from others to finally be their own boss.

There is also the issue of the nearly 200 flat-rate, for-hire vehicle licenses. These vehicles and their drivers live in limbo between taxis and the TNCs, not fully one or the other.  As we continue to work on the broader regulatory structure for this realm, we should look at phasing this category of license out in such a way that protects those who have already invested their livelihoods in these licenses.

Finally, I proposed an amendment this morning that provides for more specificity about what we will be measuring in this pilot period. We should be clear at the front end what data we need to craft a transportation system for the long-term.

At the end of the day, I do not believe this is a zero-sum game. The more transportation services like these we make available, the more people able and willing to live without their own car, and the more business for everyone in this market. That’s good for affordability, for the environment, and for reducing congestion in our neighborhoods.