Tag Archives: Taxicab Commission

Asymmetric Information and Taxicabs

Under traditional taxi service models, consumers are at an informational disadvantage when hailing a cab. Since they can see the cab only from the outside as it screeches to a halt, people can’t tell whether the inside is clean, whether the driver is well-kempt, whether he will drive safely or whether the price is reasonable.

So, the argument goes, government regulators like the D.C. Taxicab Commission can solve the problem by establishing uniform codes of conduct and by pre-screening drivers for the consumers’ benefit. To this end, the commission establishes detailed cost and quality regulations, mandating everything from the per-mile fare that cabs may charge to the appropriate shade of carmine (or is it chestnut?) with which to paint cabs. Ideally, these rules make sure that cabs and their drivers meet the highest standards of quality and customer service.

Taxi

One company has found a way to solve this asymmetric information problem without government regulation. How have regulators reacted?

You can read the rest of my piece in the Washington Times to find out.

D.C. tries again to protect taxi industry from competition

Last year, the D.C. City Council threatened to impose regulations that would have effectively barred Uber, the popular sedan-hailing car company, from the D.C. market. In a surprising show of candor, the proposed legislation admitted that the goal was to ensure that the politically powerful taxi lobby didn’t lose any business. Public reaction was swift and negative and the council eventually relented, letting Uber into the market.

While many were celebrating, I played the part of the skeptic, noting that Uber’s gain seemed to have come at the expense of other start-up transportation companies. Writing in the Washington Examiner, I noted:

But when you dig into the legislation, it appears that the council earned Uber’s praise by — you guessed it — finding a way to privilege Uber. That’s because the legislation mandates that “public vehicles-for-hire using a digital dispatch service shall be licensed.”

As tech reporter Ryan Lawler points out, the licensing requirement erects a barrier to entry for other businesses. SideCar, for example, is a West Coast service that, according to its website, “instantly connects people with extra space in their cars with those who need to get from one place to another.” It is, they say, “like a quick and hassle-free carpool.” Since these instant carpoolers are obviously not licensed, they’d be illegal in DC. That’s handy for Uber. The company managed to cross the regulatory velvet rope and, alongside taxis, obtain access to a lucrative market. But once inside, Uber put the rope back up.

I’m sorry to say that my skepticism was warranted. This morning, WAMU’s Martin Di Caro reported:

The commission that regulates all vehicle-for-hire services in the District of Columbia once again finds itself at odds with a tech start-up.  After battling the sedan service Uber in 2012 before creating a sedan class license to allow the company to operate legally in the District, the Taxicab Commission has notified SideCar management that its drivers may not pick up passengers in D.C. without the proper licenses and vehicle tags.

“Individuals who join this rideshare operation must be licensed taxicab or limousine drivers in the District of Columbia and must have vehicles that have L tags,” said Commission Chairman Ron Linton.

You can listen to the full story here.