Graham converts to deregulation over 8-hour hearing

Sometimes legislative hearings are just theater, but sometimes they actually educate elected officials about complex issues. Monday’s hearing on Uber and other innovative taxi service models achieved the latter, especially for Ward 1 Councilmember Jim Graham.

Graham started out the 8-plus-hour hearing lamenting an “uneven playing field” between Uber, which can charge any prices and doesn’t have to use Taxicab Commission-mandated technology, and standard taxis, where regulation both limits their income and increases their costs.

At the start, Graham sounded like he wanted to impose taxi-style rules on Uber. By the end, he had come to a different realization: the solution could be to let current taxis enjoy the same freedoms Uber does today.

The question that councilmembers and regulators will have to grapple with now is how exactly to let existing taxis compete with Uber. Will existing companies have to buy whole new fleets of black cars, or can they upgrade their existing vehicles?

At the start of the hearing, Graham noted that these regulations have come about because residents want higher quality. He sparred with Uber CEO Travis Kalanick, arguing that Uber sets prices instead of drivers (Kalanick disagreed, saying it was the product of a negotiation, and if drivers didn’t like the prices, Uber wouldn’t have any drivers) or that the money will go to Los Angeles because that’s where Uber is based (Kalanick emphasized that most of the money goes to the drivers).

By the end of the hearing, though, Graham’s tune had changed. He didn’t stop believing that there was an uneven playing field, and he’s right — there is. But after a lot of very happy Uber drivers testified at the hearing, he concluded that letting more companies play on the Uber side of the field is the best approach.

It is. Many of the burdensome regulations are there to push higher quality, but Uber proved that higher quality can come from competition instead, at least when customers can voluntarily choose which taxi company to patronize.

How would that work? The Taxi Commission wants to create a new “S class” license for “sedans,” or black cars, which drivers can get and then operate under an Uber-style model. Meanwhile, there will still be standard taxis you can hail on the street. Furthermore, apps like Taxi Magic (working in DC today) and Hailo (which plans to come to DC soon) let riders request a standard taxi using an app.

What’s the difference between a sedan and a taxi?

Councilmember Mary Cheh (ward 3), who chaired the hearing, focused on a key question. You have Hailo to request a regular taxi, and Uber to request a “premium” car, but what’s the difference, really? How could one set of cars have to operate under one set of taxi-style regulations, and the other under Uber-style, when both sets of cars respond to riders who request them through smartphone apps:

I suggested one option: Let all cabs run in Uber mode when picking up app-based hails. DC could deregulate rates even for dispatch calls like Hailo. Apps that let you request a taxi could also know what rates various cab companies charge; they would have to publish their rates in some standard format. A rider could pick a cab based on a combination of which one’s closest, what their rates are, how many stars it got, and your prior experience with that company.

That could be somewhat complicated, however. Existing taxi apps don’t work this way, and the Hailo CEO wasn’t really into that approach. For one thing, Hailo doesn’t know your destination in advance, so it couldn’t easily estimate your fare under different pricing schemes.

Right now, Uber doesn’t know the destination either, but Kalanick said they’re working on adding that. Doing so would help riders a lot. Councilmember Muriel Bowser (ward 4) said she tried taking Uber downtown from her home, but “surge pricing” was in effect. It only told her that everything would cost 1.5 times as much, but not what that would mean for her total bill.

Taxicab Commissioner Ron Linton suggested a simpler difference between sedans and cabs. If you have an account with the company and it has your credit card on file, and when you request a trip it gives you the full fare in advance, then it can be a sedan trip; if not, it’s a taxi trip.

Under this system, Yellow Cab could conceivably create Yellow Cab Premium, sign up some customers with accounts, get their credit cards, let them text message to reserve a car, and charge whatever rate they want. If their quality is good, people will probably use their service.

Can the same vehicle be a sedan and a taxi?

But are sedans and taxis two totally separate sets of vehicles? The current regulations require that all sedans be painted black, while all taxis will soon have to be a standard color. (Linton said that the commission will create and release 3 options for color and livery to get public comment, but he doesn’t yet know what those options will be.)

This means that the hypothetical Yellow Cab Premium would have to buy a whole new fleet of different cars. Shouldn’t we allow existing taxi fleets to compete with Uber? It would be great if Yellow Cab had an incentive to announce one day that they are going to spruce up the interiors of many of their cars, and anyone who signs up for Yellow Cab Premium will only ride in one of the top-condition cars with drivers who get good customer service ratings. Basically, the value proposition is, pay a little more, be guaranteed of getting one of DC’s best taxi drivers and none of the worst.

This has value for all riders. Not only would there be higher-quality black cabs with higher-quality drivers, but pressure for existing drivers to offer good service and maintain their cars well. If that happens, even people who hail cabs on the street would benefit. On the other hand, if only completely separate fleets can make more money, there could be a trend toward the best drivers leaving the classic taxi market. There would then be fewer, and worse, cars available for street hails.

If companies can use existing cabs as sedans, then what is the difference between Hailo’s app and Yellow Cab Premium’s? If you request a car on Hailo, the driver makes a little less money just because Hailo doesn’t know your destination? Maybe that will just lead Hailo to add Yellow Cab Premium as an option on their app. That gets us back to my original suggestion after all.

Regulations will get better

Linton agreed at the hearing that some of the proposed regulations will change. For example, he seems to have agreed with my argument that the requirement to have a local place of business, with “office furniture” and a receptionist during business hours, is silly. Instead, he said, they will just require the company to have a registered agent, so that official documents, court summons, and so on can be served to them. That’s a common requirement for any company and totally reasonable.

Cheh asked if some more information about fuel efficiency could go on the Taxicab Commission’s website, and Linton replied that they are only allowed limited web space. Cheh replied, “Well, that’s not very persuasive.” A few funny Twitter jokes about the Internet running out of room aside, this isn’t the first time we’ve heard of limits OCTO, which runs the DC government websites, places on agencies, perhaps not with the best results.

The Taxicab Commission will revise their regulations, and it seems likely that they will end up at a place which doesn’t unnecessarily burden Uber. Uber might have to start telling riders the fare ahead of time, which isn’t unreasonable or that difficult, and they will have to ensure that a DC-to-DC trip uses a DC-licensed vehicle instead of a Virginia one, which also isn’t unreasonable.

But they’ll be able to keep operating, and most of all, other companies including existing drivers will be able to compete with Uber on the same terms. That would be the best outcome for riders.