Can Taxis Compete With Uber? Overhaul Of D.C. Cabs On The Way

Modernization completed just three years ago already viewed as antiquated

By: Martin Di Caro

September 26, 2016

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Changes are coming to all of Washington’s taxicabs under sweeping new regulations overhauling the meter and payment systems used by the assortment of cab companies and independent drivers who account for some 7,500 taxis.

 

The regulations, issued by the Department of For-Hire Vehicles in an emergency rule-making, strip away many costly regulations while giving consumers the kinds of amenities now taken for granted in a vehicle-for-hire industry increasingly dominated by popular ride-hailing apps Uber and Lyft.

 

“There has been a continuous decline in total monthly taxicab rides — month after month for the past 12 months — without interruption. Driver revenue continues to fall. At the current rate, the Department projects that 2016 will show a 13 percent decline in annual taxicab rides,” according to a 22-page report on the state of the industry. Washington taxis pick up about 16 million passengers annually.

 

The transition to the all-digital meter system must be completed by Aug. 31, 2017. Although the physical meters now affixed to dashboards are going away, the current pricing structure will remain the same: $3.25 base fare, $.25 surcharge, and $2.16/mile. But cab companies for the first time will be allowed to charge lower rates in the form of discounts on the existing street hail rates. No surge pricing at times of high demand will be allowed.

 

“The taxi market needs a jolt. It needs to be revamped, and we are going to help make that happen,” says Ernest Chrappah, the department’s acting director.

Another overhaul on the way

 

Oct. 1 will mark three years since all Washington taxicabs were required to offer a credit card payment option to customers, one of several changes that was included in legislation designed to “modernize” the city’s fleet and repair its poor reputation.

 

“In 2012, the District’s taxicab fleet had a well-deserved reputation for poor service, dirty vehicles, a lack of payment options, and a disregard for regulatory requirements,” the department’s report says.

 

But the modernization effort was deeply unpopular with both companies and independent drivers who were forced to purchase expensive meters, dome lights, and adopt the fleet’s new color scheme, red and gray.

 

And chaos befell the transition to credit card payments, with disparate tech companies competing for a finite number of backseat consoles. The result has been a lack of competition (only six companies are left processing credit card swipes across the entire fleet), with long contracts and high fees for taxi companies and their drivers, the report says.

 

“Through an attached card reader, a smartphone app can perform [meter] functions at a fraction of the cost per swipe, while creating open-ended space for innovation,” the report says.

 

Even today, the quality of credit card payment machines varies from cab to cab. The new regulations issued by Chrappah will do away with the current hardware systems in favor of an all-digital platform.

 

“There’s no future for antiquated equipment in the District of Columbia,” Chrappah says.

 

Passengers will still be able to hail a cab on the street and pay cash, but by the time the new regulations take full effect, passengers will also be able to e-hail a taxi through a number of cheap apps, pay their fares with a saved credit card number or other digital device, and have the receipt texted or emailed.

 

“You would be able to pay using Apple Pay, Samsung Pay, whatever digital payment method works for you, you will get into a licensed taxicab and it is guaranteed to work,” says Chrappah.

Lessening the burden on drivers

 

Umoh Ekott has been driving a cab in Washington for 20 years, but he is thinking of giving it up.

 

“Sometimes you just have to make a change if something is not working out as you thought it would,” says the father of three during a ride up Connecticut Avenue NW.

 

Ekott blames competition from Uber and Lyft for draining away “40 to 50 percent” of his income, but his costs remain just as high.

 

His meter and credit card system cost $500, he says. The dome light — patented by the District and manufactured by just two businesses — cost $700. His weekly vehicle rental fee is about $200, and he pays multiple fees for credit card processing.

 

“Ubers are not regulated. So a lot of cab drivers, they jump up to Uber,” he says in a dejected voice.

 

Under the new rules, the patented dome lights that cost from $400 to $700 will be replaced by a $20 version. “The Department believes it should be able exercise its administrative authority to approve any cruising light that meets the legislative requirements,” the report says.

 

Drivers will welcome a reduction in costs, says Royale Simms, an attorney with the Teamsters Union which represents more than 2,000 independent cabbies.

 

“So it is more like getting back to regular business where taxi drivers can determine what equipment they have and how they generate income, more than having regulations prescribed on them that in a lot of cases were unnecessary,” Simms says.

 

Chrappah’s report cites research by free market economists at George Mason University. In a report published in July, the economists said the regulatory burden hurts both drivers and passengers, preventing the industry from competing with Uber and Lyft.

 

“Under the new rules, taxis can use cheap, smartphone-powered apps instead of these antiquated meter systems,” says economist Matthew Mitchell, a proponent of deregulation.

 

“The department is giving away its own app but also in order to spur innovation in the app market, they are allowing drivers to use other apps that can be developed as well,” Mitchell says.

 

The new regulations may give a boost to the D.C. Taxi app, which has seen limited use and remains in public beta.

Not everyone is pleased

 

David Miller, the chief executive of the D.C.-based software firm Hitch, stands to lose a lot under the new rules.

 

“My primary concern is this is a typical example of governmental overreach,” Miller says.

 

Hitch software can be found in the backseats of about 2,000 taxicabs, but his company does not fit into the Department of For-Hire Vehicles’ plans to do away with the current payment structure in favor of “digital taxicab solutions (DTS)… an open architecture system combining a state-of-the-art digital taximeter with the DC TaxiApp and as many other e-hail apps as the DTS provider chooses to integrate,” the report says.

 

In short, outside tech firms such as Hitch are being pushed out as the department shifts “the responsibility for providing systems to taxicab companies, taxicab associations, and, once it is fully operational,” a co-op of local cab companies.

 

“This is government trying to manipulate the market,” says Miller, who disagrees with the department’s contention that the new rules will make things easier.

 

“In the end it is going to result in higher costs for drivers as well as complicated efforts of visitors and residents of the city simply trying to pay for cab rides,” he says.

 

Others are raising questions about process. The “emergency” nature of the new regulations meant they were issued with minimal public input, says D.C. Council member Mary Cheh, who chairs the transportation committee.

 

“I would prefer a system that was more open and inclusive of the people who are being regulated,” says Cheh, who was behind the 2012 legislation to modernize the taxi fleet after her office produced a survey showing widespread public dissatisfaction with cabs.

 

“Some of the ideas Mr. Chrappah has are very good ideas and probable ones we would want to embrace fully, but there is also something to having a process and getting buy-in from people,” Cheh says.

 

Simms, the Teamsters lawyer, echoes those concerns. “There is a need for more input from taxi drivers,” he says.

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