SNN: The Taxi Wars

Somerville, Mass. – New, relatively unregulated “ride sharing” transportation companies like Uber and Lyft earn the praise of travelers but are prompting protests from traditional taxi drivers and others.

Across the country, and the world, the media, public officials and others are discussing how to regulate the multi-million dollar industry. Some places – like Germany – have banned the service altogether. In Somerville and the Greater Boston Area, discussions are underway, but so far no regulations, much less bans, have been announced.

In Somerville, Mayor Joseph A. Curtatone likes and has used the services, City Hall reports, but also wants to make sure local taxis aren’t put out of business.

“He’s a staunch supporter of innovation and he’s a strong advocate for entrepreneurs and new businesses that are creating new models and new jobs,” Denise Taylor, director of Communications and Community Engagement for the City of Somerville, told Somerville Neighborhood News (SNN). “Uber is no different. The Mayor loves Uber and Lyft. He’s used both services himself. But he’s also relied for a long time on our traditional taxi services so he understands and believes strongly that we need to find a solution that will both allow new businesses to enter the market while making sure that our long-time businesses aren’t put at some kind of disadvantage.”

Taxi drivers and companies point to a lot of what they consider big disadvantages, for both drivers and customers.

“There are a lot of regulations that these apps just don’t follow,” Bill Horan, the general manager of Somerville’s Green and Yellow Cab, told SNN. “The real problem is that they’re essentially illegal. By the letter of the law, or ordinance or state law, whatever it is, they are breaking the law and there’s zero enforcement.”

A better term might be “extra-legal.” The traditional taxi or hackney industry is regulated by scores of laws, rules and regulations at the state and city levels, with paperwork and regular police inspections. And in most cities or towns, the number of taxies allowed on the road is limited.

But not the new industry, which is actually a more of a service, since the companies basically connect people needing transportation with drivers via a mobile phone app.

Critics note that ride-sharing company drivers and vehicles are not scrutinized by the same background checks that investigate taxi drivers, and that the insurance coverage for drivers and passengers is insufficient. Other reproaches include the fact that tariffs are not set by communities. Instead they are determined by what is known as “surge pricing.” In times of high demand, prices are higher, and there is no apparent limit on how high they might climb.

Uber and Lyft drivers are like freelancers, and like standard taxi drivers who rent a taxicab from its owner. They have no guaranteed salary or specific hours and they do not have any benefits.

Uber and Lyft drivers pay a percentage of the fare to the app company. For example, Uber drivers pay 25 percent of each fare to the San Francisco-based company, recently valued at $18 billion.

Uber did not respond to SNN’s repeated attempts to contact the company by telephone, email and using social media. However, according to Uber’s website, its drivers are covered by “a commercial insurance policy with $1 million of coverage per incident.” Whether this actually covers passengers remains in question after an Uber driver struck a family in San Francisco, killing a child earlier this year. No benefits were paid because he was between trips and technically did not have his Uber app running. The family filed a wrongful death suit against Uber Technologies, Inc.

Services like Uber and Lyft, and also Airbnb.com, a company valued at $10 billion for connecting travellers with empty beds in people’s homes, are part of what has been lauded as the “sharing economy.”

But many economists note that the term is misleading.

“The term sharing economy, when used to describe organizations like Uber, is quite misleading,” Arthur MacEwan, Professor Emeritus at the Department of Economics of University of Massachusetts-Boston, told SNN. “Sharing is: when I have something, maybe I’m driving to the airport and you need a ride, I’ll give you a ride and that’s fine. When I charge you a fee for taking you to the airport that’s not sharing that’s selling you a service. That’s what Uber does. It’s not sharing at all… that’s a selling a service.”

Supporters of Uber and Lyft applaud the fact that they offer options to travelers who previously had no other choice than traditional taxis. Countless articles have uncovered inefficiency and even corruption in the taxi industry due the medallion system, monopolies and other issues.

“Uber-type services have been able to enter into the taxicab industry… because there are so many problems in the taxicab system. However, that doesn’t mean that Uber is the solution,” MacEwan noted.

“We allow people to come into the [taxi] industry avoiding the regulations,” he added, “handling it a different way that is very profitable for them but has all sorts of problems for the rest of us because we’re accepting this idea that somehow this is the only way to do it. But there are other ways that these situations can be improved.”

The Metropolitan Area Planning Council, a regional planning agency that works with 101 cities and towns in the metropolitan Boston area, recently began discussions on the ride app issue.

Curtatone and other mayors want to “to find a regional solution to both allow these new models for taxi service as well as make sure that the longer term businesses that have been here operating under Hackney licenses are not put at a disadvantage,” according to the City of Somerville Director of Communications Denise Taylor.