UberCab to disrupt the Taxi/Limo business
techcrunch.com
techcrunch.com
If this service became at all popular, it is very likely that cities would immediately include "mobile hailing" as also requiring a license. The entrenched interests of the taxi companies are simply too big (and they have the political clout) to let this one slide under the radar.
See also hairdressing regulations and a host of others.
I could be persuaded there exists an optimum amount of regulation for compensated car rides north of that for uncompensated car rides, but medallions have to go. With market values in the six figures though, good luck: holders have solid incentives for corruption like their lives depend on it, but the average citizen just gets minority overcharged, and the worst affected do not vote or matter in most political calculuses.
It doesn't surprise you that cab drivers in Chicago basically never drive you to random destinations, or change fares midway through the ride? The goodness of cab driver hearts isn't what's preventing it.
Their incentive to not screw me is that they value my continued custom (and chargebacks are a beast). His incentive to not screw me is that he values his cell phone continuing to buzz with new fares. They transparently operate in a low-trust environment: there are cards in the back of the back of the car for who to call for a refund in event of a dispute.
Putting this on an iPhone makes it geekier, but does not appear to change the threat model. No medallion, and pretty close to a technolibertarian paradise. I feel the need to illegalize something to wipe that smug look off their faces. :)
Sadly, they are legally prohibited from offering exactly the same service if both endpoints are within Chicago proper.
The only time I've ever been screwed with by a cab driver was with an unlicensed car service.
There's a difference between airport taxi service by chauffeur-licensed drivers dispatched by a branded cab company (with something to lose if drivers misbehave) and "I signed up with 1 of 5 different companies that dispatch cabs with iPhones".
I don't have prove that the Chicago medallion system is sensible; I'm only objecting to the notion that there is no valid concern behind them other than for-profit restraint of trade. There are absolutely valid concerns behind medallions. Go to an NYC airport or outside Penn Station and find an unlicensed cab; take 10 drives, and tell me how many of them try to screw you over. Do the same thing with medallion drivers; none of them will.
However, I had much more experience with unlicensed cabs in Washington Heights (north end of Manhattan, where licensed cabs refuse to cruise around to get business) and I never remember anyone trying to rip me off. Much of the time this wasn't with calling any specific company, just flagging down (illegally) whichever car was passing.
I think there's just too much money to be made from unsuspecting tourists at NYC airports.
For example, cabs could earn (and risk losing) a "Good Cabdriving Seal". There's no need for the quantity of such seals to be artificially limited: they could be unlimited, but only awarded to those that prove worthy.
And while we're at it, the agency doing the certification need not be a government agency at all. Why not Good Housekeeping, or Underwriters Laboratories, or Better Business Bureau?
The medaillion system is weird, but it works in new york.
The people who think that the invisible hand of the market would improve cab service are awesomely naive. The reason why cabs aren't fucked up in NYC is because of all the regulations, which can only be enforced because the cabbies have something to lose (the mediallion). If there was no government interference, cabs still wouldn't take credit cards, they wouldn't pick up non-white people, they wouldn't drive you to Brooklyn, they would form their own cabal and eventually rip out their meters and just make up whatever price they wanted to charge you, once you got there.
because of all the regulations, which can only be enforced because the cabbies have something to lose
You think that the loss of the "Good Housekeeping Seal of Approval", or "UL Certification", or the like is nothing? Don't you think that potential customers would quickly learn to look for that emblem on a cab?
If there was no government interference, cabs still wouldn't
Nonsense. You're just making stuff up, without the slightest evidence. Do you really believe that cab customers would turn away paying customers just because they're not white? And even if they did, that would just open an opportunity for a minority-catering company to make a killing.
In Manhattan? Never. (but I've never tried to get a cab in Harlem or north of that)
You think that the loss of the "Good Housekeeping Seal of Approval", or "UL Certification", or the like is nothing? Don't you think that potential customers would quickly learn to look for that emblem on a cab?
Are you serious? The only thing people look for is if the cab is yellow.
Nonsense. You're just making stuff up, without the slightest evidence.
I'm not just making stuff up, those are all things that cab drivers used to do until the city told them to stop doing those things.
Do you really believe that cab customers would turn away paying customers just because they're not white?
Yes.
And even if they did, that would just open an opportunity for a minority-catering company to make a killing.
Do you live in New York? There already are car services, livery cars and gypsy cabs.
It wasn't "cabs are lazy".
It's a big rip-off and I am thankful whenever I visit SF to have a zipcard. Now I only pay BART to get me from SFO to (near) our vacation rental. If ubercab can provide fares without that runaround, I'm all for it.
A voluntary medallion scheme would prevent that; the city government could issue medallions to those who fitted whatever standards it chose to lay down.
And customers would be free to choose to use a medallioned or unmedallioned service.
With digital cameras and other low-cost person and location tracking technologies, it's not easy for drivers to take riders on any ride other than that which was contracted, nor for providers with bad reputations to borrow the identities of others. Branded quoted dispatching has returns to scale -- perhaps it's even a natural monopoly -- and incentives for self-policing. So bad actors can't just hop to another of multiple dispatchers and get the same amount of business.
Floating rates and open entry can restore service to areas that regulated rates sometimes cause to be unserved -- because they're comparatively hard to get to or dangerous, and there's plenty of business elsewhere.
And finally, for all the supposed protections provided by regulation, a city with strict regulations will also have a bunch of gypsy and counterfeit cabs -- and in SF, if local media reports here are to be believed, many of these are indistinguishable from the 'real' thing, even by most police/enforcers. You get in one -- and you get indistinguishable service as from other cabs, because the operators want to be cabbies, not robbers. And yet -- iPhone dispatching could give out a 1-time single-word-password more secure than any cab 'dress'. So if this were really something to be scared of, a branded iPhone dispatcher can provide more assuarance than the city medallion authority.
There is a valid concern at the heart of taxi licensing -- but it long ago grew into primarily a cartel, using that original justification to enrich incumbents, doing more damage than benefit. And, the restricted medaliion program is a solution from another era; let us try to get the same benefits with new tools, and see how it works.
Unfortunately for your argument, while the medallion system does unjustly restrict competition for cab driving jobs in Chicago and NYC, it does not in fact appear to harm consumers. Cabs work in Chicago and NYC. The potential harm of deregulating and devolving controls to unproven technology far outweighs the benefit.
However, I expect that if the service becomes popular, both the cab and MUNI lobbies will attempt legislative sabotage, and the SF supervisors are so enamored of paternalistic reasoning it's a real threat to the business.
If a regulatory change harms consumers, what's the point of deregulating?
San Francisco might benefit from deregulation, because there are political problems and structural breakages in their system. But the Chicago and NYC cab systems work pretty well right now as far as I can tell.
Incidentally, while I agree that medallion caps are anticompetitive and an artifact of old price-fixing schemes, they have a beneficial effect of making it expensive to operate a licensed cab, which creates incentives for cab operators to avoid some negative externalities of their business (like running people down, or operating blatantly unsafe vehicles, etc).
Taxi revenues are currently $91k/year in NYC. Breakdown: $18k medallion, $50k labor, the rest is maintenance/insurance. If labor costs were reduced to $35k/year due to competition (taxi driving isn't exactly high skill labor) and medallion costs were cut in half, that's a 25% reduction in taxi cost.
http://www.nyc.gov/html/tlc/downloads/pdf/presentation.pdf
I think my proposed $9k/year would be sufficient to pay for taxi inspections to get rid of blatantly unsafe vehicles. As for running people down, current incentives not to do that seem sufficient. It's no more a problem to be run down by a taxi than by a Dominos driver, who has the same incentives as a taxi driver. In fact, Michael Q. Lateforwork has even less incentive than any taxi driver to not run people down - he won't lose his job for doing so.
Similarly, most people who deliver pizza are not career pizza delivery drivers. A pretty big chunk of them are students. Their incentive not to wreak havoc isn't the loss of their pizza job, it's in not screwing up their lives and bankrupting themselves.
That said, you have a good point. And I'm not HN's official advocate for taxi medallions. I just want to point out that while it certainly wasn't the intention of the medallion system, or even its primary effect, artificially-limited medallions do create a scarcity value to them that incentivizes drivers to play nice with the rest of the system.
There are plenty of unlicensed cars out there, and there is a clear difference in how reliable they are.
I wouldn't vote against any sensible replacement scheme, and yours sounds sensible.
May that you never be in charge of taxi service.
As for the number of vehicles, that's an issue not primarily caused by cabbies. A congestion charge (levied on cabbies and drivers alike) and eliminating free parking seems like a solution to that - it works pretty well in London.
Which in NYC, with its existing low cost subway and bus alternatives, basically translates to "helping rich people by eliminating the lower-middle-class jobs their fares currently support". You would expand the pool of people who choose cabs over the subway down from the top a little bit while pushing the actual service workers further out from the city.
As for the number of vehicles, that's an issue not primarily caused by cabbies.
Perhaps because the current medallion system restricts the number of operating cabs?
A congestion charge (levied on cabbies and drivers alike) and eliminating free parking seems like a solution to that
I'm all for a congestion charge (though my version actually wouldn't apply to medallioned cabs) and eliminating free parking. But you said the point was to lower costs for consumers by increasing competition. We're getting to the point where we actually have to do the math to see where everything falls, but if you don't tweak the parameters right, you could easily find yourself in a situation where consumers are right back to paying today's fares (because there aren't actually more cabs on the road) but instead of the money going to the cabbies, it's going to the city in fees.
it works pretty well in London.
London, where cab drivers are probably the best paid, most skilled, and most stringently regulated in the world?
As for doing the math, scroll up. I gave you numbers, and showed that even making fairly generous assumptions, there is a LOT of rent being extracted from the current system.
Perhaps because the current medallion system restricts the number of operating cabs?...London, where cab drivers are probably the best paid, most skilled, and most stringently regulated in the world?
Fun fact: there are about 250 million cars in the US, and about 250 thousand taxis. But I'm sure all congestion problems are caused by the taxis - thank god for limited numbers of medallions.
http://en.wikipedia.org/wiki/Passenger_vehicles_in_the_Unite... http://www.schallerconsult.com/taxi/taxidriverreport.htm
I see nothing in your previous numbers showing how you do or don't keep the benefit to the consumer after throwing in a congestion tax, which is what I said we needed to do the math for.
Fun fact: there are about 250 million cars in the US, and about 250 thousand taxis. But I'm sure all congestion problems are caused by the taxis - thank god for limited numbers of medallions.
How many of those 250m cars are in NYC, and how many of those 250k taxis are? And at what point did I suggest that all congestion problems were caused by taxis? I even explicitly said I would support a congestion tax for other kinds of traffic as an orthogonal solution.
Also, I didn't realize that the 37'th percentile of income (36'th percentile in NY [1]) did not count as lower middle class (or just plain middle class). My mistake.
If the congestion tax costs less than $24,000/year/cab, consumers still pay less for a taxi.
[1] http://www.city-data.com/income/income-New-York-New-York.htm...
Which is the number set by the medallion system. My original point in this line of argument was that one of the main reasons cabs don't contribute to congestion in the city is because the number of cabs allowed in is capped. You're the one who wants to make that number bigger.
Also, I didn't realize that the 37'th percentile of income (36'th percentile in NY [1]) did not count as lower middle class
The labels are flexible depending on who's drawing the boundaries, I'm sure. The point is that I wasn't contradicting myself when I said your plan would both cut a certain class of jobs and increase traffic, I was simply saying that you're replacing fewer higher-paying jobs with more lower-paying ones. Where we disagree is that I think in this case that's equivalent to giving rich people a break and forcing more of the city's service workers to live further away, and I assume you don't.
If the congestion tax costs less than $24,000/year/cab, consumers still pay less for a taxi.
You're taking the savings from the medallion and labor costs that you posited above and assuming they'd be passed directly to the consumer, but that's overly simplistic. More competition means marketing costs go up, which drives the fares back up a bit. The congestion tax is presumably convincing fewer people to drive to work, which increases the demand for cabs, which drives the fares back up a bit more.
The point was not "you are wrong about consumer prices going down", it was "you have to start modeling the problem more carefully to have a meaningful conversation about it". You're probably right, consumers would save money, but again, given who the consumers are (oversimplifying: rich people), I don't necessarily see that as a good thing when it comes at the cost of cabbie pay.
Even if the number of cabs increases by 5x (i.e., customers are underserved by a factor of 5x), it will still be a small number.
As for the distributional benefits, yes. I'm willing to harm the wages of a middle class cabbie if it helps a poor unemployed person. I'm kinda progressive that way.
You're taking the savings from the medallion and labor costs that you posited above and assuming they'd be passed directly to the consumer, but that's overly simplistic.
I don't think so. Consumers pay the average taxi $90,000/year. I'm proposing a change in which consumers would only pay that taxi $66,000/year.
By the way, I think we should reverse your argument. You seem to favor creating artificial shortages in low skill fields to drive up wages. Since this is presumably good policy, perhaps we should expand it. How about waiter licenses for high end restaurants (which primarily serve the rich)?
(I ask about expanding this policy to other sectors because I think status quo bias is the main reason you support the status quo.)
High-end waitservice is hardly a low-skill field. Good waiters are well compensated, and restaurants compete for them almost like technology companies compete for programmers. And restaurants themselves are completely different businesses than taxis. Each additional taxi added to the city is more or less identical to the taxis that were there before, whereas restaurants are highly differentiated from each other. You can't predict the marginal payout of an additional restaurant.
But with that said, restaurants are regulated through zoning and health ordinances. You can't just start a restaurant out of your apartment or set up a table wherever you please to start serving people.
Consider any low skill job which serves rich customers. Under what conditions should we pass a law restricting supply, making an unlucky subset of those workers unemployed but raising wages for the remainder? All commodity services (including, but not limited to landscaping, taxis and maid service)?
Should we only do it in cases where we already do it? (I.e., should we simply maintain the status quo?)
So for every 15 cabs, the city could spend $75,000 on a dedicated undercover taxi inspector. Lets say this undercover inspector works 250 days/year, and rides 3x/day. Thus, every taxi is subjected to an undercover inspection every single day (on average, assuing 250 working days/year). Assuming an average fare of $12 and taking revenues of $90,000/year (see my previous link), a taxi driver has 30 fares/day, one of which is an undercover inspector.
Each time he uses shady tactics, his odds of being caught are 1/30. 50% of cheating cabbies will be caught before they manage to cheat even 20 customers.
Also, if you don't feel that $35k/year (higher household earnings than 37% of the US) is a living wage, then what is?
So I'm thinking 50k.
http://www.bankrate.com/calculators/savings/moving-cost-of-l...
Come on, 35k in NYC is barely a living wage and you know it.
I agree with you not him, because I don't trust the process that will generate the market-based solution, and I think the medallion system actually pretty much works in Chicago and NYC. But that doesn't make the argument much more productive.
I would welcome a separate congestion tax levied on certain other kinds of traffic to complete the solution. You want cabs in the city, and you want them running all the time - they're doing the useful work of moving people around, and should certainly be preferred to traffic that congests the city during rush hour just to cram into a parking lot for eight hours.
Even if there are 10,000,000 cabs, if the congestion tax is set appropriately, they won't all be clogging the streets, since they won't be able to make a buck doing it.
I'm deeply suspicious of this kind of reasoning when it's unaccompanied by an explanation of how the tragedy of the commons would be avoided. You're a cab driver with rent and your kid's tuition to pay, are you the one staying home today?
If congestion charge + other expenses > expected revenues, yes. Actually, things should equilibrate roughly at expected revenues - congestion charge - other expenses = average low skill wage.
The real trick is to set the congestion charge somewhat higher for taxis than for regular vehicles, since taxis spend more time on the road. The proper ratio would be (taxi charge/regular charge) = (taxi time on road / regular time on road), presumably this could be estimated using sat photos.
The real trick is to set the congestion charge somewhat higher for taxis than for regular vehicles, since taxis spend more time on the road.
Commuter vehicles deliver less value to the city, though. They spike congestion in the morning and the evening, waste time looking for parking, and take up valuable real estate just sitting around during the day. That's the traffic you want to discourage, not cabs, delivery trucks, and other actual economic contributors.
But that doesn't matter, because this is the eBay problem; a reputation adequate to do business in the system is too cheap to establish from scratch to make losing one a major deterrent.
And this isn't necessarily the eBay problem, if you have to provide a driver's license or some other set of credentials to set up a driver account, and you can't just switch your handle in the system. The post was kind of light on those details.
(a) There will be more than one of these dispatching services, so you'll just hop.
(b) There's an inherent TOCTTOU problem, since they're only checking licenses when you sign up, not every time you pick up a fare. You'll just "rent" someone else's license; there are presumably tens of thousands of people who don't care what their cab dispatch reputation is.
This is kind of a silly argument, though, because my main point was actually agreement that a taxi review system would probably be horribly broken. I just don't think it would necessarily be broken in the exact same way that eBay's is.
Alt text mainly.
In Manhattan or other parts of the city, I don't see how this kind of thing could compete with the yellow cabs or the car services. People have the money to pay the higher prices, and there are enough horror stories (true or not) floating around that very few would see it as worth the risk.
For both Private Hire and Hackney Carriages, the cars/drivers are licensed and must meet regulatory requirements regarding vehicles and insurance policies. I believe the requirements for Hackney Carriages are more stringent.
Those licences exist to protect the public.
For both types of licensed drivers, UberCab would be a great extension. However, I can only imagine it working if the taxi firms themselves were willing to implement it.
Edit: Please note that I do not mean to imply that all car drivers are bad people. I am confident that the majority of them are good, honest people trying to make a living the best way they can.
UberCab contracts with black car services – mostly Towncars and Escalades
That suggests that they are probably doing some due diligence.
My friends the management consultants report that they use these black-car services all the time. You think a business traveler with a big expense account hails one of those yellow cabs, like me and the rest of the plebes? ;)
The follow-up idea of dispatching cab traffic to any random idiot with a Lincoln Town Car, an iPhone, and a possible drug problem seems to be Arrington's idea. It is, as you point out, a pretty lousy idea. [1] But don't blame UberCab.
---
[1] I should know. I had this idea five years ago. Then I conducted a thirty-minute thought experiment and decided that the due diligence would be annoying and not my cup of tea.
With UberCab, it looks like anyone could steal an iPhone/credit card, download the app, and sign up as a driver all in the space of an hour.
The only way I can see the stolen iphone game working is if you steal the iphone from an UberCab driver, or convince UberCab that you are an independent livery and then rape someone before the stolen iphone gets cut off.
In contrast, a legitimate yellow cabbie just needs to put his coat on top of the taxi license and make sure the victim doesn't see his license plate # as he drives away. That same game won't work with a legitimate UberCabbie, since there is an electronic record that driver X picked up passenger Y.
Edit: Can't resist an anecdote. There was a huge Russian instructor in one of our classes, and the class that day was about half women. He said, "Ok, man tries to rape you? Rip his eyes, like this. See? Rip! He can't see now for rest of life? Tough shit! Should not have tried rape you."
(Despite the machismo of how this might look in text, it was well received in person - a good community, good people, good training, very welcoming to everyone at any level of age or fitness. Definitely recommended, almost any studio will give you a free class so just google for your area and go take one. Really, it's awesome.)
This application could be very attractive for car jackers. A bad guy could simply place and order for an out-of-the-way alley or warehouse and know that the cabbie they hail is going to be driving a really nice car.
A would-be car jacker would need to use a stolen iPhone and credit card in order to keep from getting caught right away, but that's hardly an insurmountable barrier.
In the 90's, New York averaged something like 2 murdered cabbies a month.
Uh... NYC was a dangerous place in the mid 90's. Do you have evidence that the gypsy cabs were targets more than yellow cabs?
It's not the gypsy cabs that were the problem, it was the customers.
A would-be car jacker would need to use a stolen iPhone and credit card in order to keep from getting caught right away, but that's hardly an insurmountable barrier.
In that case, UberCab would need a stronger way to identify users. For example, you enter the cab, and the cabbie takes a photo of you with his iPhone UberCab app and uploads first thing.
Yep. http://www.taxi-library.org/marosi.htm
"Out of the 85 total cab drivers killed in 1992 and 1993, for instance, only 12 drove yellow cabs."
The difference here is that gypsy cab drivers work in more dangerous neighborhoods that are underserved by big taxi companies. I suppose ubercab drivers could just avoid those same neighborhoods...
http://nymag.com/print/?/news/features/54678/
From a safety perspective, in NYC it's illegal (and not a good idea) to hail a non-yellow-medallioned taxi on the street. They likely don't have a TLC license, and may or may not be affiliated with a larger fleet.
Call the service's base station--they might not perform background checks on the drivers, but they'll be licensed and insured. The services have an incentive to weed out the bad drivers-- if they get a reputation for spotty service or creepy guys, then customers will switch to the car service down the block (there is healthy competition in this market-- they are constantly splitting off and trying to poach each others' drivers).
I think the biggest innovation is the drivers rating the customers. It seems like a joke, but if you think about it, professional car service drivers aren't going to want to pick up just anybody for short rides. That's the real obstacle for scalability among that group. The obstacle for getting all cab drivers to join UberCab is probably the risk of alienating the customer base that might just want town cars, etc., without having to think about the complexity (i.e., it's a software problem, and a pretty easy software problem if done right). The other obstacle is the cost of an iphone, etc., for cab drivers. The obstacles for anybody with a car to join are medallions, licenses, etc., as mentioned. The other obstacle is, even with licenses, the fairness and effectiveness of the rating system is tough. Service history is a mixed blessing. When I step into a cab, I may not actually want to know about the driver's history. I may just want a nearly 100% guaranteed level of service (which theoretically the medallions provide). Though on the other hand it would be crazy to see like average on-time trips, average speeds, customer satisfactions, etc., in one big visual thumbprint before you step into a cab...
I was thinking about a similar idea and also the parallel concept of "AirBnB for passenger seats", rather than unused towncar inventory, an easier way to "book" a carpool ride from someone who's already going that way. You just run into a ton of tangles around insurance, carpooling vs taxi licenses, scaling especially abroad, and the fact that one bad driver - one accident - could completely ruin your entire business.
I do think there's potential in disrupting the taxi business, though my current angle of thought is more about using technology, especially cleantech and mobile bookings, to make it a low cost planet-friendly business. Just the thought of all those exhaust fumes scares me. Go EcoTaxis!
Buying from somebody wih a zero rep on ebay means you might lose out on your beanie baby. Putting your daughter in a random strangers car with no information other than them owning (or having stolen) an iphone is a little different.
If the taxi firm itself implemented (or used a version) of this kind of service then that could be a great win for the firm.
However, if they are considering moving in that direction (again, no proof of that), your criticism is really important to consider, and might be a pretty big limitation. I'm sure that there are ways around it, but only if the network of drivers is heavily moderated, with lots and lots of safe-guards built in. Also, not allowing children/teens to ride unless accompanied by an adult, and adding some sort of panic button to the app.
As like any other hire service, they operate under a difference set of rules. They have to be licensed, need to meet size requirements, and they have to carry much more insurance.
Some random driver with a pickup and just basic PIP coverage probably wouldn't be a good choice. Especially if you are paying for it.
Also, reading their website, they are very interested in working with limo companies and cab services not random guy with 30 minutes to spare. So no, this is not like AirBNB, at all.
In the UK there are lots of regulations surrounding Private Hire vehicles and Taxis, some of those rules are regional too. I doubt I'd see something, like this here but the firms should definitely be aware.
The whole concept sounds particularly disruptive because it seems that it would be so difficult to police.
And there is nothing stopping them from going into court and throwing water on the whole thing with an injunction.
In the everyone is a taxi model- do you really want to get into a car without knowing how that person drives? There are people in my own family I won't drive with, let alone pay them to drive me somewhere.
Pay from the app: No cash required
That's a powerful feature and it could become a very sticky app for me if I lived in San Francisco.