Ride Sharing Services Lead Taxi Medallion Values To Plummet (And That's A Good Thing)

from the competition-is-good dept

Three years ago, Planet Money did an episode on the ridiculous economics of taxi cab medallions, the protectionist, anti-competition way in which cities keep competition scarce for taxis, and (thus) drive up taxi fares. Yes, sure, the taxi folks will tell you, these medallions are supposed to "regulate" the market to keep it safe, but as pretty much everyone knows, the reality is that they're just to limit competition and keep prices high. So, given all the new pressures on that market from ridesharing* efforts like Uber** and Lyft, it shouldn't come as much of a surprise that taxi medallion prices are plummeting rapidly. They're still high -- for now -- but they're dropping fast and that's likely to continue:

The average price of an individual New York City taxi medallion fell to $872,000 in October, down 17 percent from a peak reached in the spring of 2013, according to an analysis of sales data. Previous figures published by the city’s Taxi and Limousine Commission — showing flat prices — appear to have been incorrect, and the commission removed them from its website after an inquiry from The New York Times.

In other big cities, medallion prices are also falling, often in conjunction with a sharp decline in sales volume. In Chicago, prices are down 17 percent. In Boston, they’re down at least 20 percent, though it’s hard to establish an exact market price because there have been only five trades since July. In Philadelphia, the taxi authority recently failed to sell any medallions at its asking price of $475,000; it will try again, at $350,000.

In cities like San Francisco, there's been a 65% decline in cab use as people shift to these more convenient (and often more affordable) alternatives. And the trend appears likely to continue: The end result appears to be pretty good for users -- who get more convenient, less expensive options for getting around. And, for all the stated fears from the old taxi guys that a glut of new entrants would drive away business, we can just watch what happens and see how the market sorts things out.

* Yes, I know some people hate the term "ridesharing" for these kinds of services. But that's what they're commonly called, and it's perfectly reasonable to call them that.

** Yes, Uber has been getting a ton of bad press lately for a vareity of statements and actions that, at the very least, suggest a rather cavalier attitude towards privacy, and a very aggressive view towards everything else. Thankfully, if you don't like the way Uber conducts its business, there are alternatives.

Filed Under: competition, economics, ridesharing, taxi medallions
Companies: lyft, uber

DC Councilman Leaves Cab Union Rep's Business Card In His Stack Of Anti-Uber Amendments

from the regulatory-cabture? dept

Uber's ride-sharing service has proven to be a handy measuring stick for corruption levels in local governments. Chances are that if there's serious opposition, it's tied to incumbent service providers -- cab companies and other for-hire services that aren't interested in making room for competitors.

Uber's move to the Washington DC market does strange things to the "corruption index" curve. The city is politics on top of politics, a nightmarish thicket of regulatory capture and bureaucracy for its own sake, powered by the perpetual motion of revolving doors and back scratching.

The DC city council voted yesterday on legislation ("Vehicle-for-Hire Act") that clears a path for Uber and Lyft to enter more markets, but asks for plenty in return. The standards codified by this bill would make Uber and Lyft drivers subject to more screening than national security contractors.

[T]he bill requires background checks on Uber drivers going back seven years, annual safety inspections, a prohibition of street hails by UberX drivers, and $1 million in liability insurance when a driver is en route to a rider and when the rider is actually being transported.

Another amendment gives DC cops and cab inspectors the right to search drivers' phones for evidence of illegal hails. (And issue fines if such "evidence" is found.) Fun stuff, that.

Councilman Jim Graham tried to push through a few amendments of his own, heavily skewed in favor of incumbent cab companies.

The only stumbling block for the bill at the meeting came when council member Jim Graham proposed an amendment to set a floor for ride prices so that Uber and Lyft couldn't undercut taxi prices, but the amendment was fairly quickly voted down. Many of the taxi drivers who had come to the council meeting... left once Graham's amendment failed.

Poor Jim Graham. Not only did he fail to win one for the "home team," but he also wore his heart alliances on his sleeve planned amendments. Martin Di Caro of DC's NPR station WAMU captured this priceless screenshot of Graham's markup sheet, which included a business card for the cab union's treasurer, Nessibu Bezabeh.

Someone forgot to take @Teamsters business card off eighth page of CM Graham's amendments to Uber bill. @wamu885news pic.twitter.com/NQxYzhcbJt — Martin Di Caro (@MartinDiCaro) October 28, 2014

If you can't see the tweet, it says:

Someone forgot to take @Teamsters business card off eighth page of CM Graham's amendments to Uber bill.

Here's a closer look at the unfortunate scanning accident:


Yeah, that's a little embarrassing. Or maybe it isn't. This is how business is done in the Beltway, after all. The treasurer "works" with a council member towards a "mutual goal" and hopes for the best. And Graham did his part by striding fearlessly to the plate and promptly striking out. Hey, it happens. The important thing is that he tried. And left behind a paper trail that clearly shows the motivating force behind his consumer-unfriendly amendment.

He'll have to live with that now, but considering one of his fellow council members managed to salvage a political career from the bottom of a crack pipe, there's a good chance this too will soon be forgotten.

Filed Under: amendments, cab drivers, cabs, dc, dc council, jim graham, lobbying, nessibu bezabeh, taxis, teamsters, washington dc
Companies: teamsters, uber

California Continues To Be Anti-Innovation: Tells Ridesharing Services That Carpooling Is Illegal

from the oh-come-on dept

There has been plenty of discussion about ridesharing services lately, and whether they should be subject to the same sorts of regulations as taxis. As we've discussed, while taxi regulations have some historical basis in protecting riders from scammers, most of that was for a time when there was significant information asymmetry between drivers and riders, making it much easier for drivers to scam, rip off or endanger passengers. The wonderful thing that services like Uber, Lyft and Sidecar do is get rid of much of that information asymmetry and risk. The drivers are rated and monitored. The services handle the payment terms. The regulations that once served a purpose are less and less important. And, of course, then the reality starts to become clear. Where those regulations may have once had some benefit for the public, these days, they're much more about limiting competition, keeping prices artificially high and limiting new forms of innovation.

That's become especially clear in the last few days, where the California Public Utilities Commission (CPUC) has alerted Uber, Lyft and Sidecar that their new carpooling offerings are illegal. All three companies recently introduced a rather useful innovation that actually makes it much more accurate to call these services "ridesharing." By enabling "carpooling," the services find multiple people heading in the same general direction, and put them in the same car, allowing all of them to get a cheaper fare. It's the kind of useful innovation that seems like it's better for everyone. But, not the CPUC. In the world of the CPUC, you can't innovate if you haven't first groveled for permission:

Basically, the CPUC says that under California law it's illegal for these ride-sharing services to charge passengers an individual fare when carrying multiple people in one vehicle. If the companies would like to add a carpool feature, they first have to request an adjustment to their existing permits with the CPUC or petition the state legislature to modify the law.

Some people like to mock the idea that these companies like to innovate first and deal with the regulatory issues later -- and there may be something to that. But anyone who's ever worked in a setting where innovation is happening knows that having to ask for permission is a recipe for no innovation. California has a long history of enabling innovation. It would be quite a sad state of affairs for it to go the other way.

Filed Under: california, carpool, carpooling, cpuc, innovation, permission, ride sharing
Companies: lyft, sidecar, uber

New Orleans Cab Company Owner Calls Uber A 'Cyber-Terrorist Group'

from the like-Anonymous-on-wheels dept

Cab companies are still fighting Uber and Lyft, and each turf war seems to drag out the worst rhetorical devices and statements from these companies which have enjoyed long, monopolistic runs. Most have gone running to city legislators, hoping to add further regulatory hurdles to the upstart companies, asking for anything from limits on number of vehicles in service to rates considerably higher than cab companies charge.

But because you can only do so much arguing on behalf of an entrenched incumbent before you start sound like you truly loathe the public, taxi defenders are also finding creative ways to attack the new services in hopes of making them seem sketchier than cab companies themselves. In New Orleans, the argument took the form of a bunch of words tumbling out of a flustered cab company owner's mouth.

Owner of Liberty Bell Cabs in New Orleans, Tony Makhoul, called Uber a “cyber terrorist organization.”

Based on…? Well, the report at WDSU doesn't specify. [CAUTION: Autoplay in effect.] Apparently the fact that's its an app-based ride service was enough for Makhoul to float this claim during the city council's discussion. Presumably, Makhoul was using this metaphorically, presenting the company as a cyber-threat (because it's from the internet) to poor, downtrodden cab companies who have enjoyed years of uninterrupted success thanks to protective walls of regulation.

Makhoul previously showed his propensity for using words without regard for clarity or meaning in a statement made in July.

“It’s hypocritical, preposterous and indeed disgusting that we are entertaining Uber in our market today."

Those words may mean something subjectively to Makhoul but they don't make much sense to anyone else listening in. There's nothing "hypocritical" about considering a new entrant into a market, and the only thing that's preposterous and disgusting is the amount of resistance being deployed by incumbent service providers. But this is the same cab company owner that pushed back against the deputy director of the city's Taxi Cab Bureau for enforcing existing regulations -- like requiring credit card readers in all cabs and setting a limit on how many years the same vehicle could be in service.

But this one tops his previous wordsplosions. Uber -- which will be forced to charge the highest minimum fee in the nation ($15) as a concession to New Orleans' cab companies -- is here to destroy computers… by driving people in cars. Or destroy Makhoul's business… by providing customers with a competing service. Competition is the new terrorism. Inform the NSA.

Filed Under: competition, disruption, new orleans, taxis, tony makhoul
Companies: liberty bell cabs, lyft, uber

Recruiting From Competitors Isn't Sabotage: Overstating The Uber/Lyft Fight

from the it's-competition dept

The Verge got a lot of attention yesterday for its story on "Uber's playbook for sabotaging Lyft." If you follow the space at all, you know that there have been stories making the rounds for months claiming that people working for Uber were scheduling competitors' rides and then cancelling them, thereby tying up competitors' systems. Uber has hit back saying that the reverse is actually true, and that Lyft has called up and cancelled Uber rides.

The Verge report actually doesn't focus on the whole "calling up and then cancelling rides," rather suggesting that this is a byproduct of what's really happening: a very aggressive campaign to recruit drivers from competing services:

But since at least mid-summer, some brand ambassadors in New York have been turning their talents against Lyft. Using Uber-provided iPhones and credit cards, the contractors hail rides, strike up conversations with their drivers, and attempt to sign them up before they arrive at their destination. (In other cities recruiters travel with "driver kits" that include iPhones and everything else a driver needs to get started on Uber; ambassadors were told New York State does not allow this.) Compensation varies, but contractors can earn a $750 commission for successfully recruiting a single new driver to Uber, according to a contractor.

As Lyft has gotten better at sniffing out recruiters and banning them from the service, Uber has been forced to alter its tactics. In the run-up to Lyft’s high-profile launch last month in New York City, Uber organized a "street team" to analyze Lyft’s expansion strategy. On July 9th, a marketing manager emailed a subset of the company’s contractors in New York city with a new opportunity. "We have a special ongoing project that we’re going to be rolling out next week and I wanted to get about 8–10 of you to help out," he wrote. "This is going to be completely based on your own personal hustle, as it’s not a typical onsite event. We are going to have you working on your own time helping us sign up Uber drivers, and there is HUGE commission opportunity for everyone you signup."

Here's the thing, though: I keep reading the story, and I don't see anything about "sabotage." It's in the Verge's headline and it's the word that a bunch of others have quoted as well. But basically the whole story is about aggressively recruiting Lyft drivers to drive for Uber. And, given that, I have to agree with Tim Lee that this seems like it's actually a really good thing for drivers. When there's competition for drivers, the drivers are likely to benefit.

The word "poach" often gets thrown around in cases like this, but a minute's thought should make it clear just how misguided this way of thinking is. Drivers are not wildlife on the Lyft reservation being stolen by unscrupulous hunters. They're human beings who have every right to change jobs if a new employer offers them a better deal. And the threat of being "poached" gives drivers more bargaining power with their current employers.

As we've discussed repeatedly, worker mobility is a fairly important aspect of an innovative economy. And, this isn't even a zero sum game as many drivers can (and do) drive for multiple such companies (I was recently in a cab where the guy had 4 phones going for different services).

While Uber won't come out and admit it, it does seem fairly likely that the "cancellations" are because an Uber recruiter requests a Lyft... and when the driver is assigned, realizes it's a driver that's already been pitched (the Verge article details an internal site that Uber set up to avoid re-pitching the same drivers). On Twitter, Uber's Travis Kalanick insists that every ride that an Uber recruiter requests is done with the intent to take the ride. However, when I asked why so many cancelled, he came back with the stat that 10% of all such rides cancel "for various reasons." But, of course, that's not a comparable stat. Those "reasons" could be anything from "changed plans" to "forgot something back home." When it's an Uber recruiter whose job is to take rides, the 10% cancellation number is meaningless. Kalanick wouldn't elaborate any further other than to reiterate the "intention" to take rides, which he insists is "everything." This aspect seems to be pushing the boundaries, though it's certainly not as bad as the claims of Uber doing this just to mess with Lyft. In fact, one could make the argument that this means Lyft drivers are less likely to get repeatedly hassled by Uber recruiters.

All that said, the thing that does concern me about the Verge story is something that almost no one seems to be focusing on: and it's the question about whether or not this is really the best thing for Uber strategically. A general rule I have concerning innovative companies is that if they're spending too much time worrying about their competitor, they're in for a major fall. Truly innovative companies focus on innovating first and generally aren't worried about competitors. Sure, they pay attention to what the competition is doing, but they believe in their own ability to out-innovate the competitor. When they start getting too focused on the competition, it's often a sign that they know they're not able to innovate fast enough any more.

It's not clear that this is what's happening with Uber, but it is a possibility. A perfectly reasonable alternative explanation is that Uber believes that the way it's going to best serve its customers is to have more of the best drivers working for it -- and recruiting from Lyft is the best way to do that. That seems like a perfectly viable explanation, and has little to do with "sabotage" but about putting out a better product. Either way, it's worth watching how this battle evolves, and how much of it is focused on offering the absolute best product vs. how much is about sabotaging a competitor. If it's more the former than the latter, then that seems like a good thing. So far, from the details of the story it seems like that's the case. While some may not fully agree with the tactics that the notoriously upfront and aggressive Uber are using, they don't seem to meet the claims of it being "sabotage."

Filed Under: aggressive tacitcs, competition, innovation, recruiting, ride sharing
Companies: lyft, uber

California Lawmaker Votes To Kill Uber... Then Caught Driving Drunk Just Hours Later

from the karma dept

It's a little early in the data to tell for sure, but there are some early indications that ride services like Uber and Lyft decrease cases of drunk driving by making it that much easier for intoxicated people to get somewhere without getting behind the wheel themselves. So it seems notable, if somewhat ridiculous, that California State Senator Ben Hueso was arrested for drunk driving just hours after voting in favor of a taxi-lobby supported bill that would profoundly limit services like Uber and Lyft. The bill was designed to dump a bunch of unnecessary and burdensome regulations on those companies to make it difficult for them to compete or survive in California.

Hueso voted in favor of it, and then a few hours later was spotted driving the wrong way down a one way street at 2:24 in the morning.

Powell said officers identified the driver as Hueso and said he was alone in the car. Hueso showed “objective signs and symptoms” of being under the influence of alcohol and was given a field sobriety test.

He was arrested shortly after, taken in without incident and booked into Sacramento County jail at 3:27 a.m, she said. Jail records show he was booked with a blood alcohol content of .08 or higher at 3:27 a.m. Powell said the CHP would not release the precise blood alcohol reading. He was released from jail late Friday morning.

Hueso has apologized for the drunk driving, but perhaps he should apologize for his vote... and for not calling an Uber to take him home (or wherever he was headed) that night...

Filed Under: ben hueso, california, drunk driving, dui, innovation, politics, regulations
Companies: lyft, uber

Lyft Announces NYC Launch, Taxi Commission Declares It Illegal Hours Later

from the don't-mess-with-our-taxi-medallions dept

While Uber gets much of the attention in the ride-sharing space, many people I know in San Francisco swear by Lyft instead. Lyft has the reputation of being the more laid back, friendlier version of Uber. Rather than Uber's infamous "surge pricing," Lyft has happy hour discounts. Rather than the sleek corporate feel of Uber, Lyft is famous for drivers putting giant pink mustaches on their cars, encouraging passengers to sit up front... and to give drivers a good old fashioned fist bump. While Uber has been available in New York City for some time, Lyft took its time, finally announcing plans to open up in NYC on Friday (well, Brooklyn and Queens, initially, staying away from taxi central Manhattan).

Not surprisingly, the NYC Taxi and Limousine Commission was not pleased with this. While Lyft says it's tried to work with the TLC, the TLC disagrees, noting that Lyft agreed to a single meeting that just happened this week.

So, of course, it's not surprising that, within a day, the TLC officially declared Lyft an "unauthorized service" in NYC, meaning that it may start cracking down -- something NYC did last year to the other top competitor in the space, Sidecar. Lyft says it's still planning to launch, insisting that it doesn't believe the rules the TLC are citing apply to it. Basically "come at us, TLC!"

The TLC insists that it wants Lyft to be able to operate in New York City, even saying that it's willing to change some of its rules, but bureaucracies -- especially those with close ties to highly regulated industries that have a history of keeping out competition -- don't tend to move very fast. As we've noted before, cities that quickly ban these kinds of services are basically advertising themselves as places not friendly to innovation and/or run by corrupt officials.

For all the arguments about how these services don't meet the "stringent" requirements for existing taxi regulations, almost everyone I know prefers using services like Lyft and Uber over traditional cab services. They're much more convenient and personally I've found the service to be significantly better overall. Part of the problem is that the regulations were built for a different time, when there was significant information asymmetry between a rider and a driver, allowing drivers to take advantage of riders. But, these kinds of services actually flip that equation: they provide much greater information to the rider, and even give them a big say in passing on similar information to others, in the form of ratings. Thus, there are natural incentives to provide a better overall service, making many of the purposes of existing regulations stale and obsolete.

But, of course, as often happens in highly regulated industries, those who already made it through the hurdles like those regulations because they limit competition, and allow prices to be higher due to scarcity. It also gives them less incentive to provide better services. Thus, you get into a world of regulatory capture, where things are worse for everyone. While, yes, the "intentions" of these regulations may be good, the reality is that the information exchange enabled by technology makes many of the regulations obsolete. A slow-moving bureaucracy (especially one dealing with regulatory capture) isn't going to move very fast, but that's harmful for overall innovation in the space and setting up the best conditions for citizens of NYC, who probably prefer a better overall experience in getting around.

Filed Under: new york, nyc, ride sharing, tlc
Companies: lyft, uber

Taxi Drivers In Europe 'Protest' Uber, Creating Astounding Media Attention, Massive Jump In Signups

from the best-promotion-uber-could-get dept

As you may have heard, cab drivers across Europe did the European-thing to protest the rise of disruptive services like Uber: they went on strike, snarling traffic in many European cities. Uber long ago learned that every attack on its service is a fantastic promotional opportunity, but this "strike" may have been the best by far. In other words, it appears to have completely backfired on the strikers, with Uber signups in London jumping an astounding 850%. Basically, the "protests" have pissed off people at cab drivers and made them more aware of Uber. I don't see how that benefits the cab drivers.

In fact, Uber had been hovering around the 100th most popular app in the UK over the past few weeks, but it has suddenly jumped to number 3. This may be the least successful mass protest in history. Not only does it fail to accomplish any of its goals, it appears to have massively helped those it was targeted against. As the EU's Neelie Kroes points out, this is really part of a debate about the wider sharing economy, and the recognition that innovators are building new and disruptive services that are, quite frequently, much better for the public, even if they may be disruptive to existing businesses and employees.

But denying reality and trying to break the machines doesn't work. Ever. And, as in this case, sometimes it actually benefits those they're fighting against.

Filed Under: attention, cab drivers, disruption, europe, london, protests, streisand effect, taxi drivers, uk
Companies: uber

Corrupt State Index: Virginia DMV Orders Uber And Lyft To Stop Operating Immediately

from the total-failures dept

Earlier this year, we noted that it was a pretty clear indicator of state or city corruption when those local governments figured out ways to ban innovative new upstarts, like Tesla, Uber or AirBnB. The latest state to jump up the corruption index, then, is Virginia. The Virginia DMV has told Uber and Lyft to stop operating immediately.

Virginia’s Department of Motor Vehicles sent cease and desist orders today to Lyft and Uber, telling the two ride services that they must stop operating in violation of state law or face fines against their part-time drivers.

The DMV had already issued civil penalties against the companies in April -- $26,000 for Uber and $9,000 for Lyft -- for trips that their drivers provided in Virginia despite warnings by the state agency that Virginia law does not allow their business model.

This is silly. Uber and Lyft (and others) have been shown to provide some great and convenient services pretty much everywhere else. And almost every attempt to block them seems to really be about keeping such transportation options more limited to limit supply and competition, allowing existing taxi companies to charge more (while being less convenient).

Filed Under: corruption, dmv, ride sharing, virginia
Companies: lyft, uber