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8 Keys to Keeping Taxi Issues From Becoming a Political Hot Potato

Originally published in Taxi, Livery and Paratransit Association Taxicab newsletter, August 2005.

Discussions of taxicab regulation often presuppose that taxi operators and regulators have opposing interests and goals. Certainly, operators and regulators cannot be expected to see eye-to-eye on every issue. Nevertheless, the two groups do or at least should share the same basic goals. These include prompt, reliable, comfortable and courteous service and fair and effective regulation. Achieving these goals has bountiful benefits: taxi service that is attractive to taxi users and potential users; taxis maintaining or even gaining market share relative to executive sedans, limousines, shuttles and other competitors; profitable taxi operations; and decent and attractive driver incomes.

In this article, I'd like to discuss how taxi operators and regulatory staff can work to achieve a well-functioning taxi system that benefits all stakeholders - the industry, regulators and, most importantly, users - and keeps taxi issues from becoming a political hot potato.

Listed below are eight elements that, based on my observations in a wide variety of taxi systems in North America, I think can fairly be said to characterize well functioning taxi systems. Please note: this listing is not meant to suggest a standardized set of regulations to be applied across the board. In taxi regulation, one size does not fit all, nor could it given the wide variations between cities. Rather, I suggest that cab operators and regulators use these themes as reference points in thinking about how to improve the regulatory system and industry structure in their city.

The first two points concern the mindset and expectations of operators and regulators as they enter discussion of regulatory issues. The next four points concern key goals shared by regulators and operators. The final two points address quality of personnel and regulator/industry relationships.

1. In well-functioning taxi systems, stakeholders recognize the importance of considering the needs and interests of other stakeholders. Regulators, operators, drivers, taxi users, airports, hotels, etc. all recognize that an effective regulatory system is built on a fair balancing of competing stakeholder interests. Everyone properly expects to have his or her concerns heard and addressed. No one expects to get everything they might want.

2. Operators and regulators focus on managing change rather than resisting it. It is a commonplace observation that the world is constantly changing and that the speed of change is accelerating. Nevertheless, some people respond to change by trying to extend the status quo. This strategy sometimes works quite wonderfully for a good while! But in the longer term, business and regulatory models and practices must adapt to changes in markets, customer expectations, competitors, technology, etc. At that point, competitors, politicians or others outside the taxi industry act in powerful ways, and those who resisted change are likely to be victimized by the changes forced on them.

It is much better to adopt incremental changes than to let this process gather steam. Incremental adaptations mean that operators and regulators can exercise a maximum level of control and correct any missteps that occur.

3. Moving on to taxi service goals, the first and most important shared goal is very simple: make sure that the number of cabs is consistent with the demand for taxi service. The problem with having too few cabs to serve customer needs is obvious. Perhaps less obvious but equally important, having too many cabs results in inadequate revenues to ensure economically healthy operators, a stable and qualified driver corps and sufficient revenues for dispatch operations and vehicles. Thus, setting the proper number of cabs is of paramount importance to sustain a well-functioning taxi system.

4. Some cities have about the right number of cabs but the cabs are geographically maldistributed within the city. Most often, the problem is too many cabs serving the downtown area and airport and too few cabs serving neighborhood trips. Thus, another key shared goal is reliable, prompt telephone dispatch service. Although they may not be as visible or attractive as long-haul airport trips, for example, dispatch trips form the core market for the cab business in most cities. Dispatch trips are vital to residents' mobility, especially for seniors and disabled persons - two politically potent groups whose needs are overlooked only at one's peril.

Dispatch trips are the most labor and capital intensive type of trip, requiring substantial call center operations, and often most difficult to serve well. These factors make this a challenging goal deserving of close attention.

5. Other user markets, of course, also need careful attention. The taxi stand, street hail and airport markets comprise a very substantial portion of trips in large cities and even in small or medium size communities that have high rates of car ownership. These trips are highly visible to visitors and the business community. They are important to the image of the city and often from an economic development perspective. The challenge with stand, hail and airport trips is to ensure matching of supply and demand and ensure the accountability of drivers - who may not be affiliated with taxicab companies that exercise oversight - for service quality.

6. Another key goal involves the number of cab operators and the role of competition in the industry. In discussions with cab operators, I've found that this is a very controversial area. While large cities take multi-company industries for granted, operators in smaller cities have made a strong argument that economies of scope and economies of scale mean that one company can serve the public better than multiple companies.

I agree that dispatch service in particular benefits from company size. I also believe that there are benefits from taxi operators having to compete for business and from taxi customers and drivers having a choice of companies. A multi-company environment also benefits operators, who are less under the gun when dissatisfied customers and drivers have the option of switching to another company.

Given these competing considerations, the tradeoffs between greater competition and economies of scope and scale need to be considered in the context of each city. The common thread between cities where this is addressed successfully is that regulators and operators recognize that tradeoffs exist and work to find the best balancing point.

7. The next common element to successful taxi systems involves not goals but people. It is a truism that good people are at the heart of any successful organization. Achieving and then maintaining a vital and healthy cab industry and regulatory system requires strong and forward-looking cab company managers and adaptive and resourceful regulators. Government must assign qualified staff to the function and provide resources and political backing for effective implementation of regulations. Operators must have a customer-service orientation and must devote close and constant attention to day-to-day operations.

8. A final critical element is that operators and regulators must have respectful and constructive relationships. There should be open communication between the industry and regulators. Both should understand and work to accommodate the needs and interests of each other. Appropriate action should be taken without undue delay. In my observation, key issues sometimes fester for 5, 10 and even 20 years. The passage of time only makes these issues harder to resolve.

A well-functioning taxi system is designed and adapted to the needs of each community. But keeping in mind these eight common threads to achieving a healthy taxi system can help operators, regulators and other stakeholders bring to reality the overarching goals of prompt, reliable, comfortable and courteous cab service and fair and effective regulation of the industry.

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