How a non-Uber model of ridesharing can save the taxi industry

Our earlier postings focused on the basic Uber rort that has deceived policy-makers around Australia and overseas. This does not mean we reject the concept of ‘ride-sharing’. In fact we think that a non-Uber model of ride-sharing can help save the Queensland as well as other Australian taxi industries – that this can be part of the solution to the non-competitive cartels and over-regulation of the past (at the expense of drivers and also individual owners) which are the target of ruinous present efforts of new corporate monopolisation hiding behind dishonest notions of ‘de-regulation’ and ‘creative destruction’. Uber’s aim is take over the world with driverless cars and to do away with jobs for drivers – when professional driving should be the exemplar of the service economy offering opportunities and work for many who don’t fit into other employment profiles and/or enjoy engaging with and assisting people.

An example of the kind of an overall two-tiered framework needed to provide a sustainable foundation and ‘reform solution’ for a personalized transport industry in Queensland*

Below we develop the outlines of an optimal resolution to the Qld taxi-cum-personalised transport industry crisis – a model constructed in terms of a series of steps which involve relevant sustainable methods of ‘complex problem-solving’ (see the original full paper where this solution was further detailed). This will be framed further in relation to a balanced and convergent appraisal of what we call the ‘macro stakeholders’ (the interdependent interests of government, business, the community/public, and wider ‘industry’). On this basis also, we will then put forward a specific solution formula and related requirements which could be enacted by the Qld government to hopefully ensure the fairest as well as effective outcome for the local industry. This will be in the context of a key related proposal for the government to legislate a new independent body (a proposed Taxi Commission) able to continually monitor and further guide the Qld taxi industry in the future on a more flexible needs basis.

First, a macro stakeholder perspective is really needed to be able to be able to effectively understand and address a range of related questions and issues ranging from why ‘save’ the taxi industry and/or how to integrate a sustainable model of ride-sharing so that this complements not conflicts with the public service and related functions of a healthy and optimal taxi industry. This involves a range of related tensions or conflicts which likewise require such a related ‘balanced perspective’.  The central tension lies in the public service vs. commercial roles of the taxi-cum-personalised transport industry generally and operators more specifically. The public service does not just lie in being required to service the kinds of jobs that those only interested in profits are not interested in. Such jobs include those with disabilities (e.g. with wheelchairs and seeing-eye dogs), regular ‘small jobs’ (especially involved school children, pensioners, local shopping centres, and government-sponsored accounts), and other vehicular options (such as maxi-cabs, wheelchair enabled taxis, and limousines or executive taxis). As indicated, it also includes a wider function of both directly and also indirectly (e.g. fares to local train stations or bus stops) supporting public transport options.

The related tension of ‘taxi-rank and taxi-hail’ work vs. taxi/ride-sharing bookings is another in which taxis and ride-sharing a general delineation which makes sense (again with the right overall balance).  What this suggests is a general ‘two-tiers’ model which might operate in a re-calibrated taxi industry. But this can only work on the basis of a related framework for how both driver and operator regular income needs to be based on an effective ‘level playing field’. In other words, a re-calibrated industry should still involve the foundational role of a formal or recognised taxi service by customised cars which are registered for that purpose and distinguished as a formal taxi service. This might be both complemented and supported by ride-sharing options involving personal cars which would need to meet certain safety standards and be registered – but not necessarily the same requirements as proper taxis. One such option is to limit or at least delineate part-time ride-sharing (e.g. two fares a day in peak hour traffic both ways) from the main proposal to regulate full-time ride-sharing as a second complementary and supportive tier to conventional taxis available to all registered professional ‘personalised transport’ drivers registered with the Queensland Department of Transport.

The public-private as well as taxi and ride-sharing balancing act we are concerned with here has two critical dimensions which will need to be further outlined. One is the general mechanism of balancing regulation and market forces. Our proposal for minimal but sufficient regulation will therefore should be adequately be supported in practice by the linked functions of transparency, technology and free market principles based on a couple of related keys to a basic ‘level playing field’ to be discussed further. The transparency will be facilitated by general awareness of simple principles of operation and sharing of information. The technology (also ensuring transparency) will not just involve smart phone applications but also related database, GPS and communication as well as security functions to help ensure government, business/industry and community stakeholders are all on the same page. The free market aspect to support this will lie in (a) an open field of smartphone apps and related company support (which rules out the Uber model automatically) for complementary taxi and ride-sharing books along the lines of how GoCatch was initially trying to replicate the GrabTaxis model, and (b) in relation to the formula proposed below for balancing existing taxi number and ride-sharing registration applications in terms of location-based supply and demand.

The agency of a proposed Taxi Commission to represent the convergence of macro stakeholder interests will be needed to help ensure that the right regulatory (e.g. public vs. private) balance is achieved – and not be subverted either by inflexible bureaucracy or vested commercial interests. It will therefore need to itself involve two tiers. The operational tier will need to involve ongoing and regular monitoring of, and also adjustment to, changing needs for both taxis and ride-sharing in tandem. To ensure this remains independent and does not suffer from the kind of ‘disconnects’ which afflicted the taxi industry in the past, this will also need to involve some kind of professional board with the clear-cut authorisation and transparent agenda to balance the interests of government (especially the Department of Transport), the owner-driver interests of an extended taxi industry (including ride-sharing options), related businesses which indirectly or directly support the industry (regulatory inspectors, auto mechanics, and specialised technicians) and also the public support for public as well as personal transport policies and practices.

Some of the main sticking points which will need to be overcome are internal to the existing taxi industry reform efforts. Others are more externally related to an associated challenge of integrating ride-sharing options under the aegis of a re-calibrated taxi industry in Queensland.  Snapshot #3 below outlines some of the key points.  This is organised in several related ways to provide an example of an exemplary ‘complex problem-solving framework’. In short, any overall solution would also need to sufficiently or adequately address all of these issues as well the central dilemmas of sustainability. The vertical organisation of the snapshot also is conceived to cover both past and future emphases that a re-calibrated taxi industry might further to address. The past also involves key internal challenges or dilemmas facing industry stakeholders (operators, drivers and taxi-booking companies), whilst the future focuses on how associated technological and organisational challenges will need to be also sufficiently or adequately resolved.

Perhaps the most difficult issue (and certainly the most emotional for many involved in the state taxi industry) is how the Uber challenge has already caused the values of taxi plate licenses to generally collapse. Our re-calibrated model will at least stabilize the numbers of existing licenses whilst offering real hope for the future of the industry in terms of a viable solution to the current challenge and crisis (an increasingly rare commodity with good reason in current framework).  However, there is no getting away from how, whatever happens, there will almost certainly not be any going back to the heights of the previous values – which in any case were never sustainable. These values might be also re-calibrated in relation to the optimal values, refined costs and competitive principles needed for a sustainable future industry – to allow taxis to have an effective ‘level playing field’ with the ride-sharing cars which currently (and illegally) pay little if any of the same required costs.

Snapshot #1

     MAIN STICKING POINTS/ISSUES                          AND KEY RELATED PROBLEMS

  Past   Internal
Recent collapse of taxi plate licenses and current wholesale industry uncertainty To fairly compensate or not the existing taxi owner-drivers (key issue of wider dilemma re: ‘saving’ the industry)?
The link between the overall industry and  taxi booking companies in terms of  government-sanctioned industry ‘self-regulation’ past practices. Ongoing role of taxi booking companies (B&W Cabs, etc.) ? Especially in the context that the past role has largely been superseded already?
Existing negative image of taxi drivers and industry How to change a negative image/loop into a positive one and also drag drivers (and industry) into new service as well as sharing economies?
Future External
The link between non-Uber emerging smartphone app booking companies and a future taxi industry ‘balancing act’ between public-private aspects of transparency and free market forces. How to ensure all taxi drivers and ride-sharing owner-drivers not only make a reasonable income but reasonably equivalent or equitable?
The oscillation from over-regulated past taxi industries to counter-productive ‘de-regulation’ ignores the need for ongoing monitoring and at least basic regulatory structure and processes. How to balance promise of free market principles with at least some minimal, emergent and dynamic ‘regulation’ of the re-calibrated industry?
People tend to confuse Uber with not only a ride-sharing model but also a ‘sharing economy’ opportunity (when Uber is anything but these things in reality or practice as reasonably understood). How to understand and/or support how a non-scarcity model of lower fares + plus more cars can lead to more income for drivers and more work for all in the future industry (+ other benefits beyond)?

 

In relation to our detailed proposal here for re-calibrating the Qld taxi-cum-personalised transport industry we might refer to the required ‘middle way’ as a just in time regulatory solution and framework – adapting the use of the use of the ‘just-in-time’ concept in production and also in education to refer to a optimizing strategy to reduce costs and enhance competitiveness whilst maintaining quality in terms of leaner and transparent outcomes-based processes (e.g. Voss & Clutterbuck, 1989). In contrast to the ‘ad hoc’ nature of the Uber model (and Uber-influenced de-regulation regimes), a sustainable just-in-time regulatory framework (and implementation) for a ‘re-calibrated’ Qld taxi-cum-personalised transport industry (such as the following) is needed:

 

Snapshot #2 – In a nutshell:  Key aspects of our ‘re-calibrated’ model

1.       Overview points (macro level)

–          Current taxi plate numbers and values to be generally maintained and stabilized as much as reasonably possible through an orderly transition period – along with sustainable projections of future industry (and income) growth.

–          Will include a sustainable (i.e. non-Uber) model of ride-sharing under the aegis of a re-calibrated taxi industry (i.e. the two tiers of normal taxis plus a slightly cheaper ride-sharing alternative).

–          Also the sustainable basis of a related projected transition from a scarcity to ubiquity model of the taxi industry with all fares projected to become significantly cheaper proportional to drivers being able to conversely increase present incomes – the key also to taxis really helping to resolve ‘first and last mile’ public transport challenges and reducing ‘private car use’ and related transport pressures.

–          Initial ride-sharing options should at least include part-time or irregular options (e.g. 2 trips per day in peak hour traffic) and be gradually extended with trialing also as a full-time option to meet projected growing needs and additional passenger markets.

–          All (taxi + ride-sharing) drivers to require industry accreditation overseen as per existing arrangements with the Qld. Department of Transport

–          All (taxi + ride-sharing) cars required to meet basic plus additional-where-appropriate safety standards, undergo regular inspections and appropriate CTP insurance requirements (irregular/casual ride-sharing cars will have reduced costs)

–          The image/brand of taxis (and especially taxi drivers) to be also re-calibrated as part of a new digital-age ‘service economy’ (not just a supplementary sharing economy) model – reinforced by a related new regulatory framework and related ‘cottage industry model’ focused on owner operators and drivers, and small ‘co-ops’ not large-scale management, leasing and investment schemes (and related past ‘disconnects’).

–          The Qld government not only has a responsibility to (a) make a sustainable rather than hasty decision in the public interest about the ‘right direction’ for the future taxi industry as a public-private partnership, but also (b) (because of its direct role in past industry ‘disconnects’) to provide reasonable compensation for some taxi operators. 

–          The (macro) sustainability of the future industry to be linked to (a) related (micro) mechanisms of ensuring a functional industry ‘level playing field’ and (b) a ‘hand on the wheel’ (macro-micro) monitoring and intervention only when necessary by a genuinely independent Taxi Commission (see below).

 2.       Proposed basic formula of a related two-tier taxi industry fare system (micro level)

–          A re-calibrated taxi industry can only sustainably accommodate an additional and complementary ‘ride-sharing tier’ if a critical ratio of typical fares (possibly around 14:10 – to be trialed and refined in the transition period) is established and maintained.

–          Ultimately this should reflect a market research ‘critical ratio’ by which existing taxi customers would be maintained whilst a new and additional market is created by the addition of a slightly cheaper ride-sharing alternative.

–          This would also be the key to a related requirement to ensure that all accredited (i.e taxi+ride-sharing) ‘personalized transport’ drivers are basically able to make at least roughly equivalent incomes.

–          It would further provide the reference point for helping to establish an effective ‘level playing field’ for taxi operators and ride-sharing owner-drivers – the market force ‘critical ratio’ also between the effective running costs of existing taxis (ultimately including taxi plate values) and proposed new ride-sharing options.

–          This critical ratio can also (a) inform the ‘scale’ of related projections of taxi fare adjustment (i.e. become more affordable) as well as (b) a related critical threshold of several related public-private mechanisms of related ‘just-in-time’ regulation

–          For instance, this ratio will inform how (a) existing taxis will retain and be compensated for key public service (i.e. universal service obligations – especially to existing subsidy schemes, disability customers, marginal areas, etc) which ‘ridesharers’ may not want or be able to take up (e.g. wheelchair modified taxis) and (b) how taxi plate registration can remain ongoing (e.g. to ensure that there will be ongoing commitment to any and all passengers) whilst the ride-sharing alternative might just involve annual registration and related fees.          

3.       Implementation requirements (Macro-micro linkages)

–          All taxi and ride-sharing operators and drivers to be independently ‘affiliated’ with (i.e. registered with and regulated by) with an independent Taxi Commission [i.e. why Uber is unlikely to meet the basic requirements of a re-calibrated taxi industry model]

–          Taxi booking and dispatch to be an effective free market of smartphone apps and/or direct service by operators directly regulated by the independent Taxi Commission  supporting the complementary taxi + ride-sharing options. As well as Go-Catch-type service companies and also existing taxi-booking companies, Uber can only be included if it dramatically changes its existing ‘app’ model. Non-Uber apps should be able to charge appropriate booking fees for each ‘monitored’ job – some of which might help to fund the Taxi Commission (along with a percentage of industry registration fees paid to the government)

–          Non-sustainable leasing arrangements, ‘set and forget’ regulatory frameworks, and  management company models of the past to be substantially modified or phased out. 

–          The central responsibility of the proposed Taxi Commission will be to monitor and adjust where needed (a) the fare and related costs critical ratio of the proposed two tier scheme; (b) existing numbers of both taxis and also ride-sharing car registrations in various areas, and (c) appropriate balancing also of some related aspects of the associated transparency-technology-free market formula

–           The Taxi Commission should itself involve a two tiered arrangement of (a) a ‘hands-on the wheel’ overseeing of industry affiliation processes and issues as well as on-going monitoring and adjustment of taxi numbers and fare levels where needed, and (b) an overall ‘hand-on the wheel’ guidance by a genuinely independent professional board of ‘macro stakeholders’ from government, business, and the community as well as from the industry [with its terms of reference and responsibilities simplified and sufficiently/reasonably triangulated re: the transparency-technology-market formula.

 

However, what is crucial is that the industry is pointed in the right direction in terms of some general solution which is able to provide an integrated and sustainable framework for also addressing a range of related issues here. This is in contrast to any ad hoc or piecemeal view of and planning and decision-making about some initial options or list of recommendations. 

Snapshot #3:Non-sustainable industry frameworks and related consequences of policy flip-flopping

Perhaps the only real or sustainable ‘good news’ here is that it should not be too long before Australian states that have already hastily jumped to ‘legalise Uber’ realise their mistake – and likewise their local key ‘macro stakeholders’ in business, the wider community and different levels of governance.  It is never easy to reverse a hasty decision with such wide-ranging implications and impacts – and when governments do they often fall into a negative loop of ongoing policy or even just verbal ‘flip-flopping’ between opposite approaches. This tends to just serve to keep increasing the demoralization of all. We project three possible scenarios that link to the Qld parliamentary decision-making options from here:

1.       The ‘logical’ (yet dystopian) scenario: It should by quite obvious to any reasonable person ready to look more closely at the situation, that to basically allow Uber to come and operate as an alternative taxi service of home-operated cars and drivers which generally circumvents the regulations, costs and ‘universal service obligations’ and costs of standard taxis is (a) unfair, and (b) would logically result in a full and systematic devastation of existing taxi operators, drivers and the industry more widely. Whilst Uber concedes it is really planning for this to happen with driverless cars, its’ related aim of 100% domination of the market presently requires drivers to take on the running costs of cars (and related uncertainties as well as    additional costs and charges) whilst they pay currently 25% of the gross (not net) take to their off-shore base in Amsterdam. In this way Uber aims to pay little if any tax, and make its mainly off-shore investors and shareholders very rich. After its initial seduction by some cheaper fares in some areas, the public and also the government will continue to find out that are many direct and indirect negatives. Few aspects of the local public service component of taxis (ranging from pensioners through to those with disabilities – especially in outer or remote areas) are likely to be effectively taken on by Uber the company. As well as the loss of the taxi industry capacity as also a valuable community asset, the government would miss out on much or even most of direct fees and indirect taxes that go to fund related or other services and infrastructure. After their initial flirtations with the Uber model, drivers are already finding out that this may well result in worse conditions and a ruthless war with other drivers as costs further rise and average regular income further deteriorates for all.

2.       The flip-flopping or ‘lingering death’ scenario (the most likely): As is already happening in other states, additional concessions, incentives and/or long-term cheap loans will be enacted from time to time to try and alleviate the negative consequences of Uber legalization for taxi operators (although for many this would only be delaying the inevitable or providing false hopes). There is also likely to be some not-so-successful efforts to try and get the Uber model to pay compensatory fees and taxes as it dominates and as taxis further struggle. There is likely to arise an unregulated ‘Wild West’ situation –  especially in terms of the breakdown of current universal service obligations to sick and elderly as well as the financially and geographically ‘disadvantaged’ customers. This will also mean real potential for dissatisfaction, conflict, and even violence as (a) full-time Uber drivers as well as taxi drivers increasingly struggle to make any kind of reasonable income, and (b) as they compete with the others for fares with probably an increasing desperation which may also makes taking any kind of taxi a stressful experience for many customers.  All drivers will be less enthusiastic about taking small fares and also those with a community or public service aspect. Meanwhile, the situation will likely be complicated by a similar battle between the smartphone booking apps (and additional manual taxi booking options) of Uber, existing taxi-companies, and other incoming players like GoCatch and Cabcharge who may well be tempted to just ditch their support for taxis (but also the local community and any great interest in supporting government transport policies) and try to emulate or beat Uber at its own game (perhaps also in terms of similar off-share ‘tax minimalisation’ initiatives, etc.).

3.       The genuine reversal (or lesson learnt) scenario:  A third (not very likely but always possible) scenario is that the state governments which decided to effectively legalise Uber soon realise that they have to decisively rectify their decision and try to still save their local taxi industry before it is really too late. They would also realise (a) that it will not be possible to return to the pre-1990s model of the taxi industry, but (b) that the kind of complementary ride-sharing or ‘two-tiered’ model (not the Uber model) is really the only sustainable way to go for both all internal and external industry stakeholders.

 

 

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