An article in the Denver Daily today outlines the efforts of a new cab company to enter the Denver market, and the introduction of legislation to lower the barriers of entry into the marketplace. As I consider this article, and the situation in Tucson, I am compelled to ask a few questions:
- can the Denver metro area sustain 150 additional cabs? is the demand for taxis growing, or will it be divided into smaller parts?
- the passenger may benefit by lower fares, but will drivers' wages shrink as well?
- will increased capacity cause cab companies to compete for drivers, shrinking their profits and driving cost cutting measures that may impact service quality and public safety?
- in the past 3 years taxi capacity has increased from 200 cabs to about 450
- the median fare hasn't decreased but has gone up, as most of the independents (those cab companies other that Yellow, Discount and VIP) charge 33% per mile more than the larger fleets
- driver earnings have decreased significantly due to lease increases, fewer rides (due to the economy and increased capacity), increased gas prices, and the economy
- customer service has diminished as drivers avoid short fares, certain regions of the city, and certain times of the day due to lack of incentive to wait long periods between fares
- driver behavior has become more of an issue as they compete for the fewer fares available (this is compounded by the fact that there are not cab stands in Tucson, especially at popular venues, so that there are no orderly queues that assign the next driver up)
- abuse of drivers by the larger fleets without any recourse available to the drivers
- taxis on the street without insurance and in poor operating condition as cab companies take shortcuts to prop up profits
- drivers with poor customer services skills, lack of knowledge about the metro region, and no drug or background screening
So my immediate take on Senator Ted Harvey's efforts to open the market in Denver is that it will not lead to a fair playing field, nor will the market balance itself out. Rather, it will lead to overcapacity, poor customer service, higher fares, smaller driver earnings, and driver abuse. I would recommend that the powers to be look at all issues carefully before they loosen regulation considerably and perhaps irreversibly. And as Tucson considers regulation, we should do so step by step, without creating unnecessary bureaucracy or hindering sustainable entrepreneurialism.