Mike Nudelman
There's a fierce fight between ride-sharing-app startups and the taxi companies raging around the country, and I think I know a way to make peace, let both sides walk away with a win, and, most important, give the riding public the best of all worlds.
This taxi tiff reminds me of the fights over Napster and other music-download services that I had a front-row seat for during my time in Congress. Back then, Steve Jobs was the one who managed to bridge the gap between the startup upstarts and the record labels. Borrowing a page from his playbook could similarly lead to a solution here.
Steve is no longer with us, but I think there’s someone else who can step up and play his role in this ride-share row — Rahm Emanuel. So, how does the Chicago mayor morph into the cab world’s answer to Steve Jobs? Allow me to explain.
In this case, Uber, Lyft, Hailo, Sidecar, and others that let you hail cabs on a smartphone are like a modern version of the old file-sharing companies. They are giving consumers something they want delivered in a format they want for a really sweet price. The discounts they offer might not be as cheap as a House of Pain song was on LimeWire in 2001, but being able to get across Manhattan for $6 is pretty close. And just as Napster was illegal, it is pretty clear that the Ubers of the world are operating in a legal gray area in a lot of cities that have laid down clear legal markers about requirements for cars, drivers, insurance, and other tools of the trade.
Up to now, sadly, the taxi-medallion owners have responded to this challenge like the record companies did in the 2000s — with bluster, outrage, and their own lobbyists and lawyers. And like the record companies, they have run up a pretty impressive list of states, localities, and courts that have heeded their demands that these upstarts stop.
However, I believe the taxi industry should lay down arms in the regulation wars. They should learn the lesson of the music industry and go into the e-hail business themselves.
While record companies were fighting a death battle to protect their business model of CDs sold at record stores, they missed a chance to adapt and become leaders in the a la carte cheap-download world that Napster had created. It was Jobs with his iTunes platform who eventually showed the way for the music industry to make money in a world where MP3s were king. Jobs also showed that consumers would opt for a well-regulated and legal model even if the price point isn’t zero.
Cab companies have an opportunity to adopt a similar strategy. They should lose the obsession with requiring the ride-sharing companies to comply with every single requirement that is imposed on medallion cabs. The yellows may have good arguments for their positions, but if these startups want to have drivers with insufficient insurance or illegally use private cars for commercial purposes, leave it to the inevitable backlash to eventually get those minimum standards raised.
Rather than locking horns with the ride-share companies, the taxi industry should work on joining them in allowing customers to hail their cars with apps and smartphones. Would the taxis be able to compete if given similar tools? Maybe not in terms of price, but they have other advantages. The regulatory corner cutting of the ride-sharing companies has no doubt already given many riders pause amid increasing stories of incidents in their cars including
wild surge pricing, drivers
using Facebook chat while on the go, and even
alleged sexual harassment by unlicensed Uber drivers. The better-trained, more experienced, and, yes, more regulated drivers make a better option for the rider choosing based on quality and safety rather than simply the lowest price.
Some readers may recall
my column last month in which I criticized Tesla for not respecting existing regulations in its attempts to sell cars directly to consumers without using franchise dealers. So, why am I encouraging the taxi companies to adapt to a new model rather than fight to the finish to defend existing regulations? In Tesla’s case, they want rules changed in a way that could eliminate dealers, who lawmakers decided offer consumers added value by helping to enforce warranty agreements and spread competitive pricing. In this case, the taxi companies are the ones who have been targeted by the disruptors. Just as with Tesla, I’m not suggesting taxi owners ignore laws or the courts, but they also shouldn’t ignore the innovations of their competitors.
Sadly, I don’t see the licensed cab companies adopting this approach. The battle lines are drawn too starkly, and both the cab industry and its regulators seem perfectly happy with the status quo. Medallion prices are at record levels, and regulators are being leaned on pretty hard to, well, regulate.
I say sadly because I have friends in the taxi business. They supported me in a big way when I was running for various offices, and I have advised them for money from time to time since I left Congress. Although there are some true innovators in the yellow-cab world, given how many lawsuits are pending around the country right now as part of this debate, I doubt I will keep many friends in the industry after this column. However, in spite of the seemingly entrenched opposition, I’m certain the industry is missing a big opportunity here.
This is where Steve Jobs and Rahm Emanuel come in.
It was Apple, a third party, that eventually figured out how to help the music business live with — and even love — the MP3. Just as Apple dragged the record labels into a profitable digital future with iTunes and paved the way for other services like Rhapsody, Pandora, and Spotify, I think it's going to need to be a third party that steps in and shows the taxi industry how to work with new technology rather than against it.
Someone is going to be the Steve Jobs of this Uber-taxi battle, and I think Emanuel’s the guy.
The grand bargain is there for the making, and the mayor of Chicago is probably smart enough to realize it. (And I'm not just saying that because I have a soft spot for overbearing big-city politicians with Clinton ties.)
The deal would look like this: Leave the ride-shares largely alone. Maybe insist on some insurance minimum and some baseline requirements of the drivers and cars, but let them be. Don't treat them like full-fledged taxis like most medallion owners are clamoring for. If these startups want to continue to subsidize fares or experiment with pricing models, more power to them.
But here's the Steve Jobs part. Cities should be the ones that create the taxi world's version of iTunes. Municipal governments can create and require a single city branded medallion taxi e-hail app. Since the tracking technology is already a part of most big-city cab fleets, and most cities already require credit-card readers, the technological backbone is already in the cars for cities to get into the ride-share business. Taxi's are essentially extensions of the mass transit in a city, so why shouldn't they create easy ways to access, track, and pay for that infrastructure?
It also would be a boon to the city as it would let them collect travel data and help improve access to service in neighborhoods that have been underserved by encouraging drivers to make more far-flung trips by giving them more confidence they could find return fares from places with less busy street traffic. Of course, an app could also be an excellent revenue source for a city that wants to sell advertising or use the tracking data and rider smartphone feedback to improve enforcement.
The ride-share companies benefit here too. Not only do they get to keep their cars on the road but they could bid for the contracts to build and run the apps for the cities that have them. Of course, most important, consumers win because they get to hail the entire universe of cabs from both medallion and startup fleets right on their phones.
There is nothing special about Chicago. This city-branded taxi app could work in Boston, San Francisco, New York, or really anywhere that has a regulated fleet. However, Chicago is examining the issue of ride-share regulations, and no one could ever accuse Emanuel of lacking the elbows necessary to push through legislation over the objections of an entrenched interest. The question is whether Emanuel has the vision of a Jobs and is willing to make peace between the warring cab factions by giving the taxi world and all of us its version of iTunes.
