September 9, 2015
Municipal regulators in Toronto, like those around the world, have been grappling with the entrance of ride-sharing firms and attempting to determine whether (and the extent to which) they should be regulated.
The City of Toronto has released a much anticipated staff report that will be considered at an upcoming Toronto City Council meeting on September 30th (see: 2015 Ground Transportation Review: Taxis, Limos and Uber). The report is the result of a Toronto City Council directive in July for City staffers to undertake a review of Uber and similar technology related companies, including a review of safety and competition issues.
The report makes a number of recommendations for changes to the City’s licensed taxicab and limousine regulatory regimes. In reading the new report, I was cheered to see that it is, from a competition perspective, reasonably balanced. While hardly an open market recommendation, it is progress.
That is, it does not, for example, recommend that the door be closed to ride-sharing applications (or as the report refers to them “Transportation Network Companies”), that the current fee/tariff line be maintained or that existing numbers of taxi licenses be limited. On the barrier side, however, it does recommend that the City continue to regulate (or as some would say limit) taxi fees, license numbers and other key aspects of taxi and limousine competition in the City.
In reading the new report, it seemed to me that several specific recommendations represented progress (i.e., competitive “pros”). These include: to reduce the “drop fee” for taxis in Toronto from $4.25 to $3.25; that 100 new taxi licenses be issued; and that the City further review taxis and competition and make recommendations to “lessen regulatory burden and enhance competitiveness in the municipally-licensed taxicab industry” (e.g., fares, vehicle requirements, training, etc.). Hopefully, a further regulatory review lowers barriers for taxis and ride-sharing firms alike to compete.
On the other hand, City staffers continue to appear to be intent on continuing to control the taxicab and limousine markets in Toronto. This continuation in regulation is reflected in several recommendations (i.e., competitive “cons”), including bringing ride-sharing applications within the existing regulatory regime; and reducing, but not eliminating, the “drop fee” for taxis in Toronto.
With respect to the first recommendation, the City could have recommended that, for example, ride-sharing applications represented a different market or, for example, should be subject to different (or less) regulation, as has been the case in some other international markets. This recommendation includes a requirement that only taxi brokers or limousine service companies, as defined by a proposed amended Municipal Code, be permitted to contract or “connect” with passengers.
As for the second recommendation, while a slight competitive “pro”, in an open market firms are able to set whatever rates they determine make economic sense according to the market, whether minimum, maximum or “surge pricing” based on demand.
In addition to these competition related recommendations, the City staffers also make a number of common sense suggestions relating to insurance, safety and criminal record check requirements. It is difficult to argue that safety is not a key and valid regulatory consideration. Lets just hope that the City can keep competition and safety separate and not, for example, impede more competition in the taxi sector in Toronto in the name of “safety”.
Also interesting in the City’s new staff report is the Summary, which does strike a reasonably balanced approach to competition in the Toronto taxi sector. Among the staffer comments that caught my eye were statements that while the taxi industry was concerned with increased competition (no surprise there), Toronto residents strongly supported more choice and innovation; that Uber and similar firms were causing “wide-scale disruption of established ground transportation industries” (again, pretty obvious, but in competitive terms, this is a good thing); and comments, which reflect the specific recommendations, that there is a need to reduce regulatory burdens, increase competition and lower barriers for new entrants.
In sum, while this new report takes a fairly Canadian “balanced” approach to competition, it seemed to me in reading it to be a step in the right direction. Lets now hope that Toronto City Council agrees that more competition in the Toronto taxi sector (and less barriers) is indeed a good thing.
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