Uber arrived on the streets of Los Angeles almost three years ago, boasting that its app-based ride services would help Angelenos become "more efficient, more civilized," and less dependent on their own cars. Two competitors, Lyft and Sidecar, arrived less than a year later.
The effect on taxis has been swift and costly. After several years of steadily increasing ridership, Los Angeles' nine licensed cab companies reported a 21% drop in trips in the first half of 2014 compared to the same period the previous year, the steepest decline on record.
Critics argue that taxis should go out of business if they can't keep up. But City Hall officials say that the playing field isn't level because taxis must obey rules that can stifle innovation. Now, regulators face a difficult balancing act as they try to help the city cab system: How do they aid taxis in becoming more nimble competitors without sacrificing important protections for consumers?
The first step, evidently, will be to make taxis look more like the competition.
Under a proposed order, to be put to a vote in January by the five-member Board of Taxi Commissioners, all taxi drivers would be required to use an Uber-style mobile app that would allow customers to hail a cab from their phones.
Using apps to supplement traditional taxi dispatching would create a number of more efficient options for drivers and city regulators. Fares and tips could be paid via cellphone; per-mile rates could be flexible, or discounts could be applied; cab availability across the city could easily be tracked in real time; and passengers and drivers could easily review one another.
"Ironically, we may be preserving competition through regulation," taxi commission President Eric Spiegelman said.
Los Angeles was the first major U.S. city to respond to the explosion of ride-sharing services by proposing to ease regulations for cabs. Cities around the globe have demanded that Uber — which has a market valuation of $40 billion, the most of the three startup companies — impose stricter driver training, insurance policies and vehicle inspections. The firm is banned, or soon will be, in New Delhi, Thailand, Spain, France and Nevada.
The companies have faced trouble closer to home too. Prosecutors in San Francisco and Los Angeles sued Uber earlier this month, saying that the company had overcharged passengers and misled consumers about safety. As part of a settlement agreement for a similar lawsuit, Lyft says that it will stop picking up passengers at airports without permits and will have its fare structure approved by state regulators.
Los Angeles Mayor Eric Garcetti has tried to strike a balance in the battle: He has urged taxis to innovate, but supported California's decision to regulate Uber, Lyft and Sidecar on a statewide level. Unlike the city's control of cabs, the state Public Utilities Commission has placed no caps on the number of ride-sharing drivers who can be on the road or how much they charge.
Los Angeles' 2,361 licensed cabs charge one rate: $2.85 when a ride begins, and $2.70 for each subsequent mile. Nearly 10% of the fleet is wheelchair accessible, and nearly three-quarters of the cars are hybrids.
Ride-sharing tends to be quicker and cheaper than calling a cab. In Los Angeles, UberX (Uber's cheapest service) and Lyft charge an 80-cent base fare, plus $1.10 per mile or $0.21 per minute, with a minimum fee of $4. But during high-demand periods, both firms sometimes double, triple or quadruple their fares.
Apps would make hailing a cab easier for passengers and drivers, Spiegelman said, because GPS technology would connect drivers with the nearest fare, something that doesn't always happen with the current centralized dispatch system.
The app also could be used to encourage drivers to increase service in low-income areas, Spiegelman said, by tracking how much time they spend there. Providing more service to those neighborhoods could be rewarded with trips to LAX, where drivers spend one out of every five days but can earn half their take-home pay, according to Transportation Department officials.
A driver who received a serious moving violation or was accused of a violent crime could be cut off from using the app immediately. And passengers' complaints could be submitted instantly to the taxi commission for review.
If the proposal to move to an app is approved, several key details would have to be sorted out — among them, whether to have a new app built or use existing services, such as FlyWheel and Curb (formerly TaxiMagic).
A good app may help taxis regain some lost ground, experts say, but they still have to win the battle of public opinion. Jacqueline Leavitt, a UCLA Luskin School of Public Affairs professor who studies taxi drivers, said many Angelenos believe cab companies rake in huge profits.
"The cab companies do well, but most drivers barely make enough money to get by," Leavitt said. Drivers are independent contractors who must pay for their own gas, insurance, cars and dispatch services before making a profit.
That's one reason Los Angeles isn't likely to eliminate minimum fare requirements. Spiegelman said he's wary of a competitive "race to the bottom" that reduces already thin profit margins for drivers.
He and Leavitt acknowledge that an app may not be enough to bolster taxi revenue.
"But we know what happens when we do nothing," he said. "We aren't going to come in and save the day immediately. We're going to come in and do the best we can with what we have."
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