Boston taxi medallion owners are suing the City for allowing Uber and Lyft to operate outside of existing for-hire regulations imposed on the licensed cab industry. In Boston, regulations cap the number of taxi medallions currently allowed in circulation at 1,825 – meaning there are only 1,825 licensed cabs making pick-ups in the city. Uber and Lyft, however, have managed to maneuver around regulatory restrictions in place under Rule 403, exploiting a loophole in the system.
In particular, Uber’s most popular service, uberX, which allows Uber users to request trips from drivers who operate their personal cars as – essentially – a taxi business, has been the cause of medallion owners’ and taxi drivers’ gripes. Because Uber, like Lyft, maintains that it is a information-providing tech company, rather than a transportation provider, it has been hard for cities with strict taxi regulations to impose the same rules on rideshare drivers that cabbies face; in fact, technically uberX and Lyft provide illegal for-hire services in Boston.
But Uber and Lyft have yet to cap the number of drivers they allow to operate on their platform. Factor in relaxed hiring practices – plus the fact that uberX drivers are “Guaranteed” upwards of $83,000 a year – and Boston’s fleet of rideshare drivers could outnumber the total number of cabs (1,625) by hundreds or thousands. Thus, the reason people are turning to Uber and Lyft: on-demand service, easy access, and lower costs.
A regulatory framework for ridesharing companies has been filed by the state, which would make Uber, Lyft and others legally recognized transportation models, overseen by the Department of Public Utilities. While good for Uber and Lyft, the taxi medallion owners suing the City have argued that these regulations would create an unfair, “two-tiered” system; regulations would do nothing to help prevent the demise of the taxi industry.
So why don’t drivers simply switch to Lyft or Uber? Well, for starters, numerous Uber drivers have told me that they either have, indeed, switched from driving a cab to driving for Uber; or, some drivers have told me, they drive a cab and drive for Uber (and/or Lyft, too).
But current and/or former cabbies-turned-rideshare drivers have the luxury of being able to (or have been talked into believing they can) afford to lease or own their own car. For context, what that means is: cab drivers, rather than saving money to buy their own medallion and operate their own business (for hundreds of thousands of dollars), recognize that it’s more affordable to buy their own car for $20,000 and open an uberX or Lyft business. (This should lead to more profits but low, low costs – among other reasons – have made it tougher for uberX drivers to make a living driving full-time. But that’s for another post.)
So, in theory, the ridesharing industry is better for riders (cheap, on-demand, etc.) and drivers (cars cost less than medallions, can make their own hours, etc.). These factors would seem to suggest the licensed taxi industry is nearing its end. As a result, taxi drivers who may not be able to afford to lease or buy a personal car, and taxi owners who have heavily invested in medallions – which were once considered some of the safest investments on the market – are furious with the city.
How far the network of Boston taxi industry stakeholders extends is unknown; on the surface, that networks includes the police hackney unit, taxi drivers, and all forms of medallion owners. That said, what the “Taxi Industry vs. Ridesharing War” boils down to are the medallions.
As Donna Blythe-Shaw, a spokesperson for the Boston Taxi Driver Association, told BostInno in an earlier interview: “The market dictates a medallion’s value.” At the time of the interview, all the way back in early June, taxi medallions were trading in Boston for more than $700,000 – despite uberX’s emergence as a popular alternative. Since then, Uber’s stranglehold on the market has intensified, with multiple fare cuts, and increasing support from Mayor Marty Walsh and the public.
The fallout for the cab industry has been the crippling of medallion values. As ridesharing continues to replace licensed taxi service as the industry standard for consumers, taxi drivers will, almost certainly, continue to see minimal profits; and medallion owners will stand to lose hundreds of thousands of dollars on their initial investments. (The situation is so bad for taxis, one hedge fund is betting on the taxi industry to fail.)
And thanks to medallion king pins like Eddie Tutunjian and the Boston Globe’s investigation of the industry, the general public, for good reason, has shown little sympathy towards Boston taxis. A taxi driver wouldn’t take me to (X) because it was too close. The taxi driver was talking on his cell phone the whole time. The driver said the machine was broken, so I had to pay cash.
Those are the most common complaints one hears around Boston. And they’re all accurate.
Perhaps, if Boston issued more medallions and more taxis were on the road, Uber and Lyft would have some competition. Maybe if cab fares were cheaper, medallion owners charged drivers lower shift rates, and service improved in general, the public would be more sympathetic. But those are hypothetical possibilities, and “I’ll Uber home tonight” is a common expression.
So, while reports of the medallion owners’ lawsuit against the city read like stories about “Fat Cat Medallion Owners Whining About Uber and Lyft,” there’s more to the story. Yes, it’s impossible to deny that Uber and Lyft provide a better product – public safety concerns, aside – so it would seem counterproductive for policymakers to scrap these innovative services.
But, to understand where medallion owners in particular are coming from, think of a medallion as a $700,000 home you just bought. It’s located on the water and the zoning prohibits other homes from being built to block your view; you make your downpayment and agree to a monthly mortgage rate on this $700,000 home; after a few years, developers find a loophole in zoning laws that allows them to build around you, and houses start cropping up; the value of your home drops to $500,000, and no one wants to buy it from you because the new homes sprouting up are cheaper and better; and now, you’re left paying off a mortgage you maybe can’t afford, on a house that’s worth $200,000 less than when you bought it, believing at the time that there was no way its value wouldn’t increase.
Again, the taxi medallion system, the drivers who do provide poor service, and the Eddie Tutunjians out there don’t deserve sympathy. But those three examples represent a mere fraction of an entire industry that’s been undercut by a better product that drivers and owners never knew they would have to compete with.
Heres a portion of the taxi medallion owners’ lawsuit against the city via an earlier Universal Hub report.
The current version of Rule 403 [the city rule regulating medallion cabs] is the product of decades of revisions, designed to protect consumers, ensure public safety, safeguard competition and provide non-discriminatory taxi services to all areas of the city and to the elderly and disabled. The plaintiffs and all medallion owners operating in Boston have invested significant capital and resources to develop systems of infrastructure that meet Rule 403’s broad ranging requirements. …
[T]he City requires taxi owners to pay large sums for the “exclusive” license to engage in the business of For-Hire Transportation. For decades, taxi owners accepted these burdens and expenses as part of a quid pro quo with the city for the exclusive rights granted. The City promised, in return, that taxi owners, and the taxi affiliations and drivers who operate taxis, would have the exclusive right to provide For-Hire Transportation to individual passengers. In reliance on the City’s decades-long promise of exclusivity, taxi owners have invested hundreds of millions of dollars.
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Correction: An earlier version of this story wrongly reported that there are 1,625 licensed taxis in Boston. The correct total is 1,825. Sorry for the confusion.
Photo via Richard Kelland
