Montreal Gazette

Other cities offer possible solutions for regulation

Customers take to new service as taxi industry struggles to adjust

- ANDY RIGA ariga@postmedia.com twitter.com/andyriga

You don’t see hoteliers blocking city streets to protest against Airbnb. Or the National Assembly calling special committee hearings into Amazon’s impact on retailers.

But Uber — a popular, fast-growing worldwide transporta­tion service that has angered taxi drivers and befuddled Quebec politician­s — is a different kind of disruptive innovation.

Speed is one reason. “Uber is taking market share very quickly,” said Jacques Nantel, a marketing professor at HEC Montréal. “It took many, many years before the music industry started feeling the impact of (downloadab­le music), whereas with taxis, in less than a year, Uber is taking 10 to 15 per cent of the market.”

The fact that taxis aren’t equipped to deal with competitio­n is another factor. “Taxis are kind of a cartel,” said Youri Chassin, an economist at the Montreal Economic Institute. “It’s a supplymana­gement scheme that limits the number of taxis on the road.”

Airbnb, a property-sharing service, is also upsetting an industry but in that case, hotels were already accustomed to some competitio­n (bed and breakfasts, for example), Chassin said.

“There’s something different about transporta­tion,” added Barry Eidlin, a McGill University sociologis­t.

Services like Uber, which connects riders and drivers via apps, are part of a network — competing with other ways of getting around, including taxis, private cars, cycling and public transit.

“It affects how everything works together in a way that, say, whether you buy your book from Amazon or your bookstore does not,” Eidlin said. “That might shape the ecosystem of retailers but it doesn’t shape your everyday life experience in the same way as transformi­ng the transporta­tion infrastruc­ture would.”

THE STANDOFF

What to do about Uber is a complex question but until recently, Quebec’s official response has been confusing.

“We didn’t know what the direction would be,” Chassin said, noting that though the province was initially adamant that Uber was illegal, Uber continued to operate. A new transport minister, Jacques Daoust, appears to have a more constructi­ve approach, he added. Daoust has said Uber is “here to stay” and is launching public hearings, beginning Thursday, into Uber and the taxi industry.

Uber, a multinatio­nal with deep pockets, is arriving with a radically different business model than traditiona­l taxis.

“It’s more oriented on customer service and unfortunat­ely, the taxi industry has been very slow to respond,” Nantel said. That’s in part because in Montreal, as in many cities, the industry is fragmented, with small players unable or unwilling to invest in changing their technology and customer service, he said.

Montreal has tried to upgrade taxis — by institutin­g a dress code and requiring electronic payments, for example — but many drivers aren’t playing along, Nantel said. “I don’t feel an urgency on their part to change their behaviour,” he said of cabbies.

Consumers appreciate Uber because it tends to have cheaper rates and quicker pickup times, Chassin said. Because of its sophistica­ted smartphone app, customers also appreciate the control they have: they can see the location of nearby Uber cars, they know the waiting time and they can choose a driver who has been vetted by other users, he added.

“In the end, it’s the customer who’s going to decide what is best suited to his needs,” Chassin said.

For now, consumers are stuck in the middle.

On the taxi side, the industry has a strong lobby built during many years of close collaborat­ion with Montreal and the Quebec government, Chassin said. “They have to think in new terms, which is not easy for the taxi industry or for bureaucrat­s and politician­s. They’re going to have to adjust because the market is adjusting.”

On Uber’s side, the company “has an attitude of ‘it’s my way or the highway’ and it’s trying to just impose itself,” Eidlin said.

Uber presents itself as “an app company” but it’s more than that, he added.

“They’ re trying to pretend they’ re not employers; they are absolving themselves of any responsibi­lity for abiding by minimum-wage laws, public-safety laws, which are there for a reason,” Eidlin said.

“It’s not like being a taxi driver is a great job at this point, either, and taxis have gone a lot more toward the independen­t-contractor model. But it’s more of a regulated market, with a taxi commission that can regulate the relationsh­ip between employer and employee.”

Some Quebec taxi drivers are also unionized, providing a framework for grievances.

OTHER STRATEGIES

There are models Quebec could follow.

Last month, Edmonton became the first Canadian city to legalize services like Uber, with new rules taking effect March 1. Uber will pay $70,000 per year to operate in the city, and Uber drivers will be required to have commercial insurance. Six cents per Uber trip will go to the city.

Edmonton also set a minimum per-trip price — $3.25 — on taxis and Uber. Only taxis will be permitted to pick up street hails and use taxi stands.

Chassin said Edmonton’s low threshold for entry — $70,000 per year — is a good idea because it leaves the door open for Uber competitor­s, such as Lyft, to enter the market.

The Australian state of New South Wales, which includes Syndey, one of the country’s biggest cities, took a different approach when it set out ride-sharing rules in December.

The state imposed a $1 flat tax for every taxi and Uber ride, with the money going to a $250-million fund. It will be used to compensate the owners of taxi permits, the values of which are expected to drop. The new rules came just three months after the state cracked down on ride-sharing, suspending the licences of dozens of Uber drivers. As in Edmonton, only taxis can be hailed on the street.

Under the New South Wales system, “it’s easier to enter the market and it’s easier to compete,” Chassin said. The wages are probably going to stabilize at a new level — maybe less than the previous level of taxi drivers, but there will be more opportunit­ies and there will be more services for customers.”

Quebec, too, may have to consider a taxi-permit buyback program. In Montreal, taxi permits are valued at about $189,000.

“What we are facing is a standoff

between two revenue models and two types of economic logic,” Nantel said. It’s a fight between the highly regulated taxi industry and the free-market Uber system. If Quebec authorizes Uber, “you’re going to have to buy back taxi permits. When you’re selling permits, what you’re essentiall­y doing is granting a quasi-monopoly.”

Under the taxi system, the government limits the number of players but also imposes regulation­s. “If you’re allowing part of that trade to be working without a permit, you’ve got to buy the permits back,” Nantel said.

For Eidlin, the first step should be to weigh the trade-offs.

“Uber is obviously filling a need and creating something new that people want,” he said.

But it’s not a black-and-white issue. Some of Uber’s popularity is “due to technologi­cal innovation and bringing something new to the table” but it’s also “due to figuring out new ways to skirt labour and tax laws,” Eidlin said.

“Regardless of what Uber is doing and whether it’s a good or bad thing, the key point is that it needs to be part of a public discussion because the things that Uber is doing have an impact on the public.”

National Assembly hearings “have to look at the bigger picture,” Eidlin said. “It’s about the future of transporta­tion in this province. It’s not just about Uber and taxis. The question of how we get around is a fundamenta­lly social question and it requires social consultati­on.”

In the end, it’s the customer who’s going to decide what is best suited to his needs. YOURI CHAS SIN, economist, Montreal Economic Institute

 ?? DAVE SIDAWAY ?? Taxi drivers protested against UberX in Montreal on Wednesday by occupying the parking spaces along both sides of Sherbrooke St. during the morning rush hour. Parking along major city thoroughfa­res during morning and afternoon rush hours is not...
DAVE SIDAWAY Taxi drivers protested against UberX in Montreal on Wednesday by occupying the parking spaces along both sides of Sherbrooke St. during the morning rush hour. Parking along major city thoroughfa­res during morning and afternoon rush hours is not...

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