KEY ISSUES OVERLOOKED IN RIDE-FOR-HIRE DEBATE
Alex Hemingway thinks B.C. should consider a non-profit model.
There is often astonishment when people learn there is no ride-hailing in British Columbia.
The provincial government has passed legislation expected to bring ride-hailing to the province late next year, though questions remain about what it will look like.
The debate on ride-hailing has largely been stuck with the pro and con sides repeating familiar arguments.
Those in favour argue it would bring faster and cheaper access to vehicle-for-hire transportation, and those opposed say companies like Uber would only create more unstable work and lower wages for drivers by flooding the market with vehicles.
Important aspects of the story are being overlooked, with major implications for congestion, air pollution, greenhouse gas emissions and traffic deaths.
U.S. research shows that when companies like Uber and Lyft enter a market they increase vehicle miles travelled, adding 2.8 vehicle miles to the roads “for each mile of personal driving removed.” That’s because users often switch from other modes of travel like walking, cycling and public transit and they take more trips overall than they otherwise would have.
Cities like Seattle, New York and San Francisco are grappling with increased congestion from the expansion of Uber and Lyft. For example, in 2012, Seattle taxis provided 5.2 million trips, but the two ride-hailing giants are on pace to provide 31 million trips there this year.
In addition to the inconvenience and economic costs of traffic congestion, increasing vehicle traffic creates more deadly air pollution and higher greenhouse gas emissions. Ride-hailing has also caused an increase of 1,100 more traffic fatalities deaths per year in the United States.
Ride-hailing tends to be dominated by one or two firms in a given market. The business models of big ride-hailing companies are premised on establishing and profiting from this dominant market position, which is why venture capitalists have been willing to pour billions into Uber even while it operates at a loss.
Established ride-hailing companies benefit from a powerful set of advantages underpinned by what economists call network effects. Even if users are aware of alternative upstarts, they are unlikely to use them because most drivers are on the established apps in their market. In turn, drivers have little incentive to switch to smaller apps because almost all the customers use Uber or Lyft. This is similar to the self-reinforcing dynamics that help keep Facebook the dominant social network.
So is this an argument for preserving B.C.’s status quo taxi industry?
Not necessarily.
The existing taxi industry is oligopolistic and does not respond well to peak demand times because of insufficient taxi licences, which benefits owners of these scarce licences. The majority of B.C. taxi drivers don’t own a taxi licence but pay lease fees to owners. Typical fees for a 12-hour shift in Vancouver have been estimated at $120.
After factoring in these and other costs, local estimates put taxi wages in roughly the same range as recent estimates of Uber wages in the United States.
The endgame for Uber and Lyft, however, is to cut drivers out of the equation altogether, demonstrated by their increased investments in selfdriving-car technology.
So whether Uber extracts 25 per cent of fares or local taxi firms and licence owners extract fees, drivers get the short end of the stick.
Industries that tend toward market concentration are good candidates for alternative ownership models. Rather than ownership by for-profit multinational corporations or local taxi firms, ride-hailing services could be non-profit, owned by drivers, their communities or both.
Instead of revenues being siphoned off by taxi licence owners or companies like Uber, drivers and passengers could share the surplus, putting it toward higher wages and cheaper fares.
And instead of subjecting our cities to ride-hailing firms set on expansion and backed by deep-pocketed lobbying operations, a non-profit alternative would be easier to regulate and contain as part of a broader transportation strategy that emphasizes public transit, walking and cycling.
The idea of non-profit alternatives to ride-hailing is being discussed, planned and attempted in North America and Europe. But these efforts face a key barrier. The aggressive business models of the multinationals crowd the ride-hailing space, leaving little room for alternatives to establish themselves.
The case of Austin, Texas is the exception that proves the rule. In 2016, Austin residents voted to support new regulatory standards that Uber and Lyft didn’t want to comply with. As a result, they left Austin, removing the imposing presence of Uber and Lyft, but ride-hailing was still allowed.
Within weeks, a community-minded group from the local tech sector created a non-profit alternative: RideAustin. This non-profit ride-hailing app soon gained more than 50 per cent of the Austin market share. Drivers appreciated being paid more and treated with dignity, and passengers could round up their fares to the nearest dollar, raising money for local charities.
However, a year later there was bad news for RideAustin when the Texas state government overturned Austin’s local regulations. Uber and Lyft roared back into the city, their deep pockets enticing drivers and riders back with discounts, and re-established their market power. RideAustin’s market share dropped off rapidly, though the service hangs on.
RideAustin illustrates an important lesson for B.C. A non-profit alternative to Uber and Lyft is achievable, but if given the chance, large ride-hailing companies have the resources and motivation to torpedo communityoriented alternatives.
We could build a viable non-profit alternative, but only if we say no to the big multinational players. The provincial government could permit ride-hailing in B.C., but only on a co-operative or non-profit basis.
The B.C. government set a range of sensible regulatory standards for the industry in its recent legislation, but there was no mention of alternative ownership models. Reaction has been mixed from the big industry players, with Uber Canada’s spokesperson musing that the legislation “raises another big question mark about the ability for ride-sharing to come to B.C.”
British Columbia is uniquely positioned to do things differently because we haven’t yet let the ride-hailing genie out of the bottle.
Urban transportation policy should focus on expanding high-quality, affordable public transit. But as long as taxis and ride-hailing are part of the mix, they should be accountable to the community so that their benefits are shared and costs contained.
Ride-hailing tends to be dominated by one or two firms in a given market.