EQUITABLE TAXICAB QUOTA DEREGULATION

A CONCEPTUAL FRAMEWORK

(found on the InterNet in 1989)

The Problem

In many North American cities, a limit on the number of taxicabs is imposed by law, supposedly in the public interest, with the discretionary power to vary the limit generally delegated to a regulatory agency.

Almost universally, taxicab quota systems have failed to protect the Interests of the general public in adequate and proper for-hire urban transportation services at reasonable cost.

Taxicab quotas have generally led to:

  1. higher fares and lower quality vehicles;

  2. longer taxicab response times and generally poorer service quality;

  3. limited service options for taxicab users, and little in the way of innovations in service;

  4. ever increasing prices for taxicab licences, that represent the capitalization of earnings in excess of competitive returns, result in pressure for higher fares, and steadily reduce the value of equipment that is economically feasible to place in service;

  5. the transfer of ever increasing funds from new entrants, that could be expended to provide better service to the public, to those who are exiting the industry;

  6. the virtual elimination of competition as a means to motivate service providers to maintain service quality;

  7. the replacement of the inherent discipline of the free market with the excessively costly disciplinary processes of a regulatory agency that is either simply ineffective or dominated by the industry it is supposed to control;

  8. the inability of the agency to make changes to the quota in the public Interest in a timely manner or at all, due to intimidation, threats, and defamation of agency staff and members; disruptive public protests, service interruptions, strikes or threats of strikes; and a relentless series of legal challenges.

The Solution

The public interest would be served by the immediate elimination of taxicab quotas. However, it would be inequitable to completely eliminate the value of existing taxicab licences, wiping out the substantial investment in licences on the part of many small businessmen. This dilemma may be resolved by implementation of an "equitable quota deregulation" plan, comprised of the following elements:

  1. Licences to operate a taxicab would be issued to all who are fit, willing and able to provide adequate and proper service ("fitness only" licences);

  2. Fitness only licences would not be transferable;

  3. Fitness criteria would include a substantial cash performance deposit with the regulatory agency, In an amount prescribed by the agency;

  4. Standards for vehicle quality would be prescribed in respect of licences issued on the basis of fitness only, that would include a prescribed value for the vehicle that may be placed in service as a taxicab, and a maximum time period in which the vehicle may be in service as a taxicab;

  5. The amount of the prescribed cash deposit, plus the prescribed value of the vehicle required, would approximate the current value of a licence with a vehicle (for example, if the current value of a licence is $45,000, and a $5,000 vehicle is typically placed in service, the prescribed cash deposit could be $30,000 and the prescrIbed value of the vehicle, $20,000);

  6. The cash deposit would be fully refundable, without interest, on surrender of the licence, subject to item 7;

  7. The regulatory agency could at any time, after due process, declare all or a portion of the cash deposit forfeit to the agency, for a breach of regulatory requirements; licences would be suspended until the deposit is brought back up to the prescribed level;

  8. The regulatory agency would hold cash deposits in trust, but would have authority to use the interest earned to defray its operating costs, in order to reduce the fees that would otherwise be payable by all licence holders; and

  9. All existing licences would be "grandfathered"; existing licences and licence holders and their successors would be exempt from the prohibition against licence transfers and the cash deposit and vehicle value requirements.

Equitable aspects

Implementation of this quota deregulation plan would be equitable for the following reasons:

  1. A major proportion of the value of existing licences would be maintained; the cost of entry for new entrants would be approximately the same whether a new "fitness only" licence was obtained from the regulatory agency or an existing licence was purchased from an existing licence holder; and

  2. The existing industry would benefit from the interest earned on the cash deposits of new entrants, through lower licence fees.

Public Benefits

Implementation of this quota deregulation plan would benefit the public in the following ways:

  1. There would be no further increases in the price of taxicab licences, reducing the amount of future fare increases;

  2. Better quality vehicles would be placed in service;

  3. Greater availability of taxicabs and improved response times would result;

  4. Increased competition, or at a minimum the threat of new entrants, would permit a greater degree of Industry self-regulation in the Interests of the public, improving the quality of service;

  5. Dispatch services would become more competitive, as it becomes possible to grow In response to service improvements;

  6. Increases In demand for services would be met by additional capacity, rather than higher licence prices and regulatory lag or inaction;

  7. The total market for taxicab services would expand over time, through improved service, and more innovative service options that exploit the varying needs and preferences of differing market segments;

  8. The taxicab user would become sovereign; the user would be the focus of taxicab operators, rather than avoidance of taxicab inspectors and regulatory requirements.


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