See also:

Samuel R. Staley directs the Urban Futures Program for the Reason Public Policy Institute, a nonprofit, nonpartisan education and research organization based in Los Angeles.

The taxi industry is one of the most highly regulated industries on the local level. While many taxicab regulations were instituted as an attempt to improve service quality, the historical legacy has been lower service quality and industry competitiveness. This occurs because local regulations create substantial barriers to entry that protect a small number of established firms (creating an "oligopoly"). Many of these barriers have little impact on service quality and create inefficiencies in the taxicab industry, reducing profitability and competitiveness. Furthermore, regulations that prevent new firms from entering a market severely limit business ownership opportunities in the industry, particularly for low income and minority populations.

Since taxi entrepreneurs need little formal education to be effective and productive, the taxicab business is well suited to the skills and income needs of many in the lower tiers of the economic system. Once Indianapolis deregulated its taxi industry, for example, 32 new companies emerged within the first six months. Three fourths of these companies were owned by minorities and women. Now, seven years after deregulation, Indianapolis remains committed to its deregulation strategy. In Denver, the start-up company Freedom Cab now employs more than 100 drivers that cater to underserved and largely minority markets ignored by a cartel protected by the state public utilities commission for more than 45 years.

Thus, in many cases, taxicab regulations have a double negative effect: consumers suffer because regulations stifle competition to protect existing cab companies, and potential entrepreneurs are prevented from opening their business to create new wealth in the community.

Historically, the relaxation of taxicab regulations results in the following industry and service impacts:

The negative impact of local regulations on economic opportunity is often an artifact of the way local (and state) ordinances are designed and implemented. Taxicab ordinances were written when regulators considered taxicabs (and other transportation services) utilities. As a result, taxicab regulations followed traditional regulatory schemes, often limiting competition and access for new companies, tightly regulating fares and rates, and defining key elements of business operations such as hours of operations and location.

Shifting the regulatory focus from protecting existing companies to monitoring taxicab performance could improve services to consumers as well as create economic opportunities among less educated, poor, and minority populations.

Taxicab regulations in Madison, Wisconsin are detailed in Section 11.06 of the city code, "Licensing and Regulating Public Passenger Vehicles, for Hire." Several features of this ordinance stand out as unnecessary regulatory burdens on start-up entrepreneurs. If stringent enough, regulations effectively impose a "cap" on the number of taxis and companies by creating significant financial, political, bureaucratic, and administrative barriers that add costs to starting a new business. Economic opportunities are most severely limited for poor and minority groups that typically have the few resources to devote to the maze of red tape, hearings, and approvals. These regulations may be partially responsible for the decline in the number of legal taxicab companies in Madison from seven in 1979 to just three in 2000. In addition, and perhaps more importantly, these regulations limit the ability of the taxi industry to adapt to a dynamic transportation market.

Among the more important regulatory obstacles to creating a taxicab company in Madison are:

Similarly, other seemingly less intrusive regulations may negatively impact economic opportunities in the taxicab market. Current regulations, for example, require drivers and companies (Sec. 11.06(9)) to have a interior and exterior markings that permanently identify a car as a cab. The intent of this regulation is to ensure consumers are fully informed about the cab and the fare charged, a laudable and important goal. On the other hand, this regulation inhibits the ability of cab drivers to use personal vehicles as part-time cabs. This regulation could be modified to require exterior markings only when the cab is in service as a taxi, allowing drivers to take their car out of service and use them for non-taxi purposes.

Policymakers should seriously consider the negative impact local regulations have on innovation and flexibility. Specialized, niche markets (e.g., for students, the elderly, or the disabled) may benefit from having companies enter the market that focus exclusively on their needs, whether on a full- or part-time basis. By limiting entry, local regulations may have the unintended consequence of stifling innovation, encouraging existing firms to focus on the overall market (the "average" consumer) rather than the needs of specific individuals that make up a smaller, potentially less lucrative sector of the market (the "marginal" consumer). Thus, in an attempt to improve the average quality of service, local regulations may in fact discourage the provision of high quality services to specific segments of the market and weaken market accountability.

The combined effect of Madison's local regulations creates a hostile regulatory climate for taxicab entrepreneurs. Economic opportunities are reduced while the dynamic elements of a market economy that ensure consumer needs are met are compromised.

Madison's taxicab ordinance can be reformed to ensure quality services are provided while also expanding economic opportunities for residents. This requires a paradigmatic shift in thinking about taxicab regulation toward a performance-based approach.

Rather than focusing on micromanaging the structure of the industry – service requirements, hours of operations, etc. – the city should focus on whether taxicab companies provide the type and quality of service they advertise to consumers. In essence, this requires the city of Madison to focus on the following aspects of taxicab regulation:

The city of Madison can eliminate unnecessary barriers to entry into the industry by:

Taken together, these reforms provide a more entrepreneur friendly regulatory climate for the local taxi industry. They also create a regulatory framework more consistent with the dynamic, technology driven transportation sector that focuses on consumer needs. The experience of other cities suggests that consumers – particularly poor and minority neighborhoods – will benefit from increased access to transportation, and the city will benefit from greater economic opportunity for all citizens.

Staley, Sam. "How Cities Put the Brakes on Taxicabs," The Freeman (March, 1998), pp. 147-50.

Styring, Bill. "Taxicab Licensing in Indianapolis: The Situation and Economics," paper prepared for Regulatory Study Commission, City of Indianapolis, January, 1993.

Taxicab Regulation in Ohio's Largest Cities (Dayton, Ohio: The Buckeye Institute for Public Policy Solutions, October, 1996)

Williams, Walter. The State Against Blacks (New York: McGraw-Hill, 1982), pp. 75-88.

The subcommittee has settled on a number of recommendations that, on the whole, will make it easier for start-up companies to compete against the city's established taxicab firms. The City Council may want to relax existing regulations even more when it debates the issue next week. It is not productive at this late stage in the game, however, to trash the process.

The city's ad hoc subcommittee on taxicab deregulation met from February through September to consider a mix of ideas for opening up Madison's market. It was a response to the fact that cab rides in Madison are costly and harder to come by than in many American cities, including some cities of comparable size.

Now, after seven months of work, taxi deregulation advocate Mike Roach has questioned whether there should have been voting representatives of the cab companies on the subcommittee.

''It's unfortunate, the power of the cab lobby came through,'' Roach said Tuesday after the city's Transit and Parking Commission endorsed the panel's plan.

The time to have spotlighted that objection was before the subcommittee spent months working on its recommendations, not when the final report is headed to the City Council.

A better use of time by Roach and other deregulation advocates is to continue pressing home their core argument: Unnecessary regulation that harms competition is bad public policy. Beyond certain public health and safety concerns, City Hall shouldn't have an interest in determining how many cab companies are roaming the streets.

Recommendations to be reviewed by the City Council will require cab companies to continue to provide 24-hour service for the entire city, limiting drivers to 12-hour shifts. In essence, that means one-man operations need not apply. Is it necessary to require all cab companies, regardless of size, to be on call 24 hours a day?

The established cab companies are worried that opening the market to smaller companies that would operate only during peak hours amounts to ''cherry-picking.'' If the rush-hour profit margin is cut, they argue, they won't be able to operate at a loss during off-hours.

Maybe so, but that shouldn't be the city's worry. Some smart cab company will figure out how to provide 24-hour service. The subcommittee has done a reasonable job, but the council should take it one stop farther.

An antitrust suit involving Madison's taxi industry could be around the corner if the city does not drop a requirement for all cab companies to operate continuously.

The Transit and Parking Commission recommended Tuesday that the so-called ''2 4/7 '' rule remain, despite critics' claims that the requirement is anti-competitive and protects established cab companies by walling out potential challengers too small to operate around the clock.

Peter Carstensen, a University of Wisconsin law school professor, said his role in the dispute could soon change from voluntary adviser to hired litigator.

Carstensen has spent much of his career working on antitrust cases and has written a lengthy report detailing why he believes the city taxi ordinance goes against state and federal antitrust laws.

But local officials, including City Attorney Eunice Gibson, say that the policy is just, and the burden of providing 24-hour service is equivalent to other start-up costs.

''For example,'' Gibson wrote, ''restaurants are not permitted to open if they do not have the equipment required to serve food safely.''

Carstensen countered, in a memo Tuesday, that Gibson confuses hours of service with health and safety regulation.

''The 2 4/7 requirement for all taxi companies is similar to imposing a requirement that all restaurants should be open 24 hours a day, seven days a week because the city concluded that it was in the public interest to have food available all day,'' he wrote.

Surrounding the antitrust debate are many issues, including the race of potential start-up taxi entrepreneurs and whether off-hours are still profitable. The most recent addition is the Transit and Parking Commission's concern that the taxi deregulation subcommittee included cab company executives from Madison's three firms.

The commission adopted the subcommittee's recommendations, but acknowledged a possible ''taint.''

''If I learned anything the past year, if there's a perception of conflict of interest, we should stay clear of it,'' said Ald. Mike Staude, a commission member.

The commission's recommendation included doing away with public hearings previously needed to get a taxi license, and dropping the fee from $ 1,500 to $ 1,000.

The city is letting the fox watch the chicken coop by allowing cab company representatives be voting members of the city's ad hoc subcommittee on taxicab deregulation, taxi deregulation proponents said Tuesday.

''It's unfortunate, the power of the cab lobby came through,'' taxi deregulation advocate Mike Roach said after the Transit and Parking Commission endorsed the subcommittee's proposals. ''The fact that they were voting members of the subcommittee is an affront to good government.''

Ald. Mike Staude, 8th District, said he found it ''questionable'' that the mayor allowed the taxi companies to participate on the subcommittee, which he said was an apparent conflict of interest.

But the commission adopted a proposal by Ald. Ken Golden, 10th District, to accept the subcommittee's recommendations and suggest the City Council do the same at its next meeting.

The recommendations include: requiring cab companies to continue to provide 24-hour service for the entire city, limiting drivers to 12-hour shifts, reducing the licensing fee from $ 1,500 to $ 1,000 and eliminating the public hearing requirement for taxi operating licenses.

Roach said UW-Madison law Professor Peter Carstensen expects to challenge the city's regulations as potential violations of state and federal anti-trust laws.

Taxi driving has long been recognized as a poor man's gateway to mainstream America, but not in Madison.

Madison's taxi regulations don't allow for any single-owner operator cab companies. These regulations that prevent single-owner firms from entering the market severely limit business ownership opportunities in the cab industry, particularly for low-income and minority populations.

The effect of these regulations is to require individuals to work for one of the three cab companies on the companies' terms and at their will. This situation relegates the drivers to the status of employees, denying individuals equity ownership, the main source of wealth creation in America.

Taxi deregulation in Madison would empower minority and women taxicab drivers by giving them the opportunity to start their own businesses while increasing competition in the industry and putting pressure on existing cabs to reduce fares for everyone.

In his book ''The State Against Blacks,'' Walter Williams says taxi regulations block minority entrepreneurship: ''The laws are not discriminatory in the sense that they are aimed specifically at blacks. But they are discriminatory in the sense that they deny full opportunity for the most disadvantaged Americans, among whom blacks are disproportionately represented.''

In Madison, cab drivers have become urban sharecroppers. The taxicab industry has used regulation to create a modern-day plantation system for taxi drivers; the regulatory hurdles are so high that the same three companies have had a virtual lock on the taxicab industry in Madison for 22 years. For example:

• Local regulations virtually eliminate independent, single-car operators by requiring 24-hour, seven-day-a-week service.

• Niche markets that focus on neighborhood needs are prohibited through the city's citywide service delivery.

• Taxicab entrepreneurs also face a public hearing where anyone, including your competition, can object to granting a new license.

• The city recently upped the cost of licensing a cab company from $ 125 to $ 1,500.

Since taxi entrepreneurs need little formal education to be effective and productive, the taxi business is well suited to the skills and income needs of many in the lower end of the economic system. But if the first rung of the economic ladder is broken off by regulations that deny individuals the right to own their own cab companies, how are individuals going to climb out of poverty?

The minority population loses out with the regulatory apparatus in other ways. Citywide taxicab fares are higher than they would be in a competitive, open-entry market system. Minority populations lacking cars also spend a greater percentage of their income on taxicab fares than do other populations. Minorities pay higher fares, wait longer for a cab and get poorer service than they would with a truly open market.

When Indianapolis deregulated its taxi industry, for example, 32 companies emerged within the first six months. Minorities and women owned three-fourths of these new companies. Now, seven years later, Indianapolis remains committed to taxi deregulation.

The best hope for Madison's minority population is a free and unfettered taxi industry, in terms of getting licensed so they can own their own business and in terms of receiving better service at lower prices.

The government does and should have a role in the taxi trade, but it should be strictly limited to health and safety, consumer information, driver background checks and insurance verification issues.

When government goes beyond these limits, it becomes an instrument of the existing companies whose only interest is to maintain the status quo and keep others out at the expense of taxi consumers. Madison deserves better.

NOTES: Roach, a former Madison cab driver, is a member of the city's Ad Hoc Committee on Taxicab Deregulation.

The city Ad Hoc Committee on Taxicab Deregulation recently approved a report that will soon be considered by the Madison Transit and Parking Commission and later the City Council. The report concludes several months of review and analysis of the city ordinances governing taxicabs in order to study the merits of taxi deregulation. The committee's work responds in part to a recommendation of the Task Force on Race Relations.

The task force viewed taxi deregulation as a step toward increasing economic opportunity for would-be entrepreneurs who have little access to capital for business start-ups. The task force believed that if the taxi industry could accommodate independent drivers and smaller niche market companies, the doors to new business ownership would open to people of color and others who have low to moderate incomes.

The ad hoc committee report, however, takes a very conservative stance, and virtually ignores the progressive spirit of the task force recommendation. In reviewing the report, I'm not sure at all that the committee even examined ''the merits of taxi deregulation,'' as the task force recommends. It's hard to believe that the committee did anything other than look for ways to streamline the regulations for the benefit of Madison's taxi companies.

Many key recommendations of some committee members that would have removed operating barriers to independent taxi drivers and small companies -- such as 24-hour, seven-days-a-week availability, citywide service availability and unnecessarily high licensing fees -- were rejected without consideration for their value as economic stimulants to new business. The view of committee members representing the local taxi industry was quite naturally to protect and conserve business, and not to explore opportunity for new business creation.

Well, the committee missed the point -- almost entirely. The idea is to find a way to make deregulation work for new entrepreneurs, and maintain or improve taxi service throughout Madison. If that had been the goal, the committee might have sought resolution through innovation and experimentation. Instead, the committee dodged its responsibility, and used the opportunity to restrict citizens' right to share in the economic benefits of an open market.

It's funny how some in private industry celebrate the virtue of competition and free markets until new entities want to expand into previously exclusive industry clubs; or until new entrepreneurs discover opportunities for expanding a market that the members of the existing oligarchy have yet to exploit. The oligarchy in this case claims their interests are focused on quality of service for the consumer.

And while the current city ordinance also claims to protect citizens, it in fact does more to protect the economic interests of the taxi oligarchy than in creating equitable opportunity for all of its citizens.

But even accepting as legitimate the city's interest in regulating an industry providing transportation services on city streets for hire, there's a greater duty of fairness owed to its citizens than a mere streamlining of ordinances regulating taxis. The duty owed is for a genuine examination of the merits, impacts and problems that may be associated with deregulation of the taxi industry by allowing independent drivers and small companies an opportunity to serve the city and earn a living wage.

The city owes its citizens a response to the ad hoc committee that directs it to develop a plan to implement a three- to five- year pilot or demonstration project. Such a plan would include a rigorous evaluation and impact analysis. Consider the recommendations included in a minority report to the committee of alternatives such as retaining the citywide service requirement, but eliminating the 24-hour/seven-day requirements. A test of these innovations is what's needed. Mere discussion without evaluating the service and economic impacts in real time is a gross disservice to our community. We can do better.

LaMarr Billups is a special assistant to the chancellor at UW-Madison. He is active in civil rights concerns in Madison. His column will appear every other Tuesday in The Capital Times.

MADISON, Wis. (AP) -- Some civic leaders in Madison say there are too few taxi companies in the city and they are too expensive.

The group is urging the City Council to break up what they called a " taxi company cartel, " which they said charges riders too much and shuts out competition.

They' ve submitted a petition calling for deregulating the city' s taxi ordinances to make it easier for small-time operators and independent drivers to get licenses.

" Madison' s tax regulations have created a highly sheltered environment for three taxi companies that collectively operate as a tight oligopoly or cartel, " the petition says.

The group behind the petition includes two dozen University of Wisconsin-Madison professors.

But city officials say the taxi system ensures 24-hour service to all parts of the city.

The city' s Transit and Parking Commission is scheduled to meet Tuesday to discuss changes to the city' s taxi ordinance, including lowering license application fees from $1, 500 to $1, 000.

But the group says those changes don' t go far enough.

They want the commission to drop additional rules such as requirements that taxi companies operate 24 hours a day, seven days a week. The petitioners say those rules shut out independents. But Mayor Sue Bauman defended the round-the-clock rule.

" If someone needs a cab at any particular point in the night or day, they can call any existing cab company, " she said. " They' re not going to be floundering around making a bunch of calls when perhaps they' re feeling vulnerable."

September 2, 2000

TO: Madison Common Council

Ref: An Open Petition Letter:

Introduction

Taxi service in Madison is over-regulated to the detriment of our community. The regulations, which require twenty-four pages of text, establish a control system that costs Madison and its visitors a lot but provides little benefit. The principal problem with the regulations is that they choke-off entry to a business that could and should be highly competitive. The last taxi license was granted sixteen years ago. Madison's taxi regulations have created a highly sheltered environment for three taxi companies that collectively operate as a tight oligopoly or cartel. As a result taxi rates are too high¹ and service is too low. The regulations allow taxi company owners to reap large profits, but deny access to an avenue of economic advancement to those in the most need of economic advancement- minorities and those with little income. In short, Madison's taxi regulation raises fares, lowers service quality and variety, and denies economic advancement to those in most need of it. These results are not simply theoretical; comparison of Madison's taxi service with the service provided in the many cities that have opened their communities to competitive taxi service shows that the these costly effects of taxi regulation are real.²

We find no economic or social reason to continue comprehensive over-regulation of Madison's taxi industry. Madison's entry regulations make sense for public utilities (electricity, natural gas, telephone, water) but not for the taxi industry. The taxi industry has none of the characteristics that warranted public utility regulation (highly capital intensive, natural monopoly or oligopoly, highly essential service for all or most of the population). Besides that, even the entry regulations to public utility markets are being eliminated or significantly reduced. Twenty years ago, the federal government deregulated other transportation businesses that could be competitive (airlines in 1978 & trucking in 1980) leading to major reductions in fares and improvements in service.

We concur with the United States Federal Trade Commission study that found “no persuasive economic rational” to justify entry regulations for the taxi industry. As the FTC reported “a number of Cities have achieved favorable results by deregulating entry³. A different Federal DOT study said,”If the taxi industry were deregulated nationwide, it would result in $800 million in saved fares and 38,000 new jobs for cabbies.⁴

Taxicab regulation in Madison is detailed in the Madison General Ordinance city code ⁵ Section 11.06. The features of the ordinance that effectively preclude beneficial competition are those that require:

1. a political approval process, & public hearings, where the other cab companies testify against the new applicant, [sec.11.06(4)(b)]
2. a necessity to “prove the need” for a new cab company. [sec. 11.06(4)(e)]
3. a 24-hr., 7-day service requirement for every company. [sec.11.06(7)(a)]
4. a citywide service requirement for every company. [sec.11.06(7)(a)]
5. a … color scheme with permanent markings on all cars. [sec.11.06(9)(i)]
6. a $1,500.00, application fee for any “potential” new company. [sec.11.06]
7. a minimum of three cars to start a cab company. [per CDOT staff]

Recommendations

We recommend that the Madison Common Council adopt an “open entry” system for taxicab service by revoking Madison General Ordinance sections 4e, 7a, 9i, and the 3-car minimum. Market entry should be allowed for all companies, including single owner operator cab companies, which provide reliable vehicles and qualified drivers.

Increasing competition through open entry will benefit Madison in several ways; competitive taxi service will:

1. lower average fares,
2. yield innovations and expansion in service,
3. reduce passengers wait time,
4. provide new economic opportunities for women and minorities, low-income individuals, and long-time taxi cab drivers,⁶
5. provide a more equitable distribution of income between drivers and the taxicab owners,
6. eliminate the “plantation system” under which those who want to drive cabs are required to work for one of the three cab companies.

Our recommendations pertain to market entry constraints. We do not recommend any reduction in the enforcement of safety standards for equipment and qualification standards for drivers.

Persons who have signed in person or by email:

1. Jon G. Udell, Irwin Maier Chair of Business, UW-Madison
2. Professor Rodney Stevenson, Faculty Director, WI Public Utility Institute
3. Steven N. Durlauf, Professor of Economics, UW-Madison
4. Peter C. Carstensen, Professor of Law
5. Robert Haveman, Professor of Economics & Public Affairs
6. John F. Witte, Director, Robert La Follette Institute of Public Affairs
7. Professor Glen G. Cain, Labor Economist (Emeritus), UW-Madison
8. Ralph L. Andreano, Professor of Economics (Emeritus), UW-Madison
9. William H. Sandholm, Assistant Professor of Economics, UW-Madison
10. Dongchul Cho, Professor of Economics, UW-Madison
11. Arthur F. McEvoy, Professor of Law, UW-Madison
12. Gerald J. Thain, Professor of Consumer Law, UW-Madison
13. Judith Bartfield, Assistant Professor of Human Ecology, UW-Madison
14. Barton Lipman, Professor of Economics, UW-Madison
15. Donald D. Hestor, Professor of Economics (Emeritus), UW-Madison
16. Ruth Roberts, Associate Lecturer Law, UW-Law School
17. Howard S. Erlanger, Voss-Bascom Professor of Law, UW-Law School
18. Donald A. Downs, Professor of Political Science, UW-Madison
19. Karen C. Holden, Professor of Public Affairs & Consumer Sciences
20. Jeff Bernstein, Assistant Prof. of Public Affairs & Applied Economics
21. Mike Subkoviak, Associate Dean School of Education, UW-Madison
22. Peter Norman, Assistant Professor Economics, UW-Madison
23. Donald J. Harmatuck, Professor School of Business, UW-Madison
24. Barbara L. Wolfe, Professor of Economics, UW-Madison
25. Nino Amato, Chair Madison's Race Relations Task Force
26. Warren Somerfeld, former Secretary Department of Transportation
27. Governor Anthony S. Earl, Partner, Quarles & Brady Law firm

Additional information can be found at:
www.taxi-library.org/madison.htm

Please email your authorization statement to Mike Roach to be included on the petition for economic liberty at
maroach@facstaff.wisc.edu

¹ Cascade Policy Institute, An Economic Analysis of Taxicab Regulation in Portland Oregon, 4-98 Madison's metered rates were the highest in a 28 City comparison chart of cab fares, column B.

² Once Indianapolis deregulated its taxicab industry, 32 companies emerged within the first month. Women and minorities owned three quarters of those companies. The Indianapolis News Editorial, August 4th 1994. Bill Strying, Taxicab Licensing in Indianapolis: Situation and Economics, “ paper Prepared for the Regulatory Study Commission, City of Indianapolis, Jan. 1993

³ Mark Franka and Paul Pautler An Economic Analysis of Taxicab Regulation, Federal Trade Commission, Bureau of Economics Staff Report, May 1984

⁴ United States Department of Transportation study, Regulatory Impediments to Private Sector Urban Mass Transit 85 (1984), also found in Wall Street Journal, February 1st 1993

⁵ Madison General Ordinance, (MGO), 1999, 11.06, Public Utilities, Public Passenger Vehicles for Higher, Taxicab Regulations.

⁶ The State Against Blacks, McGraw-Hill, page 75, by Professor Walter Williams nationally syndicated Columnist Heritage Features, & Chairman, Economics Department, George Mason University.

Minorities without considerable financial means will still find it next to impossible to start taxi businesses in Madison under rule changes recommended Monday by a special city committee, taxi deregulation advocates said.

The changes, proposed by the ad-hoc subcommittee on taxicab deregulation, would preserve the city's de-facto ban on one-person taxi operations.

A review of taxi rules was suggested last year by Mayor Sue Bauman's Task Force on Race Relations, which said rules may create barriers to poor and minority entrepreneurs.

Supporters said the proposed changes would streamline the process and make it cheaper and easier for entrepreneurs to offer service.

But Mike Roach, a committee member and advocate for taxi deregulation, said, "Minorities aren't going to come out well on this, unfortunately."

The regulations would also limit the potential for competition, keeping cab fares high, said Peter Carstensen, a UW-Madison professor of anti-trust laws.

He declared the rules are "a conspiracy" between cab companies and the city.

The subcommittee has been exploring options for seven months. Its recommendations are expected to be considered by the Transit and Parking Commission Sept. 12 and the City Council Sept. 19.

Under the subcommittee's recommendations, the city would still require cab companies to provide 24-hour service seven days per week.

That, combined with a safety regulation limiting drivers to 12 hours of continuous driving, would make it impossible for an individual to start a cab business.

The subcommittee said the 24-hour requirement is important because there is no bus service after 11:30 p.m.

But Roach said that is a "bogus argument" because the market would dictate that the city's three cab companies keep 24-hour service regardless of the requirement.

"It's only a pretext to keep out independent cab drivers," he said. No new cab company has been launched in Madison in 16 years, Roach said.

The subcommittee, however, did recommend the city lower the fee for licenses from $1,500 to $1,000.

But Roach said, "A thousand dollars is still a lot of money for a poor minority."

In other recommendations, the subcommittee said the city should:

*Continue requiring service coverage for the entire city. The requirement minimizes the possibility companies "redline," or avoid, troubled neighborhoods, the subcommittee said.

*Eliminate the public hearing requirement for taxi operating licenses. That would save money and allow the reduction in licensing fees, Knobeloch said.

• 1. In general, competition is both economically and socially desirable. It adjusts the supply of services to the demand. It allows entry and exit from the market without cumbersome and costly hearings. It encourages innovation and experimentation that leads to new services and new ways of providing existing services. Repeated experience in a wide range of businesses shows that removing the regulatory barriers to entry and competition has served the public well.

• 2. A central tenant in this nation is a commitment to the maximum freedom of opportunity. The right to decide what business or profession to pursue is a central element of our democracy and a core value in preserving and promoting our social order. As a nation, we have demanded as much freedom of opportunity as is possible. Individuals flourish when they have the opportunity to decide what they want to do without having to overcome unnecessary government regulation. As much as possible it is important to expand the scope of economic activity where such freedom is possible.

• 3. The taxi business is particularly unsuited for entry regulation or control over basic competition. It involves relatively modest costs; there are few, if any economies of scale or scope beyond a very modest level. Hence, this business has none of the economic characteristics associated with the monopoly or other market failures usually used to justify regulation on entry or competition exists.

• 4. There are some specific needs that require government oversight: safety, security, full disclosure of the service being offered including price, and accountability for any failure to satisfy the foregoing requirements.

• 5. Experience with open entry in other cities has produced the expected results: more services, even some price competition. It has also proven to be an important route for individuals seeking to advance themselves economically. Moreover, legitimate public interest concerns have been adequately protected.

B. Excessive fears of competition

• 1. Those who exist under the shelter of entry regulation are likely to claim that serious problems will result if more competition is allowed. Their economic self-interest may motivate in part these claims, but there is also an understandable fear of the unknown.

• 2. In actual experience, most fears of competition prove groundless. Entry does not occur as quickly or massively as opponents claim. New entrants often face significant hurdles in establishing their own creditability in the market especially if the incumbent firms have provided high quality, reliable service.

• 3. Multi-car incumbents have a number of advantages over either single car operators or even new, multi-car operations. Many customers are repeat users and will reward high quality service and reliability including service at off-hours. This is also true of those who are in a position to recommend choice of service such as hotels, restaurants and bars.

• 4. The major competitive risk to established firms comes when those firms have excessive prices or fail to provide good service. The market is in general a better means to discipline such failures than is any administrative agency procedure.

• 5. If specific problems arise for which the market is not a workable source of discipline, the law can respond with focused changes.

C. Not all regulation is impermissible–focus on public safety and other authorized areas of legitimate concern

It is clear that there are important roles for regulation in the field of taxi service. Moreover, to some degree any such regulation will increase the costs of entry and competing in the market. However, all such constraints need to be focused on legitimate goals: public safety, insurance, as well as the definition of the territory, hours, and price of service. Moreover, these are the only goals that the state laws allow Madison to seek through its regulation of taxis.

A. Competition is the fundamental policy of the state of Wisconsin in general and with respect to public transportation.

• 1. State law requires that regulatory agencies promote competition both in general and specifically in the transportation industries.

  • a. Wisconsin's antitrust law, section 133.01: "It is the intent of the legislature to make competition the fundamental economic policy of this state and, to that end, state regulatory agencies shall regard the public interest as requiring the preservation and promotion of the maximum level of competition in any regulated industry consistent with the other public interest goals established by the legislature." (Emphasis added.)

  • b. Wisconsin's motor vehicle transportation law is to the same effect; section 194.02: "The legislature intends to let the market promote competitive and efficient transportation services, while maintaining the safety regulations necessary to protect the welfare of the traveling and shipping public. It is the intent of the legislature that this chapter be interpreted in a manner which gives the most liberal construction to achieve the aim of a safe, competitive transportation industry." (Emphasis added.)

• 2. The City of Madison's authority to regulation the taxi business depends on an explicit grant of legal power from the legislature and so the city acts as a delegated state regulatory authority and is subject to the commands of 133.01 and 194.02. Although 194.01 (1) exempts taxicab service from the definition of "common motor carrier" which means that most state regulation does not apply, taxicabs are not excluded from the broad policy governing "motor carrier operations" expressed in 194.02 (quoted above), and are subject to some specific state imposed requirements; for example, 194.41(6)(b)(2) sets minimum insurance requirements.

• 3. The Madison's regulatory authority is conferred and defined in section 349.24 of the Wisconsin statutes: "The council of any city . . . may: (a) Regulate and license . . .operators of taxicabs used for hire; (b) Regulate an license the taxicab business by licensing each taxicab used for hire; . . . (d) Revoke any license mentioned in this section when in its judgment the public safety so requires." In addition, each taxicab must be insured at level set by local ordinance provided that the level equals or exceeds the minimum required by state law: 194.41(6)(b)(2) and 344.15(1).

• 4. Hence, in drafting and enforcing its taxi ordinance, Madison can only implement legislatively defined goals and must seek the most pro-competitive means of accomplishing those goals. The legislature has identified explicitly only two goals beyond the potential to collect license fees:

  • a. public safety: presumably the ordinance can impose reasonable safety standards on taxis and their drivers. Thus, unsafe cars or drivers might be reasonably excluded from this business.

  • b. insurance: the city may impose a higher level of liability insurance than the minimum required under state law (25/50).

• 5. The city can make a creditable argument that the grant of authority reasonably includes an implied right to define essential aspects of the taxi business:

  • a. scope of service–territory: the city can most easily defend requiring disclosure of any limits to the area of service; moreover, given its obligation to enforce other legal requirements against discrimination, the city may well have a plausible argument for setting minimum service areas especially if those areas include low income or minority populations. On the other hand, a requirement that all cab operators must provide service across the entire city is much harder to defend in the absence of a clear showing of the need for such a requirement and the careful assessment of its impact on the potential for new entrants to compete. After all, the market will discipline those who fail to provide service in areas where there is demand just as it will reward those who provide service in areas of real need.

  • b. hours of service: the city should be able to require disclosure of and adherence to posted hours of service. It is much more questionable whether there is any justification for requiring all operators to provide 24 hour service, seven days a week. Clearly, demand varies over the day and through the week. Hence, it inflates the operating costs and entry costs of firms if they must serve low demand times as well as high demand periods. A policy of requiring such service implies "cross-subsidization" of low volume times by excessive charges on users in high demand times. Public policy generally holds such a random tax to be undesirable. If more service is needed at low demand times than the market will supply on its own, the city can explicitly subsidize such service. This ensures public awareness and acceptance of any tax as well as a clear recognition of who is paying for the service and benefiting from it.

  • c. disclosure of prices: nothing in state law would seem to authorize the city to set rates for this service. However, it does seem that the city should be able to require disclosure of and strict adherence to posted prices.

  • d. alternative forms of service: if an individual proposes an alternative form of service–for example, a jitney type service or a local van service, the city should on the one hand be open to considering such a proposal on its merits, but would also have the authority to impose reasonable requirements to ensure that such an enterprise provided the service it promised.

• 6. Any anticompetitive city regulations have very limited immunity from federal antitrust law because the state law does not seek to pre-empt competition in this business. Under federal antitrust law, if the state has not explicitly pre-empted competition, the city is not authorized to do so on its own. This raises concerns for city liability (discussed below) and for existing operators of taxi services who might seek to use city regulation to frustrate new entry. Two cases decided in federal circuit courts upholding substantial city regulation of the taxi business that foreclosed competition rested on statutes in Texas and Illinois that explicitly authorized the regulations at issue. In the case of Wisconsin, no such statutory authorization exists.

• 1. Institutional obligations of transit commission: state law authorizes the city to operate a bus system through the establishment of a transit commission that is explicitly charged with the efficient management of that system. Bus service competes with other forms of public and private transportation. Hence, the city through its ownership and operation of the bus system is a competitor in the local passenger transportation market. In addition, through its operation of a parking ramp system it has a further stake in the operation of this market. Basically, the city reduces its costs or earns a profit as the combination of parking and bus revenue increase. One way to increase revenue is to suppress the competition of alternative forms of transportation.

• 2. Because of its statutory obligations the Parking and Transit Commission has an institutional conflict of interest whenever it regulates the taxi business.

• 3. The legal implications of this conflict are not resolved, but could be significant. The Wisconsin Supreme Court overturned Milwaukee's efforts to regulate competition in the ambulance market because the control of competition was not authorized (American Medical Transport v. Curtis-Universal, 154 W.2d 135 (1990). In the case of anticompetitive taxi regulation, the following potential judicial reactions could occur:

  • a. strict scrutiny of any anticompetitive aspect of the ordinance as well as of any adverse decisions with respect to entry: recognizing that regulatory authority has in fact been delegated, the courts would not void the ordinance because of the conflict, but would give it very critical review. The same kind of strict scrutiny would occur if the city denied operating authority to any taxi operator.

  • b. voiding the ordinance: a court might simply void the ordinance given the role of the Parking and Transit Commission. The city's obligation was promote competition. Involving the agency responsible for competition with taxi's to play any role would be evidence that the city had failed in its basic obligation. The merits of the ordinance would not be in issue.

  • c. potential antitrust liability under state or federal law because of competition with taxi business: a recent U. S. Supreme Court decision arguably reaffirms the view taken in an older case that a city which is engaged in business activities and then uses its municipal power to advance its economic interest may be subject to antitrust liability. Because of the general policy of state law, the city has no claim that it has any state authorization to restrict competition in the taxi business. This fact strips the city of its "state action" immunity in federal law. Given its status as an economic competitor and its continuing contractual relationship with existing taxi operators, it is possible to imagine a case charging a conspiracy to restraint new competition for which all might be liable.

  C. Conclusion:

  Failure to adhere to the legal constraints may result in loss of all city control over the taxi business and could result in a damage award against the city for foreclosing competition

  The city has no legal authority to impose anticompetitive regulation on the taxi business. Hence, if it does, it runs the risk of having its entire regulatory scheme voided and leaving this business unregulated.

   

  III. What should be done?

  • A. Identify legitimate public interest concerns–safety, insurance, definition of scope of business

  • B. Draft an ordinance that defines standards

  • C. Create an open entry process for new firms, which satisfy the standards

  • D. Identify an administrative agency without a serious conflict to oversee the enforcement of standards.

  ---

  Madison Regulation - Application for Initial License

  Sec. 11.06(4)(b) PUBLIC UTILITIES

  (b) Application for Initial License

  Any person wishing to obtain a license to engage in the business of transportation passengers for hire, whose rides originate within the City of Madison, shall present to the City Clerk a written application accompanied by proof of payment of the fee or fees established in Subdivision (a) above and by proof of liability insurance coverage as required in Subsection (8)(a) of this ordinance.

  The application shall state the name and address of the applicant, the number and type of vehicles proposed to be operated, the method of charging, the schedule of rates of fare to be adopted, and such other pertinent information as the City Traffic Engineer may require.

  All such applications shall be received by the City Clerk and shall be referred to the City Traffic Engineer. The Transit and Parking Commission shall hold public hearings on the applications. The hearings shall begin no later than sixty (60) days after the applications are referred by the City Clerk. The City Traffic Engineer shall notify the applicants of the time and place of the hearings. The Transit and Parking Commission shall hear all persons desiring to be heard, shall make such investigations as it deems necessary and shall establish standards to determine whether or not a company should receive a license to engage in the business of transporting passengers for hire. Such standards shall include, but are not limited to the following:

  1. The financial capability and responsibility of the applicant.
  2. The applicant’s prior experience in operating public passenger services.
  3. The level and quality of service provided by the applicant in the past in areas in which it has operated.
  4. The experience and competence of the applicant’s drivers.
  5. The applicant's prior record of compliance with applicable regulatory laws, ordinances and rules. This includes records of complaints an ~ enforcement actions against drivers and vehicle owners.
  6. The applicant's prior record of service complaints.
  7. The age and condition of the vehicles proposed to be licensed. by the applicant.
  8. The applicant's safety record, including records of accident experience and record of employee safety training.

  (Am. by Ord. 11,848, Adopted 4-15-97; Effective 5-21-97)

  ---

  City of Madison, Wisconsin
  

  AD HOC SUBCOMMITTEE ON TAXICAB DEREGULATION

  as at 7 December 1999

  *2/3 vote required for confirmation of non-city residents.

  2/3 vote required. Pursuant to Sec. 3.27(2) of the Madison General Ordinances, " * provisions of this section shall not necessarily apply with reference to membership on special study committees where, in the judgement of the mayor and two-thirds (2/3) of the Common Council, the best interests of the city will be served by the appointment of certain nonresident members who are particularly well qualified by reasons of education, background, and experience* ."

  CARL D. DUROCHER, 1441 Williamson St., 53703-3726 (6th A.D.) - Mr. Durocher will serve as a Transit and Parking Commission Representative.

  PETER W. QUIGLEY, 925 Menomonie La., 53704-1031 (18th A.D.) - Mr. Quigley will serve as a Transit and Parking Commission Representative.

  FRANKLIN W. MONFORT, 501 N. Henry St. #404 (4th A.D.) - Mr. Monfort is retired from the UW and is a frequent taxi rider. He will serve as a taxicab user.

  BARRY HELLER, 536 E. Lakeview Ave., 53716-1720 (15th A.D.) - Mr. Heller is general manager of Union Cab Coop, Inc. and will serve as representative of Madison Cab. This is a non-voting position.

  KURT E. SCHNEIDER, 2413 E. Dayton St., 53704 (2nd A.D.) - Mr. Schneider is employed by Badger Cab Company as an Account Representative and he will represent Badger Cab. This is a non-voting position.

  *RICHARD NESVACIL, 225 Church St., Brooklyn, 53521 - Mr. Nesvacil is general manager of Madison Taxi and will serve as representative of Madison Taxi. This is a non-voting position.

  MICHAEL A. ROACH, 2111 University Ave., 53705-2333 (10th A.D.) - Mr. Roach is employed by Madison Taxi as a taxi driver. He will serve as an advocate of a more open market. This is a non-voting position.

  PAUL H. KUSUDA, 200 Tompkins Dr., 53716-3255 (16th A.D.) - Mr. Kusuda is a retired social work administrator and is an advocate on behalf of the elderly, children and families, and minority groups. He will serve as an advocate of a more open market. This is a non-voting position.

  *THOMAS J. ZIARNIK, 2956 Hensen Dr., Sun Prairie, WI 53590 - Mr. Ziarnik is general manager of Howard Johnson Plaza Hotel. He will serve as a representative of the visitor industry.

  DAVID A. JENSEN, 5022 Odana Rd., 53711-1160 (20th A.D.) - Mr. Jensen is employed by TDS Computer Services as a contract manager. He will represent the business community.

  *RENEE BREMER, 1525 N. Johnson St., Stoughton, 53589 - Ms. Bremer is employed by the Madison Metropolitan School District as Transportation Coordinator. She will represent the Madison Metropolitan School District.

  NORAH J. CASHIN, 2214 Center Ave., 57304 (6th A.D.) - Ms. Cashin is Transportation Planner for the Dane County Department of Human Services. She will represent Dane County Human Services.

  *JANE B. GOEMANS, 1508 Sundt La., Stoughton, WI 53589 - Ms. Goemans is employed by UW-Madison Transportation Services as SAFE Nighttime Service Coordinator. She will represent the UW Chancellor's Office.

  ERICA F. HAWKINSON, 502 N. Frances St., #407E, 53703-1007 (8th A.D.) - Ms. Hawkinson is a UW student. She will serve as the UW-Madison student representative.

  Note: The appointment of a representative of people with disabilities will be submitted to Council on January 4.

  "Mr. Mike Roach,
  2111 University Ave., Madison,
  Wisconsin 53705-2333, fax/phone (608) 233-6592"
  

  
  

  
  

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  THE BADGER HERALD
  University of Wisconsin-Madison
  10 November 1999
  

  MADISON TAXIS MIGHT
  DECREASE SERVICE HOURS

  Matthew Fernandez-Konigsberg
  city/county reporter
  

  The future of the taxi industry could face major changes as it undergoes scrutiny regarding proposed deregulation. After receiving a recommendation from the Race Relations Task Force, Mayor Sue Bauman sponsored a resolution to create an ad hoc subcommittee to investigate the city's options.

  Currently, regulations in the taxi industry include a 24-hour service rule, public hearings for new taxi companies, limitations on driver hours, and a "public convenience and necessity" status. Deregulation would remove some, if not all, of these standards.

  "The mayor fully supports the exploration of deregulation," said Ryan Mulcahy, assistant to the mayor.

  While the fate of the subcommittee is in the hands of the Board of Estimates and the Transit and Parking Commission, Bauman is confident it will prevail and looks forward to the final results, he said.

  "The mayor has no predictions, nor does she have a preference, toward the final outcome," Mulcahy said. "But she welcomes this opportunity to explore the issues it will raise."

  The taxi industry has met this proposed deregulation issue with disapproval. "I'm opposed to it," said Barry Heller, manager of Union Cab. "By instituting this independence, it will negatively affect people who rely heavily on taxicab services."

  Worker-owned businesses such as Union Cab view deregulation as a threat to their business and standards.

  "We take this as a serious affront against our worker-owned company," Heller said. "The individual operator is a danger to our business, the status quo of community-based transportation."

  However, some potential independent operators say regulation of the taxicab industry disproportionately affects minorities.

  "Typically, minorities own their own cabs and work for themselves," Madison resident Mike Roach said. "[The current system] is un-American and wrong."

  Roach said the fact that only three cab companies exist in Madison shows the need for competitors.

  "The marketplace should decide the quantity and quality of taxicab service in Madison, not some bureaucrat," he said. "The regulation of taxicabs in Madison have hurt the industry, not helped it."

  A significant aspect of the proposed deregulation would be the removal of the 24-hour service rule.

  Heller said certain communities are dependent on the cabs as 24-hour transportation, and they will be marginalized by the proposed deregulation. "By removing the 24-hour rule, the low income and cab-dependent portion of the community will suffer," Heller said.

  With corporate hotel and air customers receiving better services, Heller said the marginalized and low-income population will be disadvantaged. "The portion of the community that needs our services the most will be hurt by this," he said.

  Another salient regulation in danger of being removed is the limitations on driver hours.

  "It is extremely important to regulate the amount of hours a single worker can drive," Royston said.

  Royston said it is not feasible for a driver to make such choices as this, with the safety of passengers in high regard.

  "We can't rely on individual drivers to know when they've had enough," he said. "This rule was established with safety in mind."

  However, Royston does agree with one proponent of deregulation. "I am in favor of the termination of the 'public convenience and necessity' rule," he said. "With this rule in effect, it questions whether or not there is a need for a new cab company to open for business."

  ---

  Wisconsin State Journal
  (Madison, WI, USA)
  4 November 1999

  MADISON TO LOOK AT THE
  RULES FOR TAXIS

  By Dean Mosiman
  City Government Reporter

  The city of Madison is preparing to take a hard look at deregulating its taxicab industry.

  Mayor Sue Bauman, following a recommendation of the city's Task- Force on Race Relations, has proposed a special, 13-member committee to explore deregulation during the next year.

  The task force said some rules may be barriers to competition for low-income and minority entrepreneurs.

  ”We're willing to take a look at it, but our first concern must be the customers," mayoral aide Judy Plaenert Olson said.

  The city requires public hearings for new taxi companies and that they demonstrate a "public convenience and necessity." It also limits driver hours, requires that companies provide 24 hour service throughout Madison, and sets safety and insurance standards.

  The city has three cab companies Badger Cab Co, Madison Taxi and Union Cab.

  ”The issue has to do with a highly regulated industry that has locked out a lot of people," said Steve Braunginn, president of the Urban League of Greater Madison

  "It's my hope the City Council will take this very seriously.” Mike Roach, who has driven for all three Madison taxi companies - - and wants to start his own service, said rules are unfair and hurt minorities disproportionately.

  It’s really dirty politics freezing people out of the market place,” he said.

  Tom Royston, operations manager at Badger Cab, which served about 900,000 riders last year, welcomed Bauman's proposal as a way to prove most rules are appropriate.

  The requirement for public convenience and necessity can be dropped, but public hearings and rules on driver hours and 24 hour, citywide service relate to safety and guaranteed service, Royston said.

  Deregulatian elsewhere has resulted in higher fares and more complaints, he said.

  "Let's put everything on the table," he said. "The taxi industry in Madison has no problem with people starting a taxi business on a level playing field."

  Roach said safety rules should be kept but that the market will ensure all parts of the city are served.

  The city has already explored deregulation.

  A Transit and Parking Commis sion staff report earlier this year said one-person companies would require more city staff time for oversight and that there is scant evidence that rates would decrease or service increase, except in already well-served areas such as the airport.

  The report said the public convenience and necessity standard should be dropped, but other rules kept.

  But it also suggested finding a way to accommodate associations of independent operators.

  ---

  Isthmus weekly Newpaper
  Madison, Wisconsin
  12 September 1999
  

  A man, a plan, a cab

  City forms new committee to revisit rules for taxis

  by Melanie Conklin
  In the Loop

  Several years ago Mike Roach, who has worked for all three Madison cab companies, sought a license to open his own taxicab company with just one driver, himself. But city rules require cab companies to run 24-hours a day, cover all parts of the city and restrict drivers' working hours to 12 per day. And there was no way Roach, working solo, could meet those requirements.

  "Regulation means consumers pay higher prices," says Roach. "It runs counter to how the free market is supposed to work." Dr. Samuel R. Staley, director of Los Angeles' Urban Futures Program, agrees that Madison's tax rules "effectively impose a 'cap' on the number of cabs because they create political, bureaucratic and administrative barriers that add significant financial and time costs to starting a new business."

  In response to these complaints, the Common Council on Tuesday appointed a new city committee to consider reforming Madison's taxicab industry.

  "Mike takes his show everywhere, and there may be some merit in what he has to say," says Ald. Ken Golden. "But I don't want to give cabs so much free reign that they can carve out which areas they want to serve. That will lead to cabs creaming the airport and not serving paratransit or low-income needs."

  The city's three metered cab companies--Badger, Union and Madison Taxi--all oppose another rewrite of the rules, which was done seven years ago.

  "It opens the door to throwing a sticker on your car and being a taxi operator," says Barry Heller, general manager of Union Cab, which severed Roach from its employ. Heller shares Golden's concern that eliminating 24-hour service standards to all areas of the city would allow companies to "cherry pick" airport or hotel calls. "What about the person without a car who needs to get to the emergency room at 3:00 am? I think this is a really backhanded way for an individual to push his own agenda."

  Bill Knobeloch, operations analyst for the city's Transportation Department, wants the committee to consider service standards and the "convenience and necessity" provision that allows the city to decide if another company is needed. But he also worries about "red-lining" out service to certain areas.

  "Once you allow cab companies to refuse service for any reason, be it time of day or geographics, you've opened that Pandora's box," says Knobeloch. "But maybe the committee will come up with some very creative solutions."

  ---

  Capital Times
  4 August 1999

  Madison's Taxi Regulations
  Stifle Innovation, Competition

  by Sam Staley

  Picture yourself as an ambitious but cash Strapped student at the University of Wisconsin. You have a job to help make ends meet, but you also have an entrepreneurial bent.

  You like taking on projects and are goal-oriented, always on the lookout for an opportunity, you stumble across a novel idea while talking to the owner of a local bar and grill.

  The barkeep is worried about students and other customers who have had a little too much to drink, particularly on the weekends. He, wishes he could provide a cheap, safe and reliable transportation service for these patrons, As a budding entrepreneur, you recognize an opportunity.

  So you strike up a deal. You will provide a taxi service for the less responsible drinkers. You estimate, using your car and a cell phone, you can charge $5 per trip in the neighborhood and $10 per trip outside the neighborhood. Trips outside the city would cost more, but you want to handle that on a case-by-case basis.

  The only problem with this schenario is that it would be impossible to start this business in the city of Madison. Among other things, local regulations would stifle your business because:

  • A 24-hour service requirement means your business has to run all day, seven days a week. Part-time operators need not apply.

  • The graduated flat fee could violate the city's code that all fares must be set by a trip meter or zone.

  • The city's public hearing requirement subjects your business to a political approval process through the Transit and Parking Commission. Existing operators can object to the new cab company, and even argue against issuing a license based on its potential impact on their bottom line. As a new operator, you need to prove that your fledgling enterprise will exist for "public convenience and necessity."

  • The business is required by law to serve the entire city - not just the market niche you have identified.

  These are just a few of the elements of the city code that make it difficult to start up a taxicab company in Madison. Not surprisingly, the taxicab industry has been dominated by three large companies with little serious threat of new competition.

  While these restrictions, may make it easier to regulate taxis - having a smaller number of taxicab companies facilitates monitoring - they discourage entrepreneurship and job creation, particularly for low-income and minority residents. In fact, when local taxi marks have been reformed to allow more competition, new companies have sprouted:

  After Indianapolis eliminated its 24-hour service requirement and a cap on licenses, 32 companies sprang up within six months. Two-thirds were owned by minority group members and women, and 158 new cabs ply the streets of Indianapolis.

  Once Colorado allowed entry into the Denver market, Freedom Cab began operations and currently employs 100 drivers.

  Cities that open their taxicab industry to more competition experience an. average 23 percent increase in the number of cabs, drivers and companies.

  Thus, opening up the taxicab market can generate jobs and stimulate neighborhood-based economic development. More specifically, the city of Madison can promote economic opportunity in the taxicab market, and embrace the dynamism and innovation of the local economy, by:

  • Repealing the 24-hour and citywide service requirements.

  • Licensing operators and companies through an administrative rather than political process,

  • Eliminating economic impact on Current operators as a justification for denying a license to a new operator.

  • Eliminating public convenience and necessity criteria for granting a new license.

  • Eliminating mandatory breaks in driver hours to enable part-time, owner-operator companies.

  These changes will not remove the city from the regulatory process. Rather, it will shift direction away from micromanaging the taxi market to a market based on performance.

  In one case a few years ago, an applicant was denied a license in part because he had been fired by the existing companies. Entrepreneurs, however, are unlikely candidates for employees of the week. They typical are driven by a desire to provide a service or product that the current market does net, creating an inherently tense relationship between employer and employee.

  The quality of the product delivered to consumers should be the primary focus of local regulations, not the internal personnel policies or financial health of existing taxicab companies.

  A more effective way to regulate the loca1 taxicab industry while encouraging entrepreneurship would be for the city of Madison to focus on health, safety and fraud in the taxi market.

  The regulatory goals can be met by annual and random inspections of vehicles, minimum bonding requirements, criminal background checks and an expedient system for lodging complaints with local law enforcement authorities.

  Beyond these functions, local regulations tend to restrict entry and reduce competition while providing little benefit to consumers.

  A performance-based system, in contrast, maximizes the potential for innovation and job creation while ensuring that consumers receive a quality product.

  _______________

  Sam Staley, Ph.D., directs the Urban Futures Program, wwu.urbanfutures.org, for the Reason Public Policy Institute, www.rppi.org, a think tank based in Los Angeles. His articles on urban development have appeared in the Journal of the American Planning Association, Planning and Markets, the Wall Street Journal, the Houston Chronicle, the Detroit Free Press and dozens of other newspapers.

  ---

  Department of Transportation
  Traffic Engineering & Parking Divisions
  Madison Municipal Building
  215 Martin Luther King, Jr. Boulevard
  P.O. Box 2986
  Madison, Wisconsin 53701-2986
  PH 608 266 4761
  TTY 608 267 9623
  FAX 608 267 1158
  

  July 14, 1999

  TO: Mayor Susan J. M. Bauman

  FROM:
  Paul J. Larrousse, Executive Secretary
  Transit & Parking Commission
  

  SUBJECT: Task Force on Race Relations recommendation to study the merits of taxi deregulation

  Your June 10, 1999 memo to David Dryer requesting a review of the Task Force’s recommendation to study the merits of taxi deregulation was referred to the Transit & Parking Commission. At its meeting on July 13, the TPC recommended the following:

  “It is recommended that an ad hoc committee of stakeholders review the entry requirements for new taxicab companies. This committee should include TPC members, taxicab passengers, taxicab companies, advocates of a more open market, people with disabilities, representatives from the visitor industry, the business community, Dane County Human Services Dept., and the Madison Metropolitan School District, as well as any other members deemed appropriate by the Mayor. It is further recommended that this committee be facilitated by a person outside the City Transportation Department.”

  .

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  Madison Capital Times
  Madison, Wis.
  Mar 15, 1999

  TIME TO OPEN UP THE TAXI TRADE?
  CITY TO STUDY A FREER MARKET

  by David Sandell
  The Capital Times

  Cab driver Mike Roach says that Madison's taxi regulations fence out competitors to support the interests of the three companies now on the street.

  "It's a modern-day plantation system. You're forced to work for somebody else," said Roach, who is running for alderman in District 10.

  Roach favors removing regulations he says put the cost of starting a taxi service beyond the independent operator, while retaining vehicle safety and driver criminal background checks and insurance requirements.

  Removing regulations requiring companies to provide 24-hour service in all areas of the city would open the market to minority and low-income entrepreneurs with limited access to start-up capital, he says.

  "It beats the hell out of selling burgers at McDonald's," said Roach, who himself was turned down for a single-operator license by the city two years ago.

  City officials say the regulations are needed to insure service to all residents, and they sound skeptical of the supposed advantages of a more competitive market. Nonetheless, the Transit and Parking Commission has asked the mayor's office to name a panel to study cab regulations.

  Roach says government should butt out of the cab business and let the market decide.

  "Let the market determine the number of cabs and quality of service in the city," he said.

  Most outrageous, says Roach, is a regulation that says before a new cab company is licensed, the city must find that a new company would serve the "public welfare, convenience and necessity."

  "Where would we be if Kohl's could veto Woodman's?" Roach asks.

  New opportunities, new costs: Cities from Miami to Denver to Indianapolis have rolled back taxi regulations in recent years.

  The theory is that cutting back regulations to foster competition will force down prices and provide business opportunities to entrepreneurs with limited capital. In some cities, many of the new companies have been owned by minorities or women.

  Critics say that many of the start-up companies soon fold and that deregulation forces prices up because the cab companies sharing the market with more competitors have to make more money from each ride.

  Three taxi companies - Badger Cab Co., Madison Taxi and Union Cab of Madison - are licensed to provide the kind of general service that would be affected by deregulation.

  Transit and Parking Commission Chairman Carl Durocher favors a study, but stressed that city regulations are intended to guarantee good service, not protect existing companies.

  Yet Durocher noted that small, start-up companies "tend to skim the cream by being available at sporting events and for airport trips, but let other companies pay for serving less profitable markets." Loosening regulations would likely hike city costs to administer vehicle safety, driver background and insurance checks for an assortment of new operators, said Durocher.

  Ald. Ken Golden, a member of the commission who Roach is challenging in the April 6 election, calls cab deregulation intriguing - the idea that more competition would not erode service and would create jobs for minorities.

  Golden is concerned, though, that if not required to, cab companies might be reticent to serve low-income, high-crime areas.

  "My first priority is good customer service," he said. Cab riders might be willing to accept less service at a lower price, but should they? "Is that my decision or is it the market's?" Golden asked.

  Refusing rides? Complaints against cab companies are rare, with only 19 filed last year, said Bill Knobeloch, an operations analyst for the city's Department of Transportation.

  He said he recalls only a single complaint of a company refusing to provide a ride in his eight years administering taxi licenses.

  But Knobeloch predicts that would change if taxi companies were not required to serve all areas of the city. "Once you allow the cab companies to refuse rides, that box is wide open. And once you open the box, I don't think you can close it."

  Tom Royston, operations manager at Badger Cab, echoes the concern that start-up companies would skim the cream. "They'd hardly go out of their way to service low-income areas," he said.

  But Royston said that for Badger, with its lower cost, shared-ride operation, low-income neighborhoods "are certainly a very valuable part of our business," that they would not be quick to abandon.

  Rick Vesvacil, general manager of Madison Taxi, said that if permitted to, his company might opt not to serve certain neighborhoods if they became too risky in the future.

  Allowing companies to operate only during prime hours would cut into the fares available to round-the-clock operators who depend on the good times to pay for the slow times, said Vesvacil.

  For city officials, there is the concern that transportation would become less available to low-income residents.

  Knobeloch says that low-income residents "are the most vulnerable transit-dependent populations." And people who can't afford a car would be the ones left stranded if cab companies decided it wasn't worthwhile to operate in the late night and early morning, hours when city buses also are not running.

  Vesvacil's own company had to overcome opposition from established taxi businesses to start up 12 years ago. He says that recent city growth, and development of the Monona Terrace Convention Center and Kohl Center sports arena, probably have made room for another cab company in town.

  "But they should come in under the same rules," he said.

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