Disruptive innovation has impacted many markets over time and is now ensuing in the St. Louis local taxi / ridesharing market. This concept generally provides consumers with greater choice, improved quality, and lower costs that benefits society in the markets it impacts. However, it tends to pose problems for incumbent corporations and their stakeholders which have no choice but to adapt or lose market share.
The City of St. Louis and Greater Metropolitan Area now have the opportunity to balance the interests of all stakeholders while promoting transportation improvements for its constituents.
St. Louis Metro Taxicab Commission (MTC) & Taxi Companies
These entities are vehemently opposed to competition they find threatening and are spreading fear, uncertainty, and doubt in attempt to scare consumers and force the hand of governments to preclude Transportation Network Companies (TNC) from entering the local market.
This tact is unfortunate as it not only ignores the needs and desires of transportation consumers, but actively rails against consumer interests in the region. It also seems to violate the MTC’s mission as defined here.
The Federal Trade Commission (FTC) has observed this unfortunate behavior in other locales and has specifically provided feedback to the Washington D.C. Cab Commission advocating for D.C. transportation consumers. Please reference the following pertinent documents:
- The Washington Post: “Has the DC Cab Commission Forgotten Who it Serves?”
- FTC Staff Submits Comments to DC Taxicab Commission on Proposed Passenger Motor Vehicle Transportation Rules
- FTC letter to the DC Cab Commission (pdf)
Is it the case that the MTC holds disproportionate sway in determining the market future for this transportation mode? Its bias and actions against the interests of local consumers engender a need for the city and regional government to rise and represent the interests of all stakeholders while promoting transportation improvements for its constituents.
Taxi Driver, Umar Lee’s Points
- He blames hipsters for fueling Transportation Network Company (TNC) demand and appears to display deep animosity for the former.
- This is inflammatory and unfounded. The demand for TNC is akin to consumer demand for better music options in the early 2000’s when Napster began disruptive innovation in the music industry. This disruption has resulted in multiple benefits for consumers while still enabling musicians and the music industry with a reasonable profit after adapting to the new environment.
- Attacks on hipsters and his claims of their hypocrisy do not necessitate a response and only serve as a distraction to the central issue which should be providing St. Louis consumers with better transportation options. Companies that succeed in doing so will profit and so will their employees. Alternatively, companies that don’t will suffer and so will their employees.
- He claims the bulk of taxi consumers are the elderly and the working-poor.
- However, it seems that the status quo doesn’t serve these constituents well. MTC / taxi company overhead and bureaucracy likely cost these consumers about 20-30% more than TNC services like Lyft. For those on limited and/or fixed budgets, added competition could noticeably improve quality of life for many St. Louis citizens. Not to mention, greater competition would likely improve service times and the overall experience. Lyft’s price and coverage map is here: http://www.lyft.com/help?article=1504205
- He claims that “serious money” is made on the weekends by the party and nightlife crowd. Additionally, added competition will reduce profit for taxi drivers in this segment, reducing the number of drivers, which would negatively impact the elderly and working poor in North City, North County, and South City.
- “Blaming Uber for hurting cabbies is like blaming the Internet for hurting newspapers. May be true. But raging vs. evolution is losing battle” - @bytimlogan
- This threat appears to be the major concern of the MTC, taxi companies, and drivers. But fighting it, as Tim Logan wisely states, is a losing battle. For these parties to survive, they must adapt as the music industry has. It may be a bitter pill, but it’s reality.
- See response to bullet below for further elaboration of the related claim that TNC’s won’t serve lower-income areas.
- He claims that Lyft and Uber are not designed to serve areas such as North City, North County, and South City.
- What facts is he basing this on?
- This is not true per Lyft’s St. Louis page: http://www.lyft.com/help?article=1504205
- To assuage these concerns, the city could divide the Metro area up into given regions and require minimum levels of TNC drivers to reside in them. This will help ensure that these areas are served and likely with faster response times than existing taxi offerings. It will also help to ensure that TNC drivers come from diverse backgrounds -- something that Umar claims will not happen.
Transportation Network Companies (TNC) - Lyft, Uber, etc
- For a model reference, view the definitions and regulations as laid out by the California Public Utility Commission. Ref: https://en.wikipedia.org/wiki/Transportation_network_company
- Technology serves to create greater efficiencies and disrupt many markets. It’s now able to do so in the ridesharing market.
- Various TNC companies exist, with a variety of competitive models represented.
Within 10-15 years, self-driving vehicles will begin to penetrate the market. Undoubtedly, both taxi companies and TNC’s will shift their operations and fleets to this model. TNC’s will likely have the upper hand and threaten taxi companies further as the latter is wholly lacking in innovation and technological expertise. To survive, taxi companies will be forced to adapt. Additionally, the penetration of self-driving vehicles means that the number of taxi drivers will begin decreasing over time and eventually be eliminated. In all cases, adaptation is necessary.
- Accept that disruptive innovation is occurring in the taxi / ridesharing market and for the benefit of this region’s transportation consumers.
- For government to realize this and help shape an environment that: 1) Facilitates open discussion and understanding 2) Develops a pilot framework enabling TNC’s to enter the market while ensuring reasonable consumer protection and safety.
- The state of California and various municipalities have trailblazed in this area. We can learn from them and adapt ordinances to meet our needs in balance.Implements the framework and supports it over the course of the pilot and beyond if approved.
- Consider forging intermediate agreements to enable TNC’s that meet the criteria to legally operate until a pilot framework can be created and implemented.
- Lastly, this necessitates TNC’s like Lyft to display goodwill and the desire to work with the St. Louis government.
Should TNC’s be allowed to enter the St. Louis market? Yes, for the various reasons stated in this document. Minimal and necessary governance standards can be developed and enforced to advance consumer protection while enabling innovation that benefits transportation consumers in the St. Louis region.
- Per its nomenclature, the MTC regulates taxi cab companies in the St. Louis metropolitan area. Thus, placing TNC’s under MTC governance is a likely mismatch.
- Consider creating or utilizing a two-tiered regulatory system for the creation and enforcement of TNC ordinances that learns from trailblazers and meets our specific needs:
- Limited governance, ensuring reasonable consumer protection and safety that the Federal Trade Commission (FTC) advocates.
- This more laissez-faire environment still protects consumers while promoting the innovation and competition that benefit them.
- Chicago: Chicago Tribune, "Editorial: Chicago ride-share ordinance is about protecting citizens"
- California: California Becomes First State To Regulate Ridesharing Services Lyft, Sidecar, UberX