Indianapolis:Before & After Deregulation

If anyone can be bothered to read all of this it shows a before and after of Taxi Deregulation in Indianapolis.In the 1990’s many ‘experts’ extolled the virtues of Taxi Deregulation.There are ‘experts’ in our own Country who say we should do the same here….Take the Time & Read this…According to several published studies, the effects of deregulating the taxi industry in United States have varied significantly, depending on local markets and conditions, but have generally been unfavorable.
Circa 1999:
Indianapolis Deregulation of its Taxicab Industry
Synopsis:Indianapolis deregulated its taxi and ground transportation industry to make it more competitive, more efficient, and a greater source of economic opportunity. Taxi fares have dropped for new market entrants, service has improved, and the number of taxi companies has nearly tripled.

Indianapolis extensively regulated the taxicab industry. Taxi cruising was prohibited, making it nearly impossible to hail a cab in the city. Passengers had to go to a designated cab stand or call for a taxi. This situation was not only inconvenient for the customers, but it also inhibited competition. Since the only practical way to get a taxi was to call one, only those taxi companies that could afford dispatch systems could compete. Further, residents who most needed the service were often denied access because they lived in low income or high crime areas. Minorities were especially hard hit.

Taxi cab licenses were severely restricted. One company owned 201 of the 392 licenses available. The top three companies controlled over three-quarters of all licensed cabs. Certain forms of ground transportation were also not allowed. The restrictions clearly favored large taxicab companies. The absence of price competition also led to high fares. The taxi fares in Indianapolis were the sixth most expensive in a group covering the nation’s ten largest cities and the midwest’s ten biggest cities.

After examining these restrictions on the city’s ground transportation industry, the Regulatory Study Commission recommended a modified form of regulated competition in order to promote competition. Minority groups were highly supportive. The Indianapolis Urban League, the Hoosier Minority Chamber of Commerce, and The Indianapolis Recorder in an editorial entitled “Taxi cab monopoly means poor service” all came out in favor of the measure. One cab driver who dreamed of starting his own company appealed, “All I want the City-County Council to do is to stop denying me the chance to see what I can do.” The City-County Council overwhelmingly voted to approve the proposal.

Since July 1, 1994 the ground transportation market has changed dramatically — and for the better. Eliminated are the cap on taxi licenses, the floor on fares, the prohibition on cruising, and operational requirements that posed artificial barriers to entry into the ground transportation market. For example, it is no longer necessary for transportation services of every company to be available every hour of the day. In addition, license fees and mandatory liability insurance coverage were reduced to reasonable levels.

The adopted proposal also allows for the creation of “public vehicles for hire” including jitneys (small buses which transport passengers along a given route), wheelchair-accessible vans, mini-vans, and station wagons. Previously the handicapped had to rely on public transportation to travel in the city — travel that has fixed schedules, follows only fixed routes, and does not respond to spontaneous requests. Jitney and limousine companies outside the county can now be licensed to operate here.

Deregulation, however, does not jeopardize customer safety. Now, unlike before, those who have been convicted of violent felonies may not get taxi licenses. Vehicle inspections, which used to be at three set times a year, now take place from two to five times a year, depending upon customer complaints. Surprise inspections are also now standard procedure.

The impact on the industry is striking. After a year the number of taxi companies has nearly tripled from 27 to 74. Most own one or two cabs. Economic opportunity has clearly opened up. Minority business entrepreneurs have opportunities to compete that would not have existed without deregulation. Over three-fourths of these new companies are minority-owned or owned by women. Nearly all of the new taxi owners are former drivers who had longed to own their own business.

The pick-up fares for new entrants are 12% below those of the three major companies. Their rate for the first mile is 7% less, and their average mileage rate is 3% less. The new entrepreneurs are innovative and drive safe, cleaner, and newer taxis. Waiting times have dropped significantly. The drivers are more courteous and have gone from wearing ripped tee-shirts to collars and ties. Most of the new companies belong to two cooperatives, started after deregulation, to pool costs and dispatch operations in order to compete more effectively.

Opportunities have opened up not only for taxi cab operators and entrepreneurs. One jitney company was founded to transport inner-city welfare recipients to jobs in a neighboring county.

2007
INDIANAPOLIS – Pete Posey lounges in his cab outside the downtown Hyatt on a recent afternoon, popping sunflower seeds while waiting for customers.

It’s been three hours since his only run of the day, a $20 trip to Indianapolis International Airport.

“Sometimes, I’ll be here five hours before I get someone,” said Posey, who has been driving a cab in Indianapolis since the 1950s. “There are hardly any days I make a profit. At the end of the month, I’m not even making enough to pay my bills. Most other drivers will tell you the same.”

This Midwestern city has had a rocky experiment with taxi deregulation in the past decade, providing a valuable case study for Denver officials considering similar moves.

Indianapolis eliminated most of the regulations governing its cab industry in the mid-1990s, leading to a flood of new taxi companies and an initial drop in prices. But the city soon found itself buried in an avalanche of complaints over dirty cabs, shoddy service and inexperienced drivers, forcing officials to add regulations in 2002.

“I was a big proponent of deregulation and thought it would be the answer to all our problems,” said Harry Fox, director of the Indianapolis Senior Transportation Programs, a nonprofit organization that partners with cab companies to offer seniors discounted fares and other services. “But it really opened the door to more problems.

“If I were in Denver, I would first try to fix the current system rather than deregulate it.”

Indianapolis officials now think they have found a happy medium that encourages competition yet ensures adequate service.

But Posey and other drivers long for the days before deregulation, saying it’s now almost impossible to make a living because there are too many cabs on the streets. And some residents also voice concerns that it’s still difficult to get taxis for shorter trips.

Hot topic

Taxi deregulation has become a hot topic in Denver, fueled by service complaints and concerns that strict rules severely hamper competition.

Some drivers are eager to strike out on their own. But it’s almost impossible to do that because of state regulations. Only three cab companies are licensed to serve the metro area, and it’s been a decade since the last one received approval.

Regulations also limit the total number of cabs on the streets, leading to shortages during high-profile events and on busy weekend nights. At the same time, seniors and disabled residents needing transportation for short trips say they’re sometimes forced to wait hours for a cab, if a driver arrives at all.

A group of drivers, passengers and city leaders has backed a push to deregulate the industry, saying competition will improve service levels.

The taxi companies have admitted there are some problems with the current system but have come out against deregulation, saying it has a poor track record in other cities and will lead to disastrous results here.

Amid the growing chorus of complaints, state lawmakers considered deregulating the industry earlier this year. But they decided to examine it more closely before making any sweeping changes.

The issue has taken on a new meaning ahead of the 2008 Democratic National Convention, which will bring more than 35,000 visitors to town and catapult the city into the national spotlight. City leaders want to make sure Denver puts its best foot forward, but they’re concerned about the taxi industry’s ability to handle all the visitors.

“Obviously there’s a need to solve some problems with the taxi system, but the question now becomes ‘What’s the solution?’ ” said Rep. Buffie McFadyen, D-Pueblo West. “I’m not convinced that total deregulation is the way to go at this point. We need to make sure the industry stays profitable so we have exceptional service.”

Regulations lifted

Indianapolis dealt with some of the same issues in the early 1990s that Denver faces now.

Several large cab companies dominated the industry, and regulations capped the number of taxis on the streets. Many drivers there, as in Denver today, wanted to start their own companies but were essentially blocked from doing so, which limited competition.

“Complaints about service were rampant,” then-Mayor Steven Goldsmith wrote in a 1994 article that appeared in the Cato Institute’s Regulation magazine. “Because the local industry was protected from competition, the near universal judgment was that service was poor, expensive and highly selective.”

With Goldsmith’s backing, the city eliminated most regulations on the industry.

Under the plan, Indianapolis:

• Abolished the cap on the number of taxi licenses the city could issue.

• Let companies set their own pickup fares, although drivers still had to charge the same per-mile fee.

• Lifted regulations that required drivers to wear badges and removed a rule preventing taxi drivers from picking up customers hailing them on the street.

The industry changed virtually overnight. Within a month, the number of taxi companies rocketed 60 percent and fares fell about 7 percent, according to reports at the time. Dozens of individual drivers went into business for themselves, and a wave of immigrant drivers moved to the city to start their own companies.

“The dress code for taxi drivers went from ripped T-shirts to collars and ties,” Goldsmith wrote at the time, citing the effects of competition. “Cabs are noticeably cleaner, cabbies are friendlier and their vehicles are more visible on our streets.”

‘It was a fiasco’

But problems cropped up almost immediately, and they quickly snowballed.

Many new cab “companies” essentially consisted of a driver and his cell phone. The companies didn’t have enough resources – or the desire – to pick up seniors and others looking for short rides. Instead, drivers flooded the airport, hoping for a few higher-profit runs downtown.

Locals and visitors alike complained that drivers, many of whom just moved to town, didn’t know their way around the city. Reports of cab drivers running up the meter by taking circuitous routes increased noticeably.

“At that point, you essentially just had to go down to the City-County Building, give them $100 and, bam, you were a cab company,” said Sergio Gonzalez-Piriz, executive vice president of Yellow Cab in Indianapolis. “The joke used to be that you could fly here in the morning and by afternoon you could have your own cab company, as long as you had a car.”

The result: Consumers weren’t quite sure what to expect when they took a cab.

Some drivers were prompt and courteous. Others were notoriously late and didn’t take care of their cars – or themselves. Smaller cab companies didn’t have an office, leading to spotty service. And they often didn’t take complaints seriously.

“It was a fiasco,” said Fox, who has run the senior transportation nonprofit here for two decades. “There was no quality control. The drivers could use baths. The cabs were sometimes filthy. Deregulation brought in a lot of people who didn’t speak or understand English. We had a lot of complaints from clients.”

The big taxi companies, like Yellow Cab, continued to offer phone dispatch systems and to pick up short-haul passengers. But they had fewer workers to serve outlying areas, as many of their best drivers branched out on their own. The larger companies also had to focus more on the eroding high-profit routes to make sure they weren’t left with just the short runs.

To top it off, the city didn’t respond aggressively enough to consumer complaints, some say.

“The first cut at deregulation created a mess,” said John Livengood, president and chief executive officer of the Indiana Hotel and Lodging Association. “Nobody was watching over the industry. It was like the Wild West.”

Improvements, problems

Faced with those problems, the city adopted a plan to bolster certain service standards and add a few regulations.

New entrants now are required to have at least 20 cabs, take a comprehensive training course and operate a central office that’s open 24 hours a day. All drivers must accept credit cards, have two-way radios and offer service to any “orderly” person who hails a cab.

The city also created a passengers bill of rights and upped enforcement of its regulations. And it hiked the yearly fee drivers must pay to pick up passengers at the airport.

But the city did not limit the number of cab companies or drivers, keeping intact the core of deregulation. The new rules cleared up many of the problems, locals say. “Our members tell us the service is better and that the cabs are cleaner,” Livengood said. “The situation has definitely improved. I don’t hear many complaints now.”

Some visitors agree.

Thornton resident Mark Passmore said he prefers the cab structure in Indianapolis over Denver, saying it gives consumers more choice.

“I’m so against Denver’s cab industry that I refuse to take a taxi there,” Passmore said recently while in Indianapolis on business. “It’s just too expensive. It’s much better out here.”

The city still allows cab companies to set their own initial pickup rate, which is the base fee passengers pay to get in the taxi. Some companies in Indianapolis charge as little as $2, while others charge $5 or more.

But many cab drivers say the system has diluted profits for everyone. They complain that it’s tough to make a decent living now, and that most drivers are barely scraping by. Many immigrant cab drivers, willing to work for slim profit margins, moved to the city after deregulation, flooding the city with taxis. And the airport’s taxi holding lot is constantly jammed.

“This city is just not that big, yet we have 600 some cabs on the street every day because there are no limits,” said Ron Michael, who operates Ron’s Taxi. “There are just too many cabs for a city that’s not busy 24 hours.”

The immigrant drivers also complain of the difficulties, and some say they wish there was a limit on the number of cabs.

Then there’s Posey, who said a pension from a previous career as a truck driver is the only thing holding him up financially.

“We would’ve been better off without deregulation and these other changes,” Posey said. “It might have worked if they had done it right and put some limitations on the number of cabs. But it wasn’t done right here. I think this will be my last year doing it.”

In Colorado

• State legislators recently shot down a proposal to deregulate the taxi industry, saying they want more time to study the issue.

• They did, however, pass a bill allowing the Public Utilities Commission to examine the leasing fees taxi companies charge drivers.

What’s next

• A joint House and Senate transportation committee will meet Tuesday with a panel of stakeholders, including cab owners and taxi drivers. Lawmakers hope to determine this summer what, if any, changes are needed and draft legislation for the next session.

• Local tourism officials also are spearheading a study that will examine the industry in an effort to help lawmakers. The study, funded by the cab industry but overseen by the Denver Metro Convention & Visitors Bureau, will look at issues such as access for handicapped customers and response times.

• The Public Utilities Commission will hold a meeting June 21 to discuss taxi issues with consumers, drivers and cab company officials. The meeting, which is open to the public, starts at 9 a.m. in hearing room A at the PUC.

The Indy experience

Indianapolis has had a rocky experience with deregulation, which essentially removed limits on the number of taxis that could serve the city and made it much easier to start a cab company.

DEREGULATION CREATED SOME BENEFITS . . .

• The number of cab companies rocketed 60 percent in the first month and doubled within several years, significantly boosting competition.

• Fares initially dropped by about 7 percent as cabbies set their own fees.

• Service levels initially improved as taxis battled to woo customers.

BUT PROBLEMS AROSE QUICKLY . . .

• The influx of cabs made it difficult for drivers to make money, so they started focusing on the higher-profit airport runs at the expense of shorter trips.

• Many new “companies” consisted solely of a driver and his cell phone, so customer complaints about poor service were not always adequately addressed.

• Consumers complained of dirty cabs – and drivers.

• Many new cabbies didn’t know their way around the city, meaning they’d get lost, drive circuitous routes with the meter running or even drop passengers off at the wrong destination.

SO INDIANAPOLIS ADDED NEW REGULATIONS STIPULATING . . .

• Drivers must have lived in the city or surrounding areas for at least a year.

• Applicants for taxi permits must complete a training program.

• Taxi owners are subject to up to two inspections a year.

• New companies must have at least 20 cabs.

Source: News Reports, Indianapolis Business Journal, Regulation Magazine, City Of Indianapolis, Rocky Mountain News Research

Across the nation

21 cities experimented with taxi deregulation in recent decades, only to generate widespread criticism. A flood of new cabs spawned rising prices and deteriorating service, said Brad Whittle, president of Denver Yellow Cab.

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