ABJ on Taxis v TNCs

(Community Matters) irresponsible journalism that ABJ even prints Ed’s statement that Yellow Cab’s ap is anything like Uber’s or Lyft’s & that it’s got “more local reach” than the aps of Uber & Lyft without a direct challenge. Ed doesn’t do himself any favors by stretching the truth on such easily refuted statements. Despite my enthusiasm for TNCs, I’m a taxi fan too and believe we ought to deregulate to level the playing field (lift caps on permits) while ensuring access for disabled (TNCs should have to provide access too) as well as liability coverage and public safety. Don’t get me started on Ed’s disingenuous statements about differences in liability coverage between the two models.

Ed ABJ taxi

ABJ – The taxi empire strikes back: How Austin’s cab companies plan to compete against Uber, Lyft

pasting since article behind wall:

The taxi empire strikes back: How Austin’s cab companies plan to compete against Uber, Lyft

Staff Writer-Austin Business Journal

Ed Kargbo likes to makes a point that, in a way, his company was Uber before Uber was Uber.

The president of Yellow Cab Austin — the dominant player of the local industry — likes to note that the Hail A Cab app that dispatches vehicles to Austin consumers in need of transportation has been in place since 2010, and that one out of three trips handled by his company come through the app.

Though Kargbo isn’t too worried about being out-innovated by upstarts such as Uber Technologies Inc. and Lyft Inc., which are known as transportation network companies, or TNCs, the entry of those companies into the Austin marketplace in recent months has put the local cab crunch in the limelight.

It’s clear to many city leaders and Austinites that the nearly static size of Austin’s regulated tax fleet — now with just under 760 vehicles — hasn’t kept up with its fast-growing population.

Surging power sought

The biggest difference between taxis and TNCs, according to Kargbo: “They’re able to surge the marketplace with drivers and we’re not, so the biggest problem has to do with supply. We’ve only added 81 cabs in four years and those numbers don’t balance out.”

A 2013 study by the San Francisco Municipal Transportation Authority on how to solve that city’s taxi crunch looked at taxi availability in major American cities. Austin came in near the bottom with 6.7 taxis available per 10,000 residents, behind Dallas’ 16.7, Houston’s 11.8 and car-scarce cities such as New York City; Washington, D.C.; and Chicago.

That study was based on 2010 census numbers. Given Austin’s population growth of about 100 new residents per day and the fact that the number of licensed taxis in Austin hasn’t kept pace since 2010, that means the effect of the local cab shortage is even worse than those numbers suggest.

Austin cab company executives have been lobbying for more taxi permits in Austin since 2010. Kargbo said the city’s growth has created enough demand to gradually add 300 more vehicles to the streets in the next 18 months.

He and others in the Austin taxi marketplace have been pushing city leaders to approve those permits as soon as possible, with an increase of around 100 in time for South By Southwest 2015 as an initial goal.

Because cabbies themselves are essentially small businesses, it’s a very tricky proposition to add more competition to their landscape.

Kargbo said some increase is likely to be approved in the next 90 days but there is disagreement between City Council members and taxi officials over how quickly the 300 new vehicles should be added. Another bump in the road to more permits could appear if something isn’t done before an entirely new Council takes control in January.

City leaders currently want the entire increase to happen almost immediately but some in the cab industry want to add them more gradually.

“You very easily could do 25 (vehicles from each of the three taxi companies) every six months without putting any kind of a hardship on the drivers,” said Ron Means, general manager of Austin Cab. “Having everything come on at once would let you handle the big surges for South By Southwest, ACL Fest, F1 and other big events but to put those cars out there permanently takes some time to work things out.”

PR problem

The local cab companies have been sideswiped to a large degree by the tech cachet of Uber and Lyft and the David vs. Goliath narrative those companies have created while trying to get approval to operate in Austin. In October, Austin City Council voted to allow TNCs to operate in the city under a temporary set of regulations put in effect while a city-appointed committee works to create a more long-term framework for the companies. Uber and Lyft had been operating in a renegade fashion since the spring, though neither company has disclosed how many drivers it has employed.

Kargbo said Yellow Cab doesn’t disclose proprietary information about its Hail A Cab app, such as how many times it has been downloaded, but he said he is confident it has more local reach than Uber and Lyft combined.

The bigger challenge, he said, is combating the image problem that’s come about during the political debate over ridesharing and TNCs.

“As the media covers that debate it gives more attention to their product. We have to keep growing through more marketing efforts,” he said.

He expects the reputation of Austin cab companies will improve as more drivers are added and average wait times can be decreased to less than five minutes from the current average of eight minutes. Uber and Lyft have been wowing some Austinites with response times about half of what cab companies offer now.

On the upside for the cabbies, publicity over Uber and Lyft’s “surge pricing” during peak hours has taken some of the sheen off the new transportation kids waiting at the end of the block. Reports of Austinites paying hundreds of dollars for a relatively short ride turned many heads, and cab companies plan to tout their steady rates — even late-night downtown or during Austin’s popular festivals.

Still, response times for those peak-time riders needs to be addressed quickly and cab companies are confident they’ll do it.

“We’ll get that number down to under 10 minutes during peak hours and customers won’t have to worry about getting gouged after the fact,” Kargbo said. “Their riders are getting raked over the coals and their drivers have to work twice as hard to make a living doing that. We’re going to increase our response 24 hours a day with no price surging as a result.”

Much at stake

Exact financial data on the cab industry is tough to come by, in part because the heads of companies don’t want to give TNCs any additional insight they could use to further disrupt their business model. Kargbo and Means declined to reveal their companies’ revenue, with Kargbo saying only that “traditionally the cab business has done very well in Austin.”

The financial models for cab companies vary, but Austin cab drivers typically own their own vehicles and pay a percentage of their fares on top of a weekly franchise fee of about $300 to their affiliated company.

In exchange, the companies pay for the city permits and provide a maintenance shop and a dispatch system to provide drivers with business.

Nationwide, revenue for the cab industry was projected to reach $11 billion in 2014, with a growth rate of just over 2 percent per year expected through 2019 and a profit margin of around 15 percent before taxes.

It is unknown how much TNCs will cut into that revenue but Ray Mundy, a professor of transportation at the University of Missouri-St. Louis, said early multi-year studies in New York City and San Francisco have shown Uber and Lyft drivers reduce ride and call volume for traditional taxis by about 33 percent.

Mundy has conducted 25 studies of local cab systems, including a 2011 study in Austin that called for an increase in the number of cab licenses issued by the city.

His study found that the cab response time for the Austin area during most times of the week was very good, with weekend evenings as the only times when demand far outstrips supply.

He said 100 to 150 extra cabs could be justified during those times, which is the biggest chunk of business Uber and Lyft have targeted with their early marketing efforts in the city.

Mundy said the push by Austin companies to put more vehicles on the street is “a reasonable competitive response” to a disruptive force in the market. He worries, though, that economic pressu res may cause a push to relax insurance requirements on city-licensed drivers and reduce other overhead costs as TNCs become a standard option in Austin and consistently cut into revenue.

“The industry probably reacts by asking for some relief on their insurance policies, and it bothers me to have the prospect out there of lowering of insurance standards and background checks,” he said. “With TNCs on the scene, at peak times you do get more service but it creates a situation with less money going through each cab.”

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