Monday, November 8, 2010

Cabulous, Uber, and San Francisco's Poor Taxi Industry Part 2, by John Han

Photo by John Han.
Comments to the previous post entitled, "Cabulous, Uber, and San Francisco's Poor Taxi Industry" has raised some very interesting and valid responses.  And I felt compelled to go ahead with Part 2 of that blog.  So here goes...

With respect to all my fellow cab drivers, I have no problem with the concept of what Uber is doing... to offer a medium through which people can order limousine services without having to call a specific company.  That is a type of centralized dispatching system in itself, only it’s for the limousine industry not the cab industry.  Cabulous is a similar type of centralized dispatching system, except it’s for the cab industry.  They are both fine concepts and I applaud the entrepreneurs who developed them.  

Whether Uber is implementing and administering its business model in compliance with state laws that regulate limousine services, I have little to say about that, as I am not an attorney or a regulator and have little knowledge about the inner workings of the company.  I would prefer to leave that up to the regulators, the attorneys, and the company’s CEO.

So why is Uber so threatening to San Francisco’s taxi industry?

First off, I doubt it’s because Uber and its customers are evil, malicious people who are resorting to breaking the law in order to get even with bad, bad cab drivers who were rude to them.  Or maybe they are, but I wouldn’t know.

I prefer to think that it may be because the City’s taxi industry, including the regulators, are to a degree, controlled by the economic and political will of the cab companies, that own most of the City’s dispatching service infrastructure.  They have successfully monopolized that infrastructure long ago.

Therefore, the cab companies’ strong and tight grip to maintain control could be doing its share to withhold the taxi industry, and its drivers, from being able to evolve to where it needs to, in order to stay competitive in a more rapidly changing world of technology.

Uber is a threat to taxi drivers, not because they are evil as many taxi drivers may presume, but because it is not beholden to the cab companies the same way taxi drivers are and it is not being controlled by them.    Uber can expand as any independently established business in America may.  Taxi drivers, generally speaking, may not.  Taxi drivers are naturally and inherently questioning if this is fair as it would not seem to be.   But that is not Uber's fault.  It is the fault of the industry's structure that has been maintained for over thirty years, which has given cab companies too much power to set the standards for everyone.  Uber is an attempt by individuals and entrepreneurs to successfully address the industry's broken system, since regulators so far have been unable to do so.  The problem is much more complex than I could address in a single blog.

Just as one small example, Uber can effectively take away customers who might normally take cabs, but otherwise could be persuaded to pay more money for limousines, if they could acquire one easily through a service like Uber.  

This is the free market and healthy competition brings out the best in competing industries.  So there is nothing illegal about that.   

The part that is troubling, and has taxi drivers very concerned, is that taxi drivers attempting to compete with this have their hands tied to a degree by their cab companies, because Uber’s service is a centralized dispatching system not limited to a single company fleet, but a universal fleet, and it may be expanding.

Taxi companies, by contrast, control the City’s dispatching system yet are not willing to pull their resources together to form a more efficient centralized dispatching system, demanding that regulators allow them to remain as they have for so many years... individually branded companies.  For those in the know, they are not, by the way, in business to provide transportation services to public passengers, yet they retain control of that aspect of the City's transportation service.  That is what is appalling. 

Therefore, calls issued through cab companies may not be issued as efficiently between passengers and cab drivers who both depend upon the cab companies as their medium.  Thus, Uber has an advantage in the means with which they may issue their calls.  It is more efficient.  And this is worrying taxi drivers.  

The City must address this issue as we are being subjected to an unfair competitive disadvantage. 

Enter Cabulous, which meanwhile is attempting to expand and impact San Francisco’s taxi industry, and may become an industry-wide medium between passengers and cab drivers in the future if it is allowed.   

The City and County of San Francisco seems to be inviting the company to enter into the fray.  One question though… does the proposal to redefine “Dispatch Service” include Cabulous?  The proposal for the new definition reads as follows.

"’Dispatch Service’ shall mean any person, business, firm, partnership, association or corporation that holds a Dispatch Service permit issued by the SFMTA, and that receives communications from the public regarding taxi service and Found Property for the purpose of forwarding such communications to drivers affiliated with a color scheme that is affiliated with the dispatch service, and shall include any owner, manager, employee, lessee, and any agent of said service.  ‘Dispatch Service’ shall not include any service through which the public is able to communicate directly with drivers, and shall not include any effort on the part of a driver to market his or her services to the public.” (Underlining mine)

Cabulous is not affiliated with a color scheme, and does enable the passenger to share their location with drivers when they’re on their way.  Would this exclude Cabulous from being considered a dispatch service by regulation, since it isn't affiliated with a color scheme and allows the public to communicate directly with drivers? 

Nonetheless, the SFMTA is endorsing the company and is encouraging people to use it.  Perhaps the key is in the phrase, "any agent".

And if I’m not mistaken, the SFMTA may be considering licensing the company, or one like it, to broker the centralized dispatching system this City needs.  That is fine.  If Cabulous can expand to the point where it could service San Francisco's entire taxi fleet, drivers will be all the better off.  

But in the meantime, it is unfortunate that the City seems so uninterested and unwilling in administering the system itself, by exercising its regulatory powers and make cab companies be the ones to provide it.  

But then again, does the City and County of San Francisco ever dare to piss off the cab companies? 

31 comments:

  1. Hi John,

    Nice work. I agree that Uber, as it is presenting itself now is what I would consider valid competition except for one remaining factor that troubles me. It is thatbthey are using an iPhone or a gps enabled smart phone to measure the fare. I still do not believe that it is legal for them to determine the fare in this way. However, they are now presenting themselves as a premium car service and I'm ok with that. Frankly, if someone offered a cab driver $35 to drive them from 2nd & Townsend to Pacific and Jones they'd get at least if not better service as Uber, but I digress.

    I take issue with the thought that the City "must" implement a centralized dispatch. Is a central dispatch a good idea? I believe so. However, if taxi companies were held to strict performance standards, which they should be, then I doubt that a central dispatch would seem like such a dire need. Only about half of the City's cabs are fully engaged, that needs to change. After the rogue cab companies are dealt with then I think we can take a comprehensive look at dispatch and possibly a central system. If we allow the rogue companies to continue then they will undermine any implementations to improve fleet effectiveness and we will continue to return to square one.

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  2. Cabulous is not a harbinger of centralized dispatch but its death knell. Cabulous—customer-to-cab, phone-to-phone—is de-centralized dispatch.

    Is it the death knell as well of existing dispatch systems? Possibly, but I doubt it. More likely, as at Citywide, it will meld with them.

    I don’t use it driving at DeSoto because I’m busy enough with our own radio, which management, dispatchers and drivers have made very successful. That success wasn’t achieved overnight or as a gift from the heavens. It came after decades of investment, skill building and dedication. We built it generations before the city thought to make radio service a requirement. We worked hard to build it and we work hard to keep it.

    You seem to think it’s unfair of us not to want to share what we’ve earned, that we should just hand the caring of it over to an undefined dispatch bureaucracy. Would centralized dispatch service our hospital and business clients as well as our dispatchers do? Why should it, there’s nothing to lose if it doesn’t. Would it give the same personalized attention to individual orders as our dispatchers? With no personal stake in the outcome, no.

    Should you get your wish, here are some things I would expect:

    • Drivers who don’t take radio orders now will continue not to take them

    • As the distinction between full service and other companies erodes, companies with full service overhead—but without the radio business to justify their gates—will eliminate gas and gate shifts

    • There will be fewer, larger companies but more independent operators

    • Drivers who formerly took radio calls in busy times, won’t. Without the competitive motivation to keep and acquire customers for “my company,” why should they?

    Centralized dispatch is not the answer to our real problem: a constant supply of taxis in a wildly fluctuating market. Ms. Jones in the Sunset can’t get a cab on Saturday night because there aren’t enough. Sunday morning, two or three drivers are fighting over her business because there are far too many. October is a deluge of cab business, January a drought.

    We may never be able to adapt to the highest peaks or the lowest valleys, but we can do better.

    Part of the real answer is your idea of single operator medallions. Another, (the proposing of which is heresy in Our Fair City) is company medallions. Medallions that companies, not the city, owns. The city sells them; companies buy them. Medallions whose revenue won’t go into the pockets of medallion holders or brokers, but will remain in-house justifying gas and gate overhead; on the streets when they’re needed, off the street when they’re not.

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  3. Jane,

    You bring up some great points about company branded dispatch. De Soto has a reputation for its service to hospitals and has good downtown accounts. And as Athen says, the problems with service quality are bigger than just whether or not there is a central dispatch system.

    But I am still an adamant supporter of centralized dispatching. It doesn't have to eliminate company branding. My idea of it would be that companies would keep and maintain their own dispatch services, but also be tied in to a central unit simultaneously. That way, customers could still continue to call a company they have a good rapport with if they want only that company to serve them.

    For example, maybe a hospital only wants De Soto to service them because of their long standing relationship and good service to hospitals. They could just keep calling De Soto's and no one else. Another client may only want Yellow Cab because people say they tend to have the nicest cabs. Those people could keep calling Yellow only. Companies could still have their faithful followers.

    Others may only want a Green Cab if they could get it because of their social and environmental conscientiousness.

    But if the client doesn't have a specific preference... they just want a cab... then they should have the option of calling a different number... one that is a central hotline and can dispatch the closest available cab despite the company it may be from. This would increase availability to those trying to reach cabs by phone, as it would give them access to all of the City's available fleet, (assuming all cabs transition to GPS systems) rather than just the fraction they can now access through a single company.

    I agree with you in that I don't think a central dispatching system that would eliminate individual, company branded dispatching is a good idea. It would not be fair to customers, or to companies, or to cab drivers. In fact, it would be somewhat scary and totalitarian.

    But one that offers choices is a good one and it's the one I think San Francisco should adopt eventually. I concede to Athen's point that it doesn't have to be today, but it is something we should be moving towards as an industry.

    Central Dispatching obviously isn't the end all answer to everything. No one thing is. But it should definitely be in the picture.

    BTW, thanks for your comment about liking my single operator medallions.

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  4. I am looking forward to next dotcom venture - Busulous! Soon, we can have reliable web bus service in lieu of, ahem, muni's.

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  5. Jane - there is a lot of truth in what you have to say about individual companies like Desoto. There are certainly the best radio company I worked for but ... The inability of companies to communicate with each other is a major reason why people stop playing the radio when it gets busy - No-gos. If you could put an end to customers calling several cab companies at the same time, a lot more people would play the radio.

    If we could end this, I think a lot more drivers would play the radio and service would improve.

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  6. Woops - a failed to point out that some sort of central dispatch or computer interlinking could put an end to this.

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  7. "Skimming operation" is a correct label for Ubercab. They cherry-pick customers in the high-rent districts, and leave real cabs to pick up seniors and disabled, people waiting at the supermarkets, and anyone who lives in a rough part of town.

    Services like Ubercab and Cabulous should be required to affiliate with bona fide full-service taxi dispatch companies. Then they provide a useful supplement to cab service that is available to all. Otherwise they undermine the licensed dispatch services by taking away the most profitable part of the business, and leaving us only the business that is relatively more difficult and expensive to service.

    Competition is fine, just so long as we all have the same requirement to serve all parts of the city, and all of its residents.

    Charles Rathbone (www.luxorcab.com)

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  8. I'd like to echo what Ed Healy said on his blog. Director Hayashi is a one thousand percent improvement over what we experienced under the old Taxi Commission. You can tell that she actually cares about drivers.

    I remember the first time she appeared at the Taxi Commission and told us all that she was a "Consensus Builder". No one is ever going to be completely happy, but everybody's views are heard and respected. I hope she is with us for a long time. We are very lucky to have her.

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  9. What I also look forward to is, when I need to report a crime, I can log on to copulous.com.(Maybe calling it "copulous" is not the greatest name though. It could, um, be taken for something different....)

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  10. Eric, I thought you already got your medallion :)

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  11. I Haven't got my medallion yet but I was approved at my hearing. Thank you.

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  12. John, customers already have the option of calling any cab they want through decentralized dispatch: Cabulous. It's only been around for a year, and it still doesn't have a huge number of drivers signed up, but it's got a lot more activity than it did a year ago. Give it time.

    Like radio dispatch when it was new, it's a private, entrepreneurial answer utilizing the latest technology very successfully. Like radio dispatch, which replaced street corner dispatch phones (Old Yellow was still using them to a limited degree in the 1970s), it will take some time to find its full potential. But that potential is vast. Its costs are up front and if they get out of line a competitor will undercut them.

    Who would build and maintain centralized dispatch? If it’s government, here’s what will happen: Without competition there will be no control on costs. Those costs will be borne by all of us, companies, medallion holders and drivers alike.

    What kind of a system will it build? The kind that works best for it, not you. I don’t think it’s too Orwellian to predict that centralized dispatch would eventually be used not merely as a resource for drivers but as a resource for whatever “emergency” or “public need” the city perceives or concocts.

    We will pay to build it, then to maintain it with city employees making a lot more money than most of us in the cab industry ever shall, but with no incentive to work as hard as we do. Will it adapt to new, better technology? Maybe. Cabulous will adapt because it must. It is truly customer driven. If its customers, cab drivers and cab riders, aren’t happy, Cabulous will lose out to somebody else who will make them happy.

    I conclude by restating what I said at the end of my earlier comment: The bigger problem is that we have too few cabs at busy times, too many when it’s slow. Government does have the task of addressing it. Let’s hope it does it right.

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  13. Correction. My third paragraph from the bottom should read, with new text in caps:

    What kind of a system will it build? The kind that works best for it, not you. I don’t think it’s too Orwellian to predict that centralized dispatch would eventually be used not merely as a resource for drivers but USING DRIVERS as a resource for whatever “emergency” or “public need” the city perceives or concocts.

    ReplyDelete
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