5 Reasons Uber has leverage in Austin (or, How Austin made taking taxis awful)

Austin is in election season. City Council passed a new set of rules for Uber and Lyft, and the companies have funded an initative to repeal and replace those rules with rules more similar to the ones previously in place. On May 7, the issue will be decided by voters. This election has been heated, with charges that Uber pays its drivers too little and its campaign workers too much and countercharges that City Council members are in the pocket of Big Taxi. For many people I know, the referendum poses an awkward choice: they think the new rules the City Council passed are reasonable but they don’t want to see Uber and Lyft leave.

How is that when two young, money-losing startup companies contemplate stopping service here, that possibility gives them so much leverage? Mostly, the answer is that Austinites remember getting rides prior to Uber and Lyft, it was awful–and nothing has been done to fix the underlying problems.

1 The city (still) limits the number of taxis

Finding a taxi in Austin when you needed one was hard. At 2:00 AM on Friday and Saturday nights (closing time for bars), throngs of downtown revelers used to line up desperately searching for cabs. Many folks had to wait until the first wave of cabs had already driven to the suburbs and back. Others gave up and either drove home intoxicated, took unpaid rides from strangers, or hired unlicensed cabs. Since Uber and Lyft have arrived, the number of people offering rides for money and the number of paid rides have both risen dramatically, showing that the demand was always there, but couldn’t be provided for with the limited number of taxis the city permitted.

2 The city (still) forbids taxis from pricing appropriately

Uber and Lyft vary their prices for a variety of reasons. They use sales and first-ride discounts to promote their services; they use temporary price hikes to motivate drivers to get on the road at times of high demand. Given the city-mandated taxi shortage, taxi companies could have used similar tactics to build ridership at down times and motivate all their drivers to drive at times of highest demand. Except the city doesn’t allow taxicabs to change their prices except by act of City Council. The tools that Uber uses to provide reliable service aren’t available to taxis.

3 The city (still) limits the number of taxi companies

Ever wonder why, when riders and drivers both complain vigorously about the existing taxi companies, no other company came into existence and tried to lure drivers away to work for them instead? After all, Uber and Lyft are constantly fighting for each others’ drivers. The city only grants franchise agreements to three companies and limits the number of drivers for each, so they have no incentive to compete for drivers. As a member of my neighborhood association, I’ve met with people looking to start a new taxi company. Unfortunately, all their time was spent on the politics of convincing City Council members to allow them to serve customers rather than the actual logistics of serving customers. Starting a business is hard enough; starting a business that requires political approval before you are allowed to operate is a step too far for most people.

4 The city (still) forbids other companies from offering anything that even vaguely resembles a taxi ride

With the city-mandated taxi shortage, you might expect people to get more rides from slightly differentiated services like prearranged ride companies (called limousine service, but not limited to stretch limos). However, the city code includes many rules with no conceivable consumer benefit. For example, limo services are forbidden from charging less than $55/hour, must wait half an hour before providing service, and must keep trip tickets proving both of those facts.

5 Uber and Lyft provide better services than traditional taxis

Even acknowledging reasons 1-4, Uber and Lyft probably wouldn’t have as much leverage as they do if they merely provided another option on par with what existed before. But they really have managed to use digital technology to provide much better service for passengers. Just some of the Lyft features I’ve personally used recently:

  • Texted my driver before he arrived to okay bringing my cat along.
  • Waited upstairs until GPS showed my ride was a minute away.
  • Automatically matched for carpool with people I didn’t know.
  • Texted my friends a link to a map tracking my ride’s current progress.
  • Paid and tipped my drivers via credit card on file without driver interaction.

In addition to these flourishes, they’re better at the basics of requesting and dispatching cars. This is a point that gets acknowledged repeatedly at City Council. In one debate, Ellen Troxclair argued passengers already have a choice of fingerprinted drivers (taxis) vs. non-fingerprinted drives (Uber/Lyft), and Mayor Adler said it wasn’t realistic to expect passengers to choose taxis given their inferior service.

What next?

Uber and Lyft currently have superior technology and regulations that allow them to put as many drivers as they need on the streets and price rides based on the conditions they face. With the possibility that those companies will be unwilling to continue service under Austin’s new regulations, voters face a choice between having access to convenient, reliable paid rides and the regulations which at least some of them prefer.

Uber and Lyft’s tenure in Austin has exposed the massive gap between the ride services we had and the ride services we want. Whatever the outcome of the election on Proposition 1, I hope that City Council realizes that, as long as it forbids taxi drivers from collectively meeting the number of rides needed, they will always be providing a massive amount of leverage to non-taxi companies who want to meet that demand.