

Portsmouth regulators vote to eliminate taxi regulations in response to Uber - sighsighsigh
http://m.seacoastonline.com/article/20150121/NEWS/150129793

======
greggyb
A few key things: It seems like the cab companies are not happy about this
move by the commission.

Second, this portion of the proposal:

> Replace the current taxi medallion system with a registration process that
> would require all drivers to register with the city clerk's office and
> provide proof of commercial insurance.

This article does not make it clear if the insurance Uber provides by default
for UberX drivers would count here, or if drivers would need their own
commercial insurance policy.

If UberX's insurance does not count, then this move would not introduce
significant ridesharing, and the only benefit to the policy change would be
the elimination of the medallion system.

Do not read me wrong, that is a wonderfully good thing, as regulated limits to
supply legally enforce monopoly pricing. I read the primary benefit of UberX
and similar services in the massive increase in marginal transactions
facilitated, rather than the relatively simple task of acting as a modern taxi
dispatcher.

Again, this is all conditional on the proposal passing, and the commercial
insurance requirement excluding UberX insurance for casual ride-sharers.

------
stolio
> Cataldo said if drivers are smoking, or offering rides in unkempt vehicles,
> consumers will decide if they want to hire them.

Remember this only works if there's an "arbitrarily large" number of other
drivers competing for the same fare. As always, deregulation only works if the
markets being deregulated can become healthy and stay that way long term.

~~~
greggyb
Uber has a pretty good track record of bringing in more and new drivers.

Given that personal automobiles are a large sunk cost that many people have
incurred, being able to generate marginal income through ride-sharing seems
like it needs a lot of active barriers to entry (like restrictive regulations
favoring incumbent taxi services) to really limit the supply of drivers.

~~~
stolio
Personal automobiles are NOT a sunk cost. You can sell your car, the portion
of the cost that is "sunk" is small.

It's really expensive to drive for a living, especially in a nice car.
Obviously you can make a ton of money if your parents bought your car and pay
for your repairs, if you're not paying for commercial insurance, and if your
main competition faces strict regulations that you've cleverly sidestepped.

To this day Uber releases numbers that don't account for wear and tear on your
car, anybody who's ever delivered pizzas will tell you that changes the
economics of it drastically.[2]

There are also reasons not leave a public good like transportation in the
hands of people looking to "generate marginal income".

But the real joke is Uber's brought in about $5 billion in funding in the past
five years, their recent valuation came in at over $41 billion[0] and there's
still this narrative of Uber being the little guy out there fighting big
government. It's a real underdog story!

They're simultaneously taking on _" 6,300 companies operating 171,000
taxicabs. More than 80% of these companies operate less than 50 vehicles"_[1]
in America alone. Think about that, they're poised to put about 3,000 small
business under in the coming years, but they're out there for the little guy.
They're taking the market over and if they have their way it'll go from
regulated oligopoly to unregulated oligopoly with them at the top. It's an
absolutely huge power play, and like every rational business they're fighting
for whatever monopoly power they can get:

> There’s not a lot of earth-shattering IP in the ride-sharing space, but Uber
> seems to be making a play to own it, having submitted 11 patents that cover
> every major aspect of its business model. If granted, it could find itself
> with a technical monopoly not only in ride-sharing but other businesses
> based on its processes, like general delivery (again, more reason for those
> rich investors to be excited, right?)[0]

Forgive my rant, Uber's marketing pisses me off. They're not some benign force
trying to help people get luxury rides to the airport, they're a rational
business making rational business decisions.

[0] -
[http://www.forbes.com/sites/jonathansalembaskin/2014/12/05/t...](http://www.forbes.com/sites/jonathansalembaskin/2014/12/05/the-5-keys-
to-ubers-valuation/) [1] -
[http://www.tlpa.org/about/taxicab.cfm](http://www.tlpa.org/about/taxicab.cfm)
[2] - [http://www.washingtonpost.com/blogs/the-
switch/wp/2015/01/22...](http://www.washingtonpost.com/blogs/the-
switch/wp/2015/01/22/the-missing-data-point-from-ubers-driver-analysis-how-
far-they-drive/) bonus link: [http://www.quora.com/How-much-does-an-Uber-
driver-make-1](http://www.quora.com/How-much-does-an-Uber-driver-make-1)

~~~
greggyb
Regarding sunk costs: in a strictly technical sense, you are correct, but in a
practical evaluation a personal vehicle represents a large sunk cost for an
individual. How do I justify this? People only sell their car to finance
buying a new one. Individual car owners always have a large amount of their
capital tied up in _a_ vehicle, even though the specific vehicle will change
over the course of years. For those (vast majority) of car owners who do not
choose to eschew personal vehicle ownership, it is entirely accurate to
consider a vehicle a sunk cost.

That being said, I don't really disagree with most of what you have to say,
though I do disagree with your negativity.

It is expensive to drive for a living - so expensive, in fact, that it was not
a living until monopoly pricing was forced by government regulation.

The excess capacity of vehicles owned for personal transportation is huge. I
don't want to repeat myself, so I'll link to another thread discussing Uber
(and friends) where I participated that makes my position very clear[0].

I do not view Uber as an underdog. I agree with you that they are a rational
business pursuing their profit. I also believe that in pursuit of their profit
they will provide a great amount of value to consumers, and to ride-sharers
who can defray some portion of their cost of ownership of a personal vehicle.
The point is not to make a living, but to defray costs. The historic trend of
jitney services (a combination of ride-sharing and public transit in
widespread practice before regulation - history in linked thread) was of a
high turnover driver base, with many performing relatively few trips, and some
few working "full time" for a short time frame. This is the model that Uber
(along with its friends) improves upon.

While I do not debate the narrative you have presented as common about Uber
(and friends), I have not made arguments that follow it. It is a valid point
that does not apply to the discussion I have engaged in. I view as a net
positive the dissolution of all 3000 firms you have referenced if Uber (and
friends) can provide an analogous service more desirable to consumers and at a
lower cost (I do not deny the transitional pain - note I said net positive,
not absolute). We can certainly disagree on this point and have a discussion
about the merits of industries being displaced and altered with technological
and regulatory change, if that is what you'd like.

Even if Uber manages to acquire patent protection over every aspect of its
business model and on the terms they have applied for those patents, this is
still a superior situation to the stagnant monopoly pricing that has been
enforced by medallion systems for nigh on a century. Patents will expire
before another century has passed.

That being said, the fact that there are already multiple players in the
market for ride-sharing apps indicates that the ideas are, while novel also
rather obvious. I would be surprised if they managed to acquire patents that
remove their competitors from the market completely.

I agree that Uber is not a benign force trying to help people get luxury rides
to the airport. I also agree that they are a rational business making rational
business decisions. The way I read the situation, though, is that they are
eliminating significant deadweight loss that is a direct result of the status
quo they are challenging. They are providing significant competition in an
industry which has seen consumer-harming regulation for a century. Forgive me
for not being upset that a company pursuing its own self interest is also
doing good as a side-effect.

[0][https://news.ycombinator.com/item?id=8874249](https://news.ycombinator.com/item?id=8874249)

~~~
stolio
> It is expensive to drive for a living - so expensive, in fact, that it was
> not a living until monopoly pricing was forced by government regulation.

This was done in exchange for stability in price, stability of service and
other benefits i.e. we're getting something for our money.

> The excess capacity of vehicles owned for personal transportation is huge. I
> don't want to repeat myself, so I'll link to another thread discussing Uber
> (and friends) where I participated that makes my position very clear[0].

I glanced through it, I don't find the argument convincing.

> They are providing significant competition in an industry which has seen
> consumer-harming regulation for a century.

#1 Is it consumer-harming? #2 if it is, does it harm consumers more than it
benefits society at large?

The medallion system has limited the number of cabs on the road which
minimizes the pollution and congestion they cause, it also makes sure they pay
their fair share for things like road repairs since they're using a public
good for commercial use. Because the cars are generally awful shades of yellow
or orange pedestrians, cyclists and other cars are safer as well. These are
things that benefit society as a whole.

Believe it or not, many people like to know ahead of time how much a cab ride
is going to cost so they can plan accordingly.

At the end of the day Uber is going to regulate the market using their market
power to whatever extent they can. They simply aren't going to bring an
efficient, competitive market place where everybody wins. You don't get valued
at $40 billion when all you have are easily substituted assets (it's an app, a
brand, and some logistic management software) unless you have a long term
angle of somehow making massive profits which according to basic economics
_are assumed to be impossible in healthy markets._

~~~
greggyb
>> It is expensive to drive for a living - so expensive, in fact, that it was
not a living until monopoly pricing was forced by government regulation.

> This was done in exchange for stability in price, stability of service and
> other benefits i.e. we're getting something for our money.

If you'd read the history in my linked post, it is clear that these were not
salient issues and the regulation was pushed through by municipal carriers and
private trolley operators who could not effectively compete in the market. The
regulation was not desired by taxi/jitney operators nor requested/supported by
the public.

While it is true that regulation _can_ be a general benefit, it is often the
case that it is supported, at least in part if not in full, by
firms/industries desirous of legal protection and elimination of competition
where they cannot effectively compete.

What "we" the consumers got was less regular service, areas that are typically
avoided by cab drivers and thus underserved, legally enforced monopoly
pricing, "and other benefits."

>> The excess capacity of vehicles owned for personal transportation is huge.
I don't want to repeat myself, so I'll link to another thread discussing Uber
(and friends) where I participated that makes my position very clear[0].

> I glanced through it, I don't find the argument convincing.

Let's be clear here, the point you are explicitly disagreeing with is that
there is a large amount of excess capacity in the vehicles which are currently
owned and operated for personal use. To disagree you must claim that there is
not much excess capacity in these vehicles. To weakly support this position
you would need to argue one of two things:

1) That vehicles owned and operated for personal use are in use for the vast
majority of the day (i.e. they don't sit parked for more hours than they spend
driving).

OR

2) That vehicles owned and operated for personal use are filled to seating
capacity in the vast majority of the trips that they make (i.e. every time
someone drives, they have more seats filled than empty).

To strongly support your position you'd have to argue both of the above. I am
not trying to artificially box you into a corner, but I can truly think of no
other arguments to support the premise that there is _not_ a large amount of
excess capacity in vehicles owned and operated for personal use.

>> They are providing significant competition in an industry which has seen
consumer-harming regulation for a century.

> #1 Is it consumer-harming?

I argue yes for the simple fact that the supply is artificially constricted.
Fares are higher than they would otherwise be and there are fewer suppliers of
rides-for-hire, thus underserving geographic areas or limiting capacity at
peak hours.

> The medallion system has limited the number of cabs on the road which
> minimizes the pollution and congestion they cause, it also makes sure they
> pay their fair share for things like road repairs since they're using a
> public good for commercial use.

I will not divert this into an argument as to the size or costs of these
effects. If pollution, congestion, or fair-share-of-costs are concerns, then
the appropriate way to address this is to address the actual concerns - use
costs, congestion fees, gas taxes, or any other similar policies address these
concerns while also providing revenue that could (in an ideal world) be used
to pay directly back into road maintenance.

That being said, medallions are privately owned, and the rents accrue to the
holders of the medallions. Thus one of your benefits, namely "makes sure that
they pay their fair share for things...." is not even true. The medallion
system does literally nothing but reduce the number of cabs and increases the
fare.

> Because the cars are generally awful shades of yellow or orange pedestrians,
> cyclists and other cars are safer as well. These are things that benefit
> society as a whole.

Citation needed. Seriously. You are claiming that the color of a car impacts
the rate of accidents they are involved in. Besides this being fairly absurd,
you are conflating cab coloring with regulation of taxi services. If the color
of cars providing a taxi service is of such public concern, then it would be
much easier (and less costly) to require enhanced visibility modifications to
such cars, for example reflective sections or only allowing yellow cabs (which
are not even the norm in many areas - not everywhere with cabs is NYC). Why
should we resort to a consumer harming medallion system to make sure cabs are
garish? What should we do about the widespread black car industry of other
cars for hire that have been around since long before Uber and compatriots?

> #2 if it is, does it harm consumers more than it benefits society at large?

> Believe it or not, many people like to know ahead of time how much a cab
> ride is going to cost so they can plan accordingly.

You can easily check the fare before the ride with the Uber app, so I'm not
entirely sure about the argument here.

> At the end of the day Uber is going to regulate the market using their
> market power to whatever extent they can. They simply aren't going to bring
> an efficient, competitive market place where everybody wins.

They are not going to devote their efforts to doing so, this is correct. But
the actions they are taking are moving the market in that direction anyway -
for example in the parent article, it is leading to moves which will allow
enhanced competition in the Portsmouth market. Even where taxi regulation
change not a whit, UberX and similar (ride-sharing version, not taxi-dispatch
version) will allow price competition against incumbent taxi services, and
excess capacity at peak times and in underserved areas. Even if the price they
can charge is restricted, the latter two benefits remain.

> You don't get valued at $40 billion when all you have are easily substituted
> assets (it's an app, a brand, and some logistic management software) unless
> you have a long term angle of somehow making massive profits which according
> to basic economics are assumed to be impossible in healthy markets.

Well, as covered extensively above, the market for taxi services is far from
healthy, so there's a large immediate opportunity for Uber in soaking up the
excess demand that current taxi services simply do not fill.

That being said, even if Uber and similar move the taxi service and ride
sharing industries toward more health, there is a huge difference between
economic profit (revenue > opportunity cost) and accounting profit (revenue >
outlays). Consumer electronics are a good example - there are commodity parts
and labor easily available, but there are many firms in this market with
healthy profit margins and prices have been tumbling for consumers for
decades.

I am not saying that Uber and similar are identical to consumer electronics,
but there is obviously a significant network effect and first mover effect
which contribute to the valuations we see.

I read your posts as seeming to assume that I am naively painting some
panglossian image of Uber as the champion of the everyman, providing cheap and
wonderful transport for all. This is not the view that I hold. If my
understanding of your tone is incorrect, I apologize. I would like to engage
only on the salient points of the issue. I have identified several I find
important and supported them above. I will summarize below.

1) The current regulatory regime was implemented primarily for the benefit of
incumbent and municipal public transit providers.

2) There is excess capacity and some level of sunk cost in vehicles owned and
operated for personal transportation (they are not constantly utilized or
filled to capacity, but a single owner bears significant fixed costs that are
not adjusted for this fact).

3) Medallions artificially restrict the supply and raise the price of cab
services, without significant benefit to consumers.

4) Uber and its competitors (whom you repeatedly do not acknowledge) are
providing a service that is of objective value to consumers.

5) Uber and its competitors are, in so doing, providing competition at a level
unseen for nigh on a century to the incumbent taxi service industry.

~~~
stolio
Fine.

> 1) The current regulatory regime was implemented primarily for the benefit
> of incumbent and municipal public transit providers.

Without buying into free-market libertarianism I don't see how to convince
myself of this. Do companies try to purchase favorable regulation? Of course,
it's exactly what Uber is doing right now. But I don't believe people go to
engineering school for 4+ years, then work 5+ years for their PE licenses just
so they can take kickbacks. Traffic systems and roads must be engineered, it's
why they work, and at the end of the day limiting the number of cabs on the
road seems like a pretty obvious thing to do.

> 2) There is excess capacity and some level of sunk cost in vehicles owned
> and operated for personal transportation (they are not constantly utilized
> or filled to capacity, but a single owner bears significant fixed costs that
> are not adjusted for this fact).

Sunk costs? No. You're making up a new definition of a well defined term.
Excess capacity? 95% No. Lyft Line is the only place I've seen where that
argument makes sense. Maybe Uber has a similar set-up, but when people are
driving 20-80 hours a week that's just another 3,500 lbs of metal on the road.
Cars don't depreciate _that much_ while sitting in garages.

> 3) Medallions artificially restrict the supply and raise the price of cab
> services, without significant benefit to consumers.

Medallions are just part of a comprehensive regulatory system designed over
many decades. They do decrease the number of cabs on the road. Every cab
increases congestion, increases everybody's insurance rates, increases
pollution, increases the risks faced by pedestrians, etc.

> 4) Uber and its competitors (whom you repeatedly do not acknowledge) are
> providing a service that is of objective value to consumers.

I never said they weren't. What, am I the Grinch trying to deprive people of
value because I don't buy into Uber's PR?

> 5) Uber and its competitors are, in so doing, providing competition at a
> level unseen for nigh on a century to the incumbent taxi service industry.

I never said they weren't. It's useless to compare the long-term steady-state
of the regulated cab industry to the brief period of competition that will
occur if barriers to entry are removed. Of course that increases competition.
In the short term. Then new barriers to entry are erected and the market
concentrates again. The long term picture of "deregulation" is a probable
Uber/Lyft duopoly that thanks to their size will likely have as much or more
regulatory power than the current cab companies.

Investors don't believe this will be a long term competitive market, that's
why Uber's valued at $40 billion. I don't believe it's going to be a long term
competitive market, I think it has oligopoly written all over it. Uber
certainly doesn't think it's going to be a long term competitive market, in
fact it's probably one of their greatest fears. The only people who actually
believe that Uber marks a return to free-market economics are the
libertarians, and this I attribute to the genius of Uber.

edit: > Let's be clear here, the point you are explicitly disagreeing with is
that there is a large amount of excess capacity in the vehicles which are
currently owned and operated for personal use. To disagree you must claim that
there is not much excess capacity in these vehicles. To weakly support this
position you would need to argue one of two things:

> 1) That vehicles owned and operated for personal use are in use for the vast
> majority of the day (i.e. they don't sit parked for more hours than they
> spend driving).

> OR

> 2) That vehicles owned and operated for personal use are filled to seating
> capacity in the vast majority of the trips that they make (i.e. every time
> someone drives, they have more seats filled than empty).

> To strongly support your position you'd have to argue both of the above. I
> am not trying to artificially box you into a corner, but I can truly think
> of no other arguments to support the premise that there is not a large
> amount of excess capacity in vehicles owned and operated for personal use.*

I really have no idea why you're going on about this. Uber isn't a car-pooling
service, it isn't car-sharing. It doesn't even solve this supposed problem of
"excess capacity" because what's the average number of occupants in an Uber
car on the road? I suspect it's less than 2. I'm not disagreeing with the
argument so much as saying it's just too bizarre to disagree with.

~~~
greggyb
I'm going to stop repeating myself. You have not materially engaged with any
of the arguments I have made in support of my positions nor coherently
addressed my position, rather have taken the positions I have provided and
engaged in no dialog beyond repeating your own claims that I have tried to
address reasonably. At this rate we will continue in circles.

~~~
stolio
Just a note: if you're going to bow out of a conversation you don't feel is
productive there's no shame in that, we all do it from time to time for a
variety of reasons. You don't have to save face by suggesting that you're
reasonable and I'm not, you're coherent and I'm not, you dealt with all my
arguments and I dealt with none of yours, etc.

I don't find your arguments compelling, you don't like mine. Whatever, it
happens.

------
a2tech
Good for them! I'm glad at least one city is living in the future with the
rest of us

------
lsllc
New Hampshire. Live free or die!

------
sighsighsigh
The title is very misleading, as the taxi commission voted to eliminate
itself. It isn't on the chopping block for any other factor than by its own
volition; an incredibly rare example of public watchdogs intentionally giving
way as the best way to pursue the public interest they were made to help.

