Thursday, July 16, 2015

How Uber is shining a light on the dirty politics of Toronto's cab industry

I can't help but wonder if the coverage is just a bit too optimistic... but I hope it's right (Globe and Mail):

In September 2012, one of Toronto’s taxi licenses sold for $360,000. As it turned out, this was a peak that presaged a major slide. By 2013, the average selling price of a cab plate had fallen to $153,867. In 2014, it was $118,235.

The reason behind this plunge is Uber, the online service that lets you order a ride through your smartphone. By the looks of it, Uber may drive a stake through the heart of the cab business. It’s about time.

[...] After my investigation of the industry, my name was mud among the city’s taxi plate holders, who were worried about losing their golden goose. One woman, who inherited a pair of plates from her father, called me a “communist” for recommending that the taxi plate system be abolished. “This is free enterprise,” she declared.

In fact, Toronto’s taxi plate system is anything but free enterprise. Instead, it is based on the artificial restriction of a natural market, and the granting of licences to a fixed number of participants. Even those who paid top dollar for a plate used to enjoy an annual return of more than 12 per cent. And for those who inherited plates, the return was manna from heaven.

On the other side of the coin were drivers and customers. Passengers paid too much for rides in old junkers, and drivers found themselves trapped in a system that skimmed the lion’s share of their revenues. Many have compared the Toronto cab industry to the feudal system, which is probably not far off the mark.

To understand how the taxi plate system and the interests behind it have contorted the Toronto cab industry, imagine how other businesses would work if operated the same way.
Politicians often need reminding that being pro-business and pro-markets is not the same thing.

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