Insights at UBC Sauder

Thumbs up to ride hailing in B.C.?

Posted 2018-02-14

The proposed introduction of ride hailing in B.C. has been a controversial topic: taxi companies claim that deregulation “could destroy their industry,” while ride-hailing services like Uber and Lyft argue that British Columbians are ready and willing to have additional transit options.

With the all-party committee of Crown corporations expected to announce its recommendations about ride hailing on February 15, we spoke to UBC Sauder Professor Thomas Ross about the contentious issue.

Taxis in British Columbia remain one of the few passenger transportation services still regulated through price and quantity. What would happen to the industry if ride-hailing was eventually approved through legislation?

Although a lot will depend on the regulations adopted for ride-hailing,there is little doubt that companies like Uber and Lyft will have a major impact on the established taxi industry. The incumbents will need to adapt to survive, and even then will probably end up as a smaller part of the industry. This adaptation is already starting with the development of new taxi apps, but will have to include a greater emphasis on customer satisfaction. Ultimately, taxi companies work from a somewhat different business model that has its own strengths, so I believe some can survive and even thrive in a less-regulated, more competitive environment.

If taxi services are deregulated, is there a way to soften the economic blow?

There are a number of ways the province could do this, but in the process, I hope we don’t prevent new players from being able to exploit their disruptive innovations. For example, taxi stands, hotel queues, curb-hailing and servicing the airport could all be restricted to traditional taxis. Regulated minimum prices would provide some protection for taxi companies but these risk undoing much of the customer benefits of the new services. Some jurisdictions have contemplated special taxes for users of ride-hailing services to generate funds to compensate taxi license owners, but I find this approach troubling. The province could also keep the regulatory requirements for the two types of services roughly comparable in order to keep the playing field as level as possible. These would include regulations related to driver background checks and training, vehicle quality and insurance.

Why has B.C. been so resistant to the shared economy and organizations like Uber and Lyft, when these services have flourished in other metropolitan cities like San Francisco, Los Angeles and New York?

I think the resistance has a lot to do with the high level of organization of the traditional taxi industry, particularly in the Lower Mainland. It appears that Vancouver in particular has a low number of taxis in service relative to demand and this, combined with a regulatory environment that does not allow price competition, has pushed medallion (the permit required to operate a taxi) values to extremely high levels. Taxi medallion holders have a large investment in the status quo and that has provided great incentive for them to resist change. And since new owners of these medallions paid sky-high prices for them before the threat of ride-hailing materialized, it is easy to have sympathy for them.

If the committee sides in favour of taxi companies, is this the end of ride-hailing in B.C.?

There is such a pent-up demand for ride-hailing services that I find it hard to believe that the government will not open up a path for some kind of participation from companies like Uber and Lyft. They may however, in an effort to protect taxi companies, tie the entrants’ hands to such an extent that they cannot compete as effectively as customers might like. This would be a missed opportunity. If the committee sides in favour of the taxi companies it will slow down the regulatory reform needed here, but the pressure from customers is not going to go away. So I expect that ride-hailing, in some form, will come to British Columbia eventually.