Why taxis need help in their competition with Uber and Lyft

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It has been one week since the Times article discussing our all-Island selectmen’s meeting of Oct. 12, discussing the future of taxis on Martha’s Vineyard, and the response has been vibrant and polarized.

We hear you, loud and clear: Uber can be expensive, but taxis need more transparent pricing, and the taxi drivers need to be more consistent in conveying the logic of flat-rate fares to the passengers (they work out to about $3.50 a mile). I also want to address some of the feedback we have received about the nature of taxi transportation on this island.

First, some confusion stems from a lack of brand awareness, which can make it difficult to problem-solve. Taxi companies are small businesses, and not all taxi companies are created equal. There are 16 taxi companies on Martha’s Vineyard, licensed in and by five out of the six towns. Each one has its own corporate culture and its own style of interacting with this market. Each one is bound by the regulations governing taxis in the town(s) in which they are licensed to operate. These regulations cover everything from driver dress requirements and vehicle maintenance to pricing. The regulations are confusingly, reciprocally enforceable in other towns, despite differing on many points. Much like any other small business, it’s important to pay attention to the quality of the service provided, and try to frequent businesses with whom you have had a positive experience.

As well, it is frustrating — but understandable — to see all taxi and livery services be broadly defined by the practices of a few problematic actors. For us in the taxi and transport sector, when we are faced with alienated customers’ complaints about another company we know to be erratic, it is the small business equivalent to hearing, “We didn’t like the fries at the Black Dog, so we won’t be dining out at restaurants anymore.” But the failure to articulate that publicly and maintain a dialogue with the Island is on us; we’re going to be better about that going forward. In this analogy, however, Uber and Lyft are the McDonald’s of taxi and livery service — a franchise like any other.

Which brings us to the second point: “You have to accept competition from Uber as part of a free market.” The truth is, Uber cannot maintain competitiveness, status quo unchanged, in a free market, because its business model is seriously flawed and its corporate culture notoriously questionable. They operate at a tremendous loss — Uber lost $3 billion in 2016, and has reported losses of $708 million and $645 million in the past two quarters, respectively. Yes, this is largely due to their rate of expansion, but Uber can only achieve profitability in this space if it can act monopolistically — by definition, noncompetitively — and if its platform becomes the de facto pricing instrument. This is where we feel threatened; we have no pricing flexibility like Uber does, and we don’t have the luxury of operating at nine-figure quarterly losses — for the obvious reason that these practices are condemnable and irresponsible. But make no mistake, Uber is not a charitable organization, and it is counting on a mass exodus of the market by taxi companies to achieve profitability.

Alix Anfang, a spokesperson for Uber, commented on my speech in last week’s Times article, pointing to studies that allegedly show that Uber and taxi companies can “complement” one another in the marketplace. Those studies weren’t conducted here, and for many reasons do not hold water in this marketplace.

The market on this Island is notoriously quirky. There are reasons why you don’t see McDonald’s, Target, and the Gap on Main Street in Edgartown. My favorite reason among these is that we, as a literal island, understand the importance of local, small businesses that are made up of your friends and neighbors and are invested in their community. Morgan Reitzas, the owner of Martha’s Vineyard Taxi, for example, is a volunteer fireman in Tisbury.

Looking beyond dollars and cents, there are ways in which we do need to better compete with the experience TNCs (transportation network companies) provide. Many people prefer to travel in smaller, cozier vehicles, as opposed to the hulking 15-passenger vans you see at the Steamship Authority. There are two factors limiting the presence of these smaller vehicles on the Island — one economic, and one regulatory.

Economically, the 15-passenger vans are designated as “van pools,” and are counterintuitively cheaper to insure than smaller vehicles. Some companies primarily focus on using these vehicles, some have none, and most have mixed fleets. You are certainly welcome to state a preference when you call for a pickup, and should pay attention to the branding of the cab you take. The minivans are more efficiently able to navigate to you than the 15-passenger vans anyway, which is why our fleet primarily comprises minivans.

The regulatory component follows a decades-old directive by the MVC that we shift toward large passenger vans as a means of curtailing vehicular traffic on the Island in the summer months. With the influx of dozens of Uber vehicles operating here full-time during those months without any oversight from the towns, this now seems quaint. Moreover, parking in the down-Island towns is becoming increasingly scarce, which is precisely the reason why taxi companies have fixed, designated areas where they are allowed to stage between fares.

Third, we are often confronted with the argument that “Uber is cheaper than a taxi.” This is the case in many markets, but it simply isn’t the case here. We’ve done the math, and monitor it daily. We have identified a few small pockets on the Island where Uber is indeed a few dollars cheaper, such as the Pohoganot, Watcha, and Long Point areas, and we are working with the selectmen to address this for next season. Overwhelmingly, however, Uber’s base fares are in aggregate about the same as ours, but they “surge” during periods of increased demand (such as the docking of a ferry, or the landing of a flight). During these periods, per-mile rates with Uber multiply, with fares five and eight times higher not unheard of. These fares are set by Uber and its platform, not by any regulatory body. We are strictly barred from engaging in this behavior because it is predatory, but also because it places control of the pricing in the hands of a corporation rather than the town in which the fare originates. I cite in my slides from the all-Island selectmen’s meeting documented examples of $90-plus Uber fares to go from Oak Bluffs to Edgartown on a Tuesday afternoon. That is insane.

Lastly, I’d like to address two comments, “The times are changing, deal with it,” and “What good are the taxis if we can just use Uber?” I submit that that taxis are regulated and permitted by the towns because, on some level, people realize here that the taxis represent a public good — that is, a benefit to the constituent townspeople. Tristan Israel, a Tisbury selectman, has on multiple occasions supported this idea. We are here in February to get you home from the boat, we are here when you’re late for work, and we are here when your car breaks down. The same cannot be said for Uber, and that is because Uber is here when it is convenient for the corporation.

And I am here if you have any further questions, comments, or just want to vent a little. You can find me down at the Vineyard Haven Steamship Authority seven days a week, waiting at the taxi stand.

Oh, and, for the record, we actually love the fries at the Black Dog.

 

Michael Mszański is the vice president of Martha’s Vineyard Taxi.

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17 COMMENTS

  1. This is simply another ”beggar thy neighbor” complaint that wants subsidy at the expense of the consumer. In this case the plea is for level playing field which has very little to do with economics. Uber has deployed a new business model just as Amazon who for years sold 1 dollar bills for 99 cents in order to create primary demand. Book stores became marginal first and now much of retail is going the way of two day delivery. The downtown store went out with the emergence of malls and soon malls will be antiquated. Businesses must learn to compete or get out particularly if the industry is low growth and low profitability. Anecdotes about local community and citizenry working together to preserve uniqueness on MV is what created high costs to begin with and soon created an umbrella under which lower cost producers emerged.

    • Following your logic, let us now invite WalMart and others to come and destroy what is left of our business community. Lower prices at WalMart – always!

      • Yes Mr Clifford I am first and foremost for the consumer. Propping up a business to satisfy some ephemeral vaguery of “community”” is fraught with problems.

        • Yes Mr Andrew; so the “battle” is joined – the people who must earn a living here versus those who only “consume” here. I wonder if what is left of the “islanders” will ever wake up and defend their way of life.

          • So Mr Clifford, I suggest the government give everyone who needs it a job on MV with a living salary. The job could be digging holes and filling them again, or walking around and picking up trash but everyone gets say 55k per year. There are not guarantees to earning a living anywhere and shouldnt be. Because we are an island, the people who live here whould be subsidized? Is that what you believe? With respect. Maybe those on the other island Chappy should get even more. Those so called islanders in construction and painting and plumbing and electricians had no remorse about jacking up prices a few years ago when demand was greater than supply and then the status quo changed. It always does when you fiddle with markets.

        • Andrew–would digging holes and filling them in again be any worse that employing people to build bombs , blow holes in the earth where houses used to be and then rebuilding the houses ? This is essentially what the military industrial complex does. It appears from decades if not millennia of experience that this kind of senseless and destructive behavior actually stimulates the economy. You should ask yourself why that happens, and if we would not be better off having people dig holes and fill them in again. While the Egyptians were building the pyramids they were the most prosperous society on earth for their time. And of what use were the pyramids ? They employed everyone– nothing more, nothing less. And full employment leads to prosperity.
          So yes, have the government pay people to dig holes and fill them in.. Or perhaps even better, have them pick up trash..

          • dondondon gives us a classic example of causation versus correlation and then he believes if the government gave everyone a job our economy would grow but he doesnt tell us who pays the government to give everyone a job and he doesnt explain how work with no economic value provides GNP growth.

        • Andrew: The government giving everyone a job is stimulus spending and yes, we the taxpayers foot the bill. Congress puts our money (and the promise of our future money) into industry, creating jobs and hopefully feeding a consumer-driven economy. A two-fold problem with this: 1) our elected representatives use it to buy votes and 2) their supporters don’t understand most of the profit from those jobs goes into pockets of the rich. But for awhile, there’s an economic bubble. If you don’t want the taxpayer to foot the bill, that means we all were wrong in the 70’s and the Carter recession should have been allowed to run its course.

          Who pays the government? Gain or loss, we do.

  2. Many insurance policies are voided when the carrier learns the driver is using their private vehicle for business and have taken on the risk of transporting strangers without appropriate liability insurance.

    The other driver pays the bill when an under-insured Uber driver causes a collision. Are you suggesting we subsidize Uber drivers?

  3. There are some things about the Uber thingy that don’t sit right with me. Is this not a vetting and organizational scheme to put anyone in the common carrier business who want so be there? My Mother taught me not to get in a car with strangers. Maybe I should look into using my boat to ferry from the mainland to the Island; how about a private helicopter pool to handle the rich folks? I think there must be good reasons for licensing common carriers.

    • A fair analogy about turning your boat into a ferry and the US Coast Guard has rules. As owner/operator, you are responsible for the lives of your passengers. As a private owner, should you still be subject to inspections for safety gear? Should you maintain in good order communication and navigation equipment?

      I don’t know how much vetting Uber does before accepting drivers. I’ve read they claim to provide liability insurance, yet drivers have said this corporate responsibility is iffy at best; Uber will change drivers’ status from employee to contractor.

      Would I trust riding in the backseat of a car that wouldn’t pass a safety inspection that’s operated by an un-vetted driver? Would I want to share the road of one of these drivers? A defense for that might be I already do, the counter being do you feel safe on the road?

  4. Your free market argument is ridiculous. If the uber business model was flawed you all wouldn’t be complaining about them stepping on your turf, as it would be assumably short lived.
    Free market IS the answer. Talk to your selectman, not the people being price gouged and bullied on the road.

  5. So what began as a question of equitable regulation has morphed into a discussion of laissez-faire versus planned economy. Gotta love it.

    • Funny thing about political discussions, those arguing for a completely free market actually want a regulated market. Try and tell them the model they espouse is socialism, that free market is black market and sweat shops.

        • From the perspective of the middle class: the economy is planned (or at least guided) and that’s what they want. They acknowledge difficulties might arise, there should be a way to extricate and come out better. Everyone winning is not free market.

          As for capitalism, that’s where the uber rich own the resources and production. The working class … well, they labor for the benefit of the rich. The rich decide if workers get weekends, holidays, or vacation. There’s no right to those.

          Try socialism. The workers can own resources and production, they can own the profits; workers receive according to the effort put in.

          If you want to complain about getting something for nothing, try communism.

  6. Vineyard taxis are the most reckless cars on the road just ask the local police how many complaints they get daily in summer, they hire anyone and everyone their rides are not rated like Uber, Uber keeps close eyes on their drivers. Every business has some kind of competition whether we like it or not that’s life. It comes down to who is doing a better job.

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