How to Balance Transportation Innovation and Regulation

Economics, innovation and improved resource utilization are revolutionizing how we travel on the road. The biggest barrier to the success of new business models is balancing regulation and being innovative.

The role of regulation

Ride-hailing companies, carsharing and ride-sharing services, and professional driver companies have re-ignited discussions on the purpose of for-hire vehicle laws. While statutes vary by city, state and country, the main purposes are:

  • Passenger safety: These laws include criminal background checks and checks of driving records. In addition, many cities require a uniform taxi color, like New York’s iconic yellow, for easy identification of approved vehicles.
  • Price controls: Metered rates for distance and waiting time, fees for airport access, and bridge and tunnel tolls let all customers know what to expect.
  • Customer service: Many laws forbid taxis from denying service to any passenger or address within their service area.
  • Congestion relief: Cities such as London and Berlin permit taxis to use bus lanes, speeding up their rides.

Anti-competitive laws

Many regulations, however, fall outside of these essential frameworks. Therefore, these protect the taxi industry, even if unintended. In Germany, for example, taxis enjoy a 7% VAT, compared to a 19% VAT for other for-hire services – even though both transport passengers from point A to point B. German law also says chauffeured vehicles must return to their base of operations after a ride if no other ride is scheduled.

The intent is to protect taxis from competition at airports and train stations, and to keep non-taxis from picking up passengers hailing a ride on the street. But the unintended consequences are tens of thousands of extra kilometers driven – wasting time, money and gas, and adding congestion.

Several U.S. cities have stringent price controls, too. For example:

  • Austin, Texas mandates that “the holder of a limousine service operating authority shall charge a customer a minimum of $55 per hour, or portion of an hour, as a base rate excluding other fees and gratuities for the first six hours of service provided to a customer.”
  • Miami, Florida requires that “limousine minimum rates shall be no less than three and one-third (3-1/3) times the hourly rate of taxicabs.”
  • Portland, Oregon set a minimum fare of $50 between PDX airport and Portland’s Downtown Core.

More options benefit consumers and the industry

These laws and others like them favor taxis, and create artificial barriers for innovative transportation business models. In many cases, innovators introduced new transportation categories before legislators could update laws. By now, however, it is long past time to allow more options. Similarly, new laws should not favor any class of transportation.

We believe that proper regulations can support passenger safety, reduce congestion and ensure service to everyone. The more choices in the marketplace, the better for customers and the mobility sector as a whole. For instance, people may use car sharing to go to dinner, and then ride a taxi back home. Simply put, the more mobility options in a given city, the more people will use all of them.

About the Author

This article was provided by Dr. Jens Wohltorf, CEO & Co-founder of Blacklane. Prior to founding Blacklane, Jens Wohltorf worked as Principal at the Boston Consulting Group. Jens studied industrial engineering at the Technical University of Berlin with research residencies at the University of California, Berkeley, and MIT, where he studied urban traffic patterns. In 2005 he completed his PhD in Telecommunications at the Distributed Artificial Intelligence Laboratory of the Technical University of Berlin.

Photo credit: Unsplash / Blacklane