Is Getting Around D.C. About to Get More Expensive?

On Wednesday morning the D.C. Taxicab Commission will hold a public hearing on its proposed regulations targeted at ridesharing companies including Uber, Lyft, and Sidecar. After the hearing, the Commission could approve regulations that would increase consumer costs and the difficulty of earning a living as a driver.

The regulations would require background checks, insurance requirements, zero-tolerance policies on drugs and alcohol, vehicle safety inspections, and occupational licensing for all drivers. The ridesharing companies would be forced to charge customers a 25 cent fee per ride to fund the Commission. Rideshare drivers without taxi licenses would be limited to 20 hours a week, an arbitrary number that prevents people from earning a living. 

The most pressing concern about the new proposed regulations is not the insurance, background check, or zero-tolerance requirements—ridesharing companies already voluntarily comply with these. It is that they will open the door to additional rules that would increase prices for consumers and lower opportunities for aspiring drivers. 

While the Commission is tasked with keeping consumers safe and rides affordable, it also has a statutory responsibility to “preserve the economic viability of the District’s public vehicle for hire industry.” While the justification behind occupational licensing is usually public safety, not all regulators are as blatantly in support of existing industries as the DCTC. The argument can be made that the DCTC is elevating the existing taxi industry over consumer safety, and it is clear affordable rides are being sacrificed. 

Eleven states and the District of Columbia require taxi drivers to obtain licenses. D.C.’s average fees associated with licensing are by far the highest in the nation at $555 (second highest is Rhode Island at $110, and Tennessee’s is only $4). In contrast, it only costs $156 to become a D.C. school or metro bus driver. D.C. taxi drivers also have to pass 2 tests and complete 12 days of training.

These statistics raise a big question over the public safety rationale for regulating taxis and ridesharing companies. Since the occupation is not universally licensed, and the difficulty of the requirements varies by state, why are there not outbreaks of rogue drivers creating safety hazards outside of D.C.? Also, why is the licensing burden lighter for bus drivers, who clearly pose a higher risk to public safety?

Overzealous regulators are jumping at any story that hints at dangers posed to the public by ridesharing services. The well-documented New Year’s Eve tragedy where a young girl was killed in San Francisco by a driver who was logged into his Uber app is continually used as justification for further regulation.

Census data show there are almost 11 million motor vehicle accidents per year and 36,000 fatalities. An isolated, unfortunate event may work as a rallying cry for entrenched taxi businesses who feel threatened by emerging competitors, but it does not show an increased risk to public safety. 

I spoke with DCTC spokesman Neville Waters about the proposed regulations. When I asked him if there were any specific cases of public safety being threatened by ridesharing services, or anything else that would prompt the creation of new regulations, he said, “I wouldn’t say that there are issues or that there aren’t issues.” What mattered, according to Waters, was that the Commission acted in a forward-looking way to guard consumers against “rogue operations.” He also expressed the Commission’s desire to codify the requirements ridesharing companies already comply with. 

It is not that regulators have bad intentions—for the most part they take their responsibilities to the public seriously. Regulated industries spawn special interest groups which use government enforcement to protect their profits at the expense of consumers and competitors. Raising barriers to entry, as occupational licensing does, keeps out new entrants. When the critical aspect of competition is missing from markets, innovation suffers and prices rise. 

D.C.’s taxi market is far more open than other large metropolitan areas such as New York City. Currently, 116 taxi companies operate under DCTC authority, but there has been a moratorium on new companies over the past few years. This moratorium has strong hints of protectionism (of entrenched companies, not consumers) since existing companies are free to add cars to their fleets. 

This summer taxi drivers in Washington, D.C. had to install dome lights on the tops of their cars and credit card machines in their cars. Some taxi drivers are rightly disturbed that the value of their forced investments will fall in value with competition that does not have to abide by the same rules. However, the proper policy response is not to add more regulations or enhance DCTC authority—it is to allow taxi companies greater flexibility on services and prices to best cater to their target customers. 

The regulations were a mistake and the ensuing losses are unfair. But basing economic policies on subsidies that benefit a few people and raise prices and reduce opportunity for everyone else is poor public policy. 

Passing one-size-fits-all, protectionist regulations is precisely what triggered problems in the taxi market and encouraged the rise of ridesharing companies. Justin Kintz, Uber’s head of public policy for the Americas, told me, “DCTC only knows one way to regulate, and that is for a 20th century business model.” Uber and other ridesharing services do not own the cars their drivers use. What they do is provide the technological platform and support to connect drivers and riders. It is not surprising that applying the same regulatory standards to vastly different business models will be disastrous. 

D.C. Councilmembers David Grosso and Mary Cheh recently introduced a bill that clarifies how ridesharing companies work, ensures safe practices continue, and limits DCTC’s authority. This bill is an example of smarter regulation that is not beholden to the special interests of the existing taxi industry. 

Uber, Lyft, and Sidecar all serve distinct purposes and cater to different customer bases. What they have in common is the benefits they offer to drivers and consumers. Their drivers enjoy convenience and flexibility, and consumers benefit from lower prices and increased choice. 

Proponents of DCTC’s proposed regulations are clear—to protect the profits of existing taxi drivers. This is not a suitable justification to infringe on consumers’ freedom to choose from a variety of options. New technology will drive a stream of new services, and ridesharing is only one example. If entrenched interests are allowed to defeat innovation, everyone else will lose.

Jared Meyer is a policy analyst at Economics21 at the Manhattan Institute for Policy Research. You can follow him on Twitter here.

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