Taxis’ protected status faces legal challenge

MAKING CONNECTIONS:  Taxis line up at T.F. Green Airport waiting for disembarking passengers, a consistent stream of business. / PBN PHOTO/MARK S. MURPHY
MAKING CONNECTIONS: Taxis line up at T.F. Green Airport waiting for disembarking passengers, a consistent stream of business. / PBN PHOTO/MARK S. MURPHY

During the week, Rachel’s Big City Transportation fills a traditional luxury-car-service niche, with two Cadillacs ferrying Rhode Islanders from their homes and offices to the region’s airports.
But starting this past summer, busy weekend nights have drawn owner Rachel Carvahlo into the streets of Providence to drive bar patrons and theater-goers around town, formerly the exclusive domain of taxis.
Technology, specifically the mobile-phone application Uber, has made it possible, and profitable, for Carvahlo and others to dive into short-distance, low-priced rides without a dispatcher, large fleet or license to pick up people waving their arms on the street.
It’s also put the Coventry resident and dozens of other Rhode Island drivers at the center of a taxi battle raging in cities around the country. Cab drivers accuse Uber drivers who pick up quick-turnaround, short-haul riders of operating “rogue” or “gypsy” taxis operating outside the law to undercut them and “steal” customers.
At the behest of taxi and limousine companies, the state this fall attempted to implemente a $40 minimum charge for all hired rides not provided by registered taxis, effectively snuffing out the business model of Uber and other car-service apps that might try to disrupt the cab industry.
“It will effectively do away with affordable transportation for Rhode Island,” said Meghan Verena Joyce, general manager of Uber Boston and Providence, earlier this month as the company rallied opposition to the new minimum charge. “Providence would be not only isolating itself, but would be making it clear it is the least friendly to consumers. That’s the wrong direction to go.”
That message may have gotten through.
The $40 minimum was scheduled to go into effect Nov. 11, but when four local car-service companies that Joyce said do not use Uber sued the state over the rule, the R.I. Division of Public Utilities and Carriers decided to suspend enforcement to work on a compromise.
Although Uber has been the public voice of the opposition to the new rules, the car services’ suit highlights the fact that the dispute is not really about Uber, which facilitates rides but doesn’t employ any drivers directly, but about the taxi industry and its status as a public service.
Since the advent of the motor vehicle, taxis have been regulated in Rhode Island as utilities, just like drinking water and electricity providers. And like those other utilities, taxis face a long and stringent list of regulations that dictate not only exactly how much drivers can charge and where they can drive, but how their cars should look and even how they dress. (Sweat pants, T-shirts with logos, and cut-off jean shorts are specifically prohibited.)
The Division of Public Utilities says the rules exist to protect riders from unsafe cars, unsafe drivers and being ripped off. The location requirements – combined with rules requiring 24-hour operation and accepting all requests for rides – are also meant to guarantee service at lower demand times and more remote locations of the state.
But as the industry matured, many drivers chafed at the rules and migrated from taxis to the more lightly regulated limousine and car-service realm, legally classified as “public motor vehicles.” Until a little more than a decade ago, these businesses were almost totally unregulated.
Then in 2002, the state began ratcheting up regulations on car services, pushing them to provide higher-cost, luxury, and longer-distance rides to protect the taxi market at the low end.
By 2011, even the new licensing requirements for “public motor vehicles,” which included drivers getting a hackney license and having their cars inspected, were seen as too light compared with taxi rules.
The next year, the Division of Public Utilities went to the General Assembly seeking authority to extend a whole new set of taxi regulations to car services and institute a minimum per-ride charge that would keep them out of the taxi market.
A bill giving it that power passed in the annual end-of-session flurry of bills last year and was signed by Gov. Lincoln D. Chafee. The division then went about filling in the specifics of the new rules that were set to go into effect this month.
“I believe the [$40 price floor] proposed in these rules will eliminate the rogue, gray-area sedan services that are really acting like taxicabs and, truth be told, stealing the work of taxicabs,” Terrence E. Mercer, associate administrator for motor carriers at the Division of Public Utilities, said in testimony at a public hearing on the proposed rules in March.
In its final order on the issue, the division wrote that car services taking short-duration rides from more highly regulated taxis is “not a valid manner of competition.” “The division also agrees that if this [Public Motor Vehicle] business model is permitted to continue and expand, it would seriously and perhaps irreparably damage a much needed and crucial taxicab industry in Rhode Island,” the order continued. “The division finds that such a business rivalry is inequitable and inimical to the public interest.”
Not everyone agrees with the division’s view of the public interest.
In a letter to Chafee, Angus Davis, founder and CEO of Providence-based payment-data company Swipely, called the $40 minimum an “underhanded attempt” to “stifle innovation and limit competition in a state that sorely needs more of both.
“The role of the [Public Utilities Commission] is not to stop business rivalry – it is to encourage it,” Davis added. “It is not the role of government to pander to special interests to protect one private business at the expense of another.”
The four car-service companies who sued the state over the $40 minimum are L.C. Transportation of Providence, Rainbow Sedans Inc. of Newport, Corporate Limousine Services LLC of Providence and Dewey’s Transportation Inc. of East Providence. The companies long predate Uber’s presence in Rhode Island and the complaint, which called the price floor arbitrary, does not mention the software company.
Chafee spokeswoman Christine Hunsinger said the governor, who met with Uber officials, was leaving the issue to the regulators, who she added have agreed not to contest the injunction in order to “work things out” on the price floor. That means the $40 minimum was not in effect as of Nov. 13 and Uber was still operating in the Ocean State.
In the pages of testimony on the new “public motor vehicle” regulations, one subject that never comes up is whether leveling the playing field for taxis would be better accomplished by loosening their regulations instead of adding more for car services.
In taxi debates across the country, advocates of deregulation question whether the strict, utility-level rules for cabs are really protecting a vital public service, or strangling one.
The New England Livery Association, which represents taxi and car-service companies and testified on behalf of the $40 minimum, argues that the interest of public safety dictates heavy regulation of taxis.
“I wouldn’t want my daughter calling someone at midnight that we know nothing about,” said association Executive Director Rick Szilagyi about unregulated car services using Uber or other apps and not accountable to any company. Szilagyi said Rhode Island was far from alone in tightening rules on car services and said other cities, including Houston, Miami, Portland, Ore., and San Antonio either have or are considering similar measures.
Mercer at the Public Utilities Division said the regulation of taxis as a utility in Rhode Island goes back to the railroad era and extended out of the fact that trains and then streetcars were considered utilities.
Safety and crime prevention were at the heart of the taxi rules, but Mercer said in Rhode Island it goes deeper into the idea that taxis should provide a standard, uniform service at a consistent price to as much of the state as possible, as often as possible.
If deregulated, Mercer said, cabs would congregate in Newport and Providence at peak hours and charge riders a premium when they could.
“It is a very important service to folks who have a disabled vehicle and no one to give them a ride to work [or to] appointments and the Laundromat,” Mercer said of taxis. “Truth be told, if they weren’t territory restricted, they would all be in Providence and Newport. The single mother in Cranston or Pawtucket or Woonsocket would never be able to get ride.”
As evidence of the hardships faced by taxi companies, Mercer said the number of taxis on Rhode Island streets had declined 19 percent, to 195 from 240, in the last three years.
On Uber specifically, Mercer questioned the company’s business model of taking a 20 percent cut of fares collected through its app and noted cars using it jacked up rates during Superstorm Sandy.
Greater Providence Chamber of Commerce President Laurie White, a regular Uber user in Boston and New York, said she doesn’t know exactly what the right regulatory balance is, but hopes a compromise can be found to allow new technology in taxis.
At least publicly, most reports of “rogue taxis” have emerged at hotels and big events.
Martha Sheridan, president and CEO of the Providence Warwick Convention and Visitors Bureau, said she has received reports of hotel guests calling cabs and having “rogue taxis” show up, although she had assumed the taxi companies themselves were sending them.
Sheridan said there is a “lot of room for improvement” in the customer service from Providence cabs and hopes a way can be found to utilize technology like Uber to improve it. •

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