Portland Continues Taxi Cartel


William Thompson is a research associate at Cascade Policy Institute.

Imagine an industry where two companies control 75% of the market, price-competition is non-existent, and new firms are prohibited from entering. While economists refer to this as an oligopoly, taxi customers in Portland know it best as high prices and long wait times.

On April 9, 2008, the Private for Hire Transportation Review Board voted down a proposal to end the long-standing moratorium on new taxi permits. Leaders cited the need of a “market-demand” study (at a cost of $130,000) before moving forward. But elsewhere in the economy, no such studies are necessary. When entrepreneurs introduce new goods or services, consumers vote with their dollars to determine whether or not there is a “market demand.”

Prohibiting new businesses inevitably raises the cost of service to consumers.  The Review Board demonstrated that itself earlier that same morning  by sponsoring an “emergency ordinance” which the City Council approved to increase the maximum rate taxi drivers can charge.

This is just the latest example of the price-gouging allowed by the Review Board. When Broadway Cab acquired Sassy Cab in October 2007, effectively decreasing competition, the board said nothing. Yet, when numerous town car companies began charging prices below the required minimum shortly thereafter (thus increasing competition and lowering prices for consumers), the board acted swiftly to increase enforcement of the mandatory “minimum price”.

Instead of awaiting approval to spend $130,000 on a “market demand study,” here’s one for free: Disallowing new companies from entering the market and restricting price competition lowers the quality of service customers receive and raises the price they must pay. The Review Board should just get out of the way and allow customers themselves to determine how many taxis the city needs.


0 responses to “Portland Continues Taxi Cartel”

  1. The “taxi cartel” doesn’t get too much sympathy from me. Being a local (and one who doesn’t make it a habit of going out and getting too drunk to drive), I never have reason to ride taxies here in PDX–but the taxi service here is indeed terrible.

    And the worst part of it is–being a taxi driver is a miserable occupation. Long hours, low pay–despite existing in a market where the competition is limited.

    (That said, I have nothing against uniform rate structures for similar classes of service, and laws ensuring fair play by both drivers and fares).

    Some questions to consider:

    * Is there anything that can be done to create a healthy taxi ecosystem in Portland–a medium-sized city that isn’t a tourist mecca? One where drivers can make a decent living, and customers can expect decent service and reasonable rates? Or are we just not a good “taxi market”?

    * Do we even need a healthy taxi ecosystem?

    * One particular popular destinations for taxi trips–I’m thinking of the airport–charge taxi drivers/companies a fee for picking up or dropping off fares at the airport. (This fee is also charged to other private transit operators–hotel and car rental shuttles, other airport shuttles, limosuines–I’m not sure if Tri-Met gets charged for the red line or airport busses) This is commonplace in other cities–but unheard of for other facilities. Can you imagine the uproar if, say, Clackamas Town Center attempted to levy a fee on taxies which delivered customers to the mall?

    One immediate suggestion I would have–beyond the issue of how rates are regulated and how many “medallions” are issued (I know that Portland doesn’t use medallions, but the NYC taxi permits are a useful analogy)–would be to permit taxis to answer hails from the street. Right now, if you want to hire a taxi (other than airport pickups, I think), you have to call the taxi company and have them dispatch you a cab. Given that many taxis spend a signficant amount of time empty, this might improve the lot of the business, while improving service.

  2. It would be interesting to know what percentage of a taxi’s time (while in service) is spent:

    1) waiting for orders from dispatch (no fare in the car)
    2) driving around to pick up a fare (or looking for a fare),
    3) with a passenger in the car and the meter running (whether the cab is parked or running).

    The company only makes money on #3, with some money recouped for #2 when a cab is first hired and the flag falls. Both #1 and #2 cost money–#1 costs the driver’s time, #2 the driver’s time plus the cost of gas.

    The interesting question is–who benefits most from the regulation model? The taxi companies? The drivers? The public? While an unregulated taxi business is ripe for market failure; the current regulation scheme seems to benefit the two taxi operations at the expense of both drivers and passengers; both of whom are limited to a few firms they can do business with.

    CPI, unfortunately, is horrendously skewed to the point of view that regulation is bad, evil, and nasty. And this is one case where it may well be–the rules are set up to benefit a few key players; enabling them to collect above-market fares and pay below-market wages. But I’m not sure deregulation would work better.

    Maybe Metro should be in charge. :)

  3. EngineerScotty said: “Maybe Metro should be in charge.”

    Actually this is probably a good concept since the taxi business should be on a regional basis and not managed by the City of Portland. Many years ago when I was in New Orleans for a couple of days, the only regulated fare(s) was the one from the Airport to any one point in the downtown area, and possibly for the reverse trip as well. However, given Metro’s reputation for wanting to control our daily lives and how people travel, just like about everything else Metro touches related to roads and transportation, taxi service and town car service would probably get even more screwed up than it already is with more bottlenecks added to the system. Metro would probably insist that only pedal cabs be used instead of the current fleet of low cost ex-police cruisers now used for taxis.

  4. I really wish people would comment when they know a situation well and just read when they don’t. EngineerScotty is way off here.

    First, we absolutely need a healthy taxi ecosystem. One major whine I get from colleagues who insist on driving downtown to work from transit accessible neighborhoods is that they might have to pick up a child or other dependent on short notice. Taxi once in a blue moon solves this. Moreover, there are many like me who rarely bring the car out, and use taxis to get to or from bad transit areas, or to get home from social events, etc. Like flexcar, a healthy cab system here and in any major city facilitates a generally carless lifestyle by allowing the 5-10 minute use of a car when you really need speed.

    Frankly, in the central areas where cabs would be expected to be successful in any town, we’re not doing so You CAN hail a cab on any city street, and it rarely takes more than 2-4 minutes downtown on the main E-W and N-S streets (3rd, 4th, Broadway, 10th, 11th, Burnside and the main couplets), but especially near the hotels. I lived in two major east coast cities and once you got out of downtown, it wasn’t any better service than we have here. Taxis in those cities frequently stand you up, take 10 min longer than promised [or won’t promise a time at all], and occasionally refuse to take you certain destinations based on their fare diagrams.

    My main gripe in Portland is that too many drivers don’t know their way around town, which is irritating for me as a local, but must be infuriating for visitors.

  5. Metro would probably insist that only pedal cabs be used instead of the current fleet of low cost ex-police cruisers now used for taxis.
    Or, the taxis would only be able to drop you off at the nearest bus stop.

    Also, I believe this view is coming from the same Cascade Policy Institute that wants to shut down all forms of public transit and bring back styrofoam coffee cups because it’s in ‘the best interests of free market enterprise.’

  6. Actually, and this is true, this is the same Cascade Policy Institute which formally suggested that the Willamette Shore Trolley ROW through Johns Landing and Dunthorpe be made into a reversible tolled express lane (“HOT Lane”), apparently unaware that the ROW must be used for rail operations in a use-it-or-lose-it easement.

    But as far as taxis go, I think a little loosening up on the number of companies/cabs would be a healthy thing, perhaps with fuel economy strings attached. (NYC is going all-hybrid, for example.) And it wouldn’t hurt to allow street hails in popular areas, either. (Or are street hails now allowed? — please excuse my ignorance on that matter.)

  7. “and occasionally refuse to take you certain destinations based on their fare diagrams.”

    In Portland they’ll do it, but they’ll complain about it the entire trip. For instance, if you land at the Airport after 11pm and then pick up bags, you’ll miss the last Red Line, and have to take a taxi. If you are going to North Portland, (where I live,) the driver will tell you all about how he will get stuck there and it will be forever before he gets a good fare to a different zone, and etc… However, at least they’ll do it, they will pick up a fare in that zone eventually, just not as fast as if I was going downtown. (They seem to complain less at 2am, although it might be because when I call a cab at 2am I’m drunk and don’t notice.) If you put a bunch of smaller taxi cab companies into town, I’m fairly sure the only time a taxi would ever go to North Portland would be when the driver is going home for the day, (because that is where the drivers tend to live…)

    So I’d rather see one taxi cab company in town, (carefully regulated like the electric company,) and good service from them, than a mash of small companies that will only serve the airport, the nightclubs, and downtown because that is the most profitable areas…

    Now, this argument is inconsistency with my viewpoint in general: Lower density areas aren’t very efficient to serve with many many services, and it looks like taxi cabs might be one of them, and so a carefully regulated taxi service is actually an incentive to urban sprawl. However, I suspect that it isn’t the population density, but the financial density that keeps the taxis from wanting to come to North Portland: Poorer people would rather walk than spend good money on a cab… They probably have far less problems going into the SW hills because, while the population density is less, the net worth per acre is higher…

  8. (Or are street hails now allowed? — please excuse my ignorance on that matter.)

    I’m not certain, but I was told not. A cab driver stopped when I waved about 2 weeks ago, and said he knows it’s wrong, but he grew up in NY City and just felt he had to stop when I waved.

    I really do like most of Portland’s cab drivers, regardless or ability to navigate.

  9. Last time I took a cab in Portland the thing needed to be cleaned out. When I took one in Japan the driver wore a suit and had white gloves on. The cab was immaculate. They, meaning Cityhall, need to open the market to get some fresh ideas.

    MW

  10. When I took one in Japan the driver wore a suit and had white gloves on. The cab was immaculate.

    I’m sure the transport ministry or one of the powerful taxi associations, such as the Tokyo Taxi Association (which recently implemented a smoking ban), might have had some say in the behavior of drivers. But it is true that Tokyo has literally hundreds of cab companies.

  11. Last time I took a cab in Mexico not only did it need to be cleaned out, I could see the road below us!

    Japan, America, or Mexico…

    Why don’t they just have TRIMET take over the cab concessions?

  12. cab hails are very easy in Portland. Often empty cabs may pass bc they are on a call, but I rarely call, and I do this 2-5 times a week. whether they’re supposed to or not is irrelevant. you can do it.

  13. Al, a friend of mine worked his way through college driving a hack in Boston. That would have been a real experience!

  14. I believe it is against the law to hail a cab in Portland. They also are required to provide city wide service and given that a cab company is required to have an office and so many vehicles it makes it immpossible for a part time owner to get in the business.

    There needs to be a new approach to all of this. Part time neighborhood services should be allowed along with ride sharing.

    But all of this is useless. Cityhall doesn’t care what the people think. They only care about who greases their palm.

    MHW

  15. Al M. wrote: Why don’t they just have TRIMET take over the cab concessions?

    In Orange County, California, the OCTA does regulate taxi cabs. And operates public transit.

    And the Toll Roads. And is the regional funding agency for the highway system.

    New York has a pretty comprehensive taxi system.

  16. I think the obvious solution to Taxis in Portland is being overlooked:

    Taxi DISPATCH should be consolidated into one central function. You would then call one number, and the dispatchers would use hi-tech computer mapping algorithms to determine the closest cab (and backup cab) to offer the fare to.

    Multiple new taxi companies could then attempt to enter the market and compete with the existing companies.

    Standard fares do make sense — you don’t want it to be like India, where you get charged a different fare based on your class/color of your skin/etc.

    Hybrids should just make sense to the taxi companies. Why drive a Crown Vic that gets 12mpg when you could drive a Ford Escape Hybrid at 30mpg or a Prius at 45 mpg? Or even a diesel Jetta, also at around 45mpg?

    And yeah, maybe it does make sense for the taxi dispatch to be regionalized. One number for one taxi dispatch for the whole region. North Plains could still have their one local cab driver (I’m making this up, I have no idea how many taxis are in North Plains), but he would be dispatched by the central dispatch center.

    Question: Would the central dispatch center then need to be a government entity by necessity (to avoid favoritism)? Or could some other structure work?

  17. I believe it is against the law to hail a cab in Portland.

    Not the case at all. Cab drivers are generally “independent contractors” who are free to look for fares where they wish as well as use their company dispatch services.

    They also are required to provide city wide service and given that a cab company is required to have an office and so many vehicles it makes it immpossible for a part time owner to get in the business.

    Cab companies ARE required to provide city-wide service, 24/7. Individual drivers –who often own their own cabs as independent contractors– are free to work as few hours as they wish, depending on their contracts with their companies. Different companies have different business models.

  18. I am a taxi driver in Portland, driving on the night shift.

    It is possible to hail a cab anywhere in Portland. There are a few issues, though:
    >> If I am free, I will stop to pick you up. Presuming you don’t look like you will throw-up in my back seat.
    >> If I accept a call from the dispatcher, I am now obligated to go to that address to pick up the caller. If I stop to pick up someone on the way, my company will fine me for not servicing the original order. (This applies to at least the two big companies in town.)
    >> The light on top of the cab means nothing in Portland. It is always on. You can’t tell if I’m on my way somewhere or not by looking at the light on top.

    Our taxi dispatch does alert the nearest cab to any call, or the one waiting the closest if several are nearby. That driver, as an independent contractor, can choose to accept of decline the call. Thus, the dispatcher (at any of the companies) really can’t tell for sure, beyond a good guess, how long it will take.

    That being said, if it’s a busy night, it will take just as long to get a cab whether you call the black one or the yellow one or the green one. If you call two or more, one will certainly get there first, but it will just be luck. The other will be close behind, and will take some time looking for you, and thus the whole system will get behind. Why did your cab take so long? I spent the last 10 minutes looking for someone who was already gone.

    If Tri-Met took over, you would get a union driver with benefits (I’d get benefits!!!) and your taxi fare would double.

    To the guy in North Portland: I feel for you, brother. Unless traffic is a hassle, it’s 10-15 minutes from downtown to most places in NoPo. I’d like to tell my fellow drivers that, too. But they don’t listen to me, cuz they’ve been burned too many times bu that guy who calls 3 cabs and only needs one. In fact, I don’t know why I still put myself through that. Well, somebody’s got to do it.

    There are limits on cab permits so that the number of cabs is limited and each driver can make a living wage. There are two problems with the number of cabs in Portland. One is that the figures presume that all cabs operate 24/7, and that’s not true. (I take a day off, for example.) Also, the number of cabs in the City of Portland is regulated, but both large companies expand their fleets with cabs that can pick up in the suburbs but not in the city. It would be more efficient for you, the passenger needing a ride, if ANY of the available cabs could pick you up. They just need to figure out a way to regulate THAT one.

    There are 5/6 companies with licensed cabs in Portland (depending on whether you count Broadway/Sassy’s as one or two), and quite a few independents operating outside the city.

  19. “That being said, if it’s a busy night, it will take just as long to get a cab whether you call the black one or the yellow one or the green one. If you call two or more, one will certainly get there first, but it will just be luck. The other will be close behind, and will take some time looking for you, and thus the whole system will get behind. Why did your cab take so long? I spent the last 10 minutes looking for someone who was already gone.”

    You are definitely helping my point. A single company wouldn’t send two cabs to the same call, (nor would anyone call for two cabs from the same company in the first place,) and so response times would be less if there was only one company in town. Not to mention: Time spent looking for customers that got into another cab is time/gas/money that has to be charged to the customers that you do pickup, so even if that single company was less efficient than the ones that would exist under a more competitive business model, it is quite likely that fares would be less with that one company.

    “If Tri-Met took over, you would get a union driver with benefits (I’d get benefits!!!) and your taxi fare would double.”

    I realize that many people feel that exploiting human labor is okay, however: I’d be in favor of you getting benefits, and if that means I have to pay more for taxi fares, that seems like it would be fair… We shouldn’t have to have TriMet take over the taxi business to make that happen, but if that is what it takes, then…

    Alternatively, we could adopt a national health care program, and fully fund social security, and so everyone would pay higher taxes, but everyone would get “benefits,” and I’d be in favor of that as well/instead. It should be noted that the company that gets the most benefit out of nationalized health care is GM. Many other auto companies, (Toyota, Volkswagen, etc,) have their health care costs paid for by their governments, but GM is paying their costs out of the profit on the vehicles.

  20. Town cars are a luxury sevice and most town car services don’t operate in the same way that cabbies do. I work downtown and I have never once seen a person just hail a town car the way you hail a cab. It’s not done by legitimate town car services. The only time I’ve ever seen a town car being hailed is by a valet for a hotel, business, or restaurant. They are flagging down town cars that they have order specifically for certain clientele. On top of which, the clientele
    that town car services pick up are not the same as the clientele cabbies normally get and never will be. Again, Town Cars Are A Luxury. This means people with the means purposely choose town cars and are willing to pay top dollar for the luxury services. Cabbies still corner the market for transportation services outside of public transportation because most people can’t afford a town car. A lot of hotels contract with town car services to handle their clientele, which is a perfectly legal and morally acceptable practice. As for parking illegally or not charging the legal minimum fee, fine the town car services that are doing it but don’t punish the majority who abide by the rules. Besides I’ve seen plenty a taxis parked illegally to last a life time. Basically it sounds like most of cabbies are complaining for no reason. Reminder: Town Cars Are A Luxury Service and most people taking town cars will only take a cab if a town car isn’t available.

  21. I work downtown and I have never once seen a person just hail a town car the way you hail a cab.

    You’re not legally allowed to hail a cab in Portland from the street. You have to call ahead.

  22. You’re not legally allowed to hail a cab in Portland from the street. You have to call ahead.

    Whether or not that’s true, I don’t know. I do know that I’ve done it on numerous occasions here in P-town.

  23. Whether or not that’s true, I don’t know. I do know that I’ve done it on numerous occasions here in P-town.

    I’ve done it to, but I’ve been told by a Broadway driver that it’s not allowed and the driver can get in trouble with the city for stopping (if they’re caught). Maybe it’s just a company policy and he gave me bad info though…

  24. Why would it make sense to ban cab hails? Is this to somehow ensure a “fair” allocation of passengers to drivers? Is this to avoid charges of discrimination? Cabbies in other cities might “not notice” fares they don’t like; it’s harder for a cabbie to discriminate when he’s directed to a fare by a dispatcher.

    Taxis are most useful when you can get one on short notice–and the shortest possible notice is a hail from the street.

  25. City Hall should came up with a customer first program! I was a taxi cab driver in Los Angeles CA. What i had experienced is that when a person is in need for a taxi service we should do the pick up all the times, but we should not pick up people on the street if we are to picking up somebody else from a dispach’s order!

    I have 2 taxi cabs here in Portland i just moved them from LA, but after i read all the requirements to be lisenced in portland, i guess i can not apply for permits for my two cars i might have to sell them! :(

  26. William Thompson,
    The Cascade Policy Institute experiment with deregulating the taxi, town car and shuttle industry in Seattle, WA failed miserably. Customers were being overcharged, taken hostage, sexually assaulted, etc. Over the past few years Seattle has re-regulated the industry and conditions have improved. When town cars were introduced to the industry in Portland they were to be (and still are) executive transportation (high dollar customers) as to not compete and operate as taxis (on demand). Almost immediately the town cars started paying hotel doormen and concierge kickbacks to be given preferential treatment. They also started offering the same rate as the taxis in Portland in order to steal the taxis on demand business from hotels. Now (2010) the economy is not good. Taxi wait times between orders are about 45 minutes to 2 hours.

    If the city of Portland’s entire Private for Hire Transportation industry (taxi, town car, shuttle, pedi-cab) was to follow your recommendations and let anyone who wants to give it a try start driving a taxi or town car the standards, safety, quality, customer service and the livelihoods of the drivers would be suffering horrendously now.

  27. William Thompson,
    The Cascade Policy Institute (you write for them) concluded in its very own 1998 analysis of deregulation that deregulating the taxi industry did not work. Here is proof:
    http://www.cga.ct.gov/2004/rpt/2004-R-0380.htm

    Some excerpts:

    There are plenty more conclusions about deregulation readily available nationwide and a lot of them are based on The Cascade Policy Institutes work (experiments). The conclusion is, nationwide, deregulation is bad for the taxi industry as well as the people and infrastructures in those cities.
    I noticed the Cascade Policy Institute does not keep an archive of their failed policies. They are still available on the internet and State Government websites.
    Sorry Bill. Had to call you out on this one.
    Jay

  28. I just posted the same comment to the same William Thompson commentary on the Cascade Policy Institutes website. I bet they don’t have the guts to post it. Go to their website and check for yourself. Maybe they will?
    Jay

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