Anatomy of an online scam: The GMC Terrain that never was
People get scammed everyday online. We know this and yet it keeps happening. Why? Because…
They’ve resisted wholesale and necessary change for decades and it’s all about greed.
Two years ago the City of Toronto wrote a comprehensive report on the industry and its issues. Nothing has really changed. Mind you nothing had really changed much from the last time the city looked at the issue.
The issue is an industry with entrenched interests which wants government protection to continue operating as a monopoly, safe to ignore competition and innovation.
As Michael Motala is a political economist and student at Osgoode Hall Law School wrote in the Globe and Mail today: “Ubernomics should be a case study in Economics 101: When you fix a mismatch between demand and supply, you profit. Regulation is justified only when it corrects market failure.”
Uber is a better idea. Better ideas always win unless you come up with an even better idea. That’s business.
The real fight isn’t over Uber. It’s over what was $10 billion in cab licenses before Uber’s arrival a couple of years ago and is now $3.4 billion and dropping.
There are 4,849 taxicab licenses in Toronto of which 3,451 are the so called Standard Licenses which can be bought and sold at market prices. The rest, 1,313, are known as Ambassador plates and are owned by the city, licensed by drivers who must drive the plates themselves for a maximum of 12 hours a day. They cannot “share” a plate with another driver.
Not so for Standard Plate owners. Families, investors, corporations have consistently acquired and hold plates as assets. For the most part they don’t drive and many have no connection to the industry other than investing in plates.
No matter what, they get their money. The result is desperate drivers working long hours to pay for a plate lease which ran up to $1,900 a month.
Two years ago the resale value of a plate hit a high of $360,000. Today plates are for sale between $100,000 and $140,000 and some observers feel those prices will continue to drop after Justice Dunphy’s court ruling.
Further, half of Standard Plates are managed by Agents who lease them out, taking a another cut from drivers.
Despite city rate regulation, Toronto cabs are more expensive than in most similar cities. There’s the $4.25 “drop” just to get in, then 25-cents for every .143 km travelled and 25-cents for every 29 seconds of waiting time.
Interested only in a better-than-TSX return on investment, plate owners are the real power of the industry and have no incentive to compete and thus are woefully behind with technology.
Finding a driver equipped to accept credit cards is a lottery. There’s no direct hailing by smartphone app as with Uber. Nor is it possible to open an app to see where the nearest taxi is and simply touch the screen to hail it.
What the industry has is #taxi, a text-based service which costs between $1.25 and $2.50, adding insult to the $4.25 drop injury. That’s $6.75 just to find and get in a cab. I think there’s only one brokerage out there with a mobile app but what if that brokerage doesn’t serve the area where I am looking for a cab?
Little wonder Uber has shaken things up.
Politically, the province and the municipalities need to find an innovative solution without the heavy hand of regulative protection further coddling a sector which has been hoist on its own petard.
So let’s look at the business. There are four stake holders: Plate owners, Drivers, the City and Customers.
As noted, the industry is dominated by plate holders. They hold all the cards, as it were.
Brokerages are their agents. They deal with the drivers, the drivers deal with the customers and the city tries to level the playing field. Except it doesn’t work because the tail is wagging the dog. It’s not about what the plate owners want anymore. It’s about what the customers want. And who are the plate owners’ customers? The drivers.
Yep. The drivers. And they’ve treated them like dirt for decades. A necessary inconvenience to collect those monthly lease fees.
Time to rethink. Time for the plate owners to reinvest instead of taking profit. If they want the value of their plates to stabilize and grow, they must invest.
The other customers, of course, are the passengers. Do you care what colour your cab is? Probably not. The only people who select cabs by brokerage are corporate clients because they’ve set up accounts. That’s not where Uber is hitting them.
For years cab have competed as brokerages. It’s a joke. It’s a cartel. No one is going to break away from the comfort zone of the pack. No one is going to invest in technology to make it better for their customers, the driver.
They don’t need to. They’re regulated and protected.
And then comes Uber. Time for a summit. Instead of whining to city hall and the province and running scare ads on the radio about Uber, plate owners would be better off pooling their resources and coming up with a better idea. Better yet, a bunch of better ideas.
The Toronto Taxi Industry has been poised for digital disruption for some time. In some ways they are a classic case study of an industry sticking its head in the sand and hoping the bad news will just go away.
For years the city has worked with stakeholders and been given conflicting opinions. There are too many cabs, there aren’t enough cabs. There is too much enforcement. There isn’t enough enforcement in the right places. The fact is, on a per capital basis we have fewer cabs than a lot of cities, including New York.
That’s a short supply. And that’s where Uber succeeds in meeting demand.
Digital disruptors like Uber are everywhere and the industry should have seen it coming five years ago when the company launched.
Digital disruption has shaken up the travel industry, newspapers, book publishing, the music industry and even the way we buy and sell goods and services, killing retailers by the score. It’s also shaking up accounting and law. Read the Globe story linked earlier.
Uber is not a taxi service. It is not a brokerage. It is a peer-to-peer platform which connects two parties and facilitates a transaction in the same way Kijiji or Craigslist or Ebay does.
Instead of continually claiming Uber is a taxi service and should be regulated, find ways to work with the city to make taxis more competitive with dynamic pricing, GPS in cabs, auto-pay by credit cards, smartphone apps which don’t ding the customer for simply using it, sharing digital text dispatch to make getting cabs to customers is more efficient.
It may mean slashing lease rates, consolidating brokerages, automating dispatch like Uber’s app.
The City could also look at creating value add for taxis with more HOV lane access, ride sharing, especially during transportation emergencies such as a TTC shutdown. It would be fairly easy to set up using current technologies.
And the province? Perhaps the province could launch an inquiry into why taxi insurance is $8,000 a year? What are the loss ratios? Is there a better way to insure taxis and take it out of the hands of the insurance industry because they too are part of the problem.
In the meantime Uber rules.