By Ryan Ekvall | Wisconsin Reporter
DEREGULATION: UW-Madison law professor Peter Carstensen led an effort to deregulate Madison’s taxi industry nearly 15 years ago.
MADISON, Wis. — Ride-sharing companies Uber and Lyft recently debuted in Madison, unannounced to city officials.
After the city found out, Doran Viste in the city attorney’s office gave her opinion that the businesses, done using a smart phone, are operating illegally if they take any compensation from passengers.
When police threatened to fine drivers who took payment, Uber and Lyft began offering free rides.
Peter Carstensen, a law professor and antitrust expert at the University of Wisconsin at Madison, couldn’t help but admire the startups’ “interesting business strategy.”
“Enter the market first, work out the regulatory issues later,” he said. “I admire that.”
RIDE SHARING: Emails obtained by Wisconsin Reporter show the city’s hostility towards ride sharing apps (click to enlarge).
Now instead of squashing the businesses, which city attorneys say cannot be licensed under the current regulations, the city is trying to accommodate Uber and Lyft, while trying to appease existing taxi cab companies. The Transit and Parking Commission discussed the ride-sharing services earlier this month.
Alderman Scott Resnick is leading the charge to find a middle-of-the-road solution to allow Uber and Lyft to stay and compete with traditional cabs.
“If we can’t eliminate the rhetoric of eliminating Lyft and Uber from operating period, then we can’t have those discussions at all,” Resnick said. “There is no city that is an Uber-only city. Even where they have largest market shares there still exist traditional cab companies.”
The existing taxi cab companies, an influential constituency, would rather keep the status quo.
In emails obtained by Wisconsin Reporter through an open records request, Tom Helms, president of the 65-year old Badger Cab has expressed his indignation to city officials who he says are not enforcing the ordinances against Uber, likening the ride-sharing service operating in Madison to him selling beer after bar hours.
Helms wants Uber and Lyft shut down until they can get licensed under the city’s current scheme.
It’s a similar battle to one that’s played out in cities across the country. Some U.S. cities — such as Houston, Los Angeles and Dallas, and international cities such as Shanghai and Stockholm — have cracked down on Uber, Lyft and other ride-sharing app drivers by levying fines. Some cities — New Orleans, Portland and Miami , for example — have banned the services.
That hasn’t stopped Uber from aggressively expanding to markets around the globe.
Nick Anderson, the Uber general manager for Wisconsin, said he doesn’t want to have to go to court to operate for profit in Madison.
“We get pushback in a handful of markets because what we’re doing is disruptive,” Anderson said. “A lot of the environments and cities we enter, they’ve got incumbents who have been there for decades. Sometimes the transportation environment is a bit out of date. What Uber is doing is trying to solve that problem.”
Technology changes, history repeats
This isn’t the first time Madison has restricted taxi operations due to its regulations. Carstensen played a prominent role in the unsuccessful battle to deregulate the taxi industry in Madison 15 years ago.
In 1999, the city’s Task Force on Race Relations recommended the city deregulate the taxi industry to increase economic opportunity for minorities and other would-be entrepreneurs. Then-Mayor Sue Bauman created a committee on taxicab deregulation based on the task force’s recommendations.
Carstensen argued at the time the city’s regulations were unnecessarily burdensome, and possibly illegal.
Madison taxi regulations effectively outlaw one-man taxi operations. Taxi companies must keep cars on the road 24/7. Drivers can only drive 12 hours a day. Taxi companies must serve all areas of the city. Drivers cannot refuse rides. And back in 1999, a new cab company would have to demonstrate need in a public hearing before the city would grant a permit.
Realistically, a taxi company would need somewhere around 10 cars to start-up in the city. The roadblocks prevented new taxi business formations and created sub-par service at monopoly prices, Carstensen said.
Mike Roach, a Madison taxi cab driver who fought the city 15 years ago, said the system amounted to “modern day sharecropping.”
Carstensen said the city could be subject to a federal antitrust lawsuit.
But not much changed. Despite the commissioning of the committee, which was heavily influenced by the existing cab companies, the city was never really too interested in deregulating the taxi market.
GIBSON: In 2001, former city attorney Eunice Gibson argued economic freedom for cab drivers is part of the vast right wing conspiracy.
Eunice Gibson, city attorney at the time, wrote in a column in Municipal Lawyer magazine that she believed a connection had been revealed “between an extreme right-wing political agenda of eliminating all economic regulation, and the taxicab rules most cities adopt under their police powers.”
She wrote the far right was “disguised as the friend of minority business opportunity.”
Since that May/June 2001 edition, courts have ruled in favor of shut-out cab drivers in counties across the country, and recently in Milwaukee. The Institute for Justice, a libertarian public interest law firm, and part of Gibson’s would-be “extreme right-wing political agenda,” represented the drivers in that case.
The court told the city of Milwaukee to remove the artificially low cap on the number of taxi licenses it issues. Now taxi drivers there worry their city might adopt Madison’s fleet system to protect the existing cab companies.
“In Madison, the big companies came in and the owners were forced to sell their permits,” Saad Malak, a Milwaukee taxicab driver, told the Shepard Express. “The same thing will happen here in Milwaukee.”
In addition to the other regulations which restrict small operators, the license costs $2,100 every two years plus $60 a cab.
Getting permission to start a new taxi business in Madison is rarer than a good steak.
It’s happened just once in the past 25 years, even though the city’s population has grown by nearly 40,000 people. Just 198 taxicabs now serve Madison, a city with nearly a quarter million people.
Enter Uber and Lyft.
Unlike traditional taxi cabs, drivers don’t wait at hotels, taxi stands or the airport. Passengers can’t hail a Uber or Lyft car. The fares aren’t metered. Instead, prices are market-based and change depending on the length of ride, number of drivers on the road and current demand for services. Drivers and riders are connected via a phone app. The ride-sharing platforms mangle the traditional definition of taxis, putting the city in an awkward position.
“The Uber and Lyft folks got the money,” Carstensen said. “They can buy the legal talent if they decide they want to really stand and fight. The city can say this is definitely a taxi, but a serious lawyer could have a lot of fun saying ‘a taxi means what you’ve defined it to be and no this is not a taxi.’”
Ride-sharing users, drivers and other city residents will find out soon enough.
“It’s difficult to have innovation when you’re talking about government regulation,” Resnick said. It’s nearly impossible to have those two in the same sentence.
“At the end of two or three months we’re going to know one way or another whether to allow both to co-exist or my proposals don’t get enough votes and the status quo remains,” he said.
Email Ryan Ekvall at email@example.com , call him at 608-257-1382 or follow him on Twitter @Nockian.