Taxi feud at Ottawa’s airport exposes industry's regulatory mess

Theglobeandmail.com
Sept. 27, 2015
By Barrie Mckenna

Have you flown into Ottawa lately?

It’s a nice terminal - spacious, uncrowded, with a soothing waterfall in the arrivals area.

The Zen welcome ends abruptly when travellers step outside to catch a cab for the short 10-kilometre ride downtown. Since early August, Ottawa’s Airport Parkway has been a virtual war zone, with sporadic blockades by striking taxi drivers and baton-wielding cabbies smashing vehicle windows and intimidating passengers.

Uber, the San Francisco-based ride sharing service, isn’t directly involved in this labour fight. But in many ways the clash is all about Uber, whose unstoppable assault on the market has exposed the ridiculous regulatory mess that is Canada’s cab industry.

At the heart of the seven-week-long strike is the airport’s decision to end a long-standing airport cab monopoly, a common practice in cities across Canada. Until this summer, one dispatch company and its fleet of 150 cars enjoyed - for a fee - an exclusive and lucrative monopoly to pick up passengers at the terminal. The deal was so good that the value of a single airport taxi licence soared to a quarter-million dollars.

But this exclusive arrangement is colossally inefficient, a price ultimately borne by consumers and the environment. Airport cabs couldn’t pick up passengers anywhere outside the airport, forcing them to return empty to the terminal and, with the fleet size capped, often leaving too few cabs available at airport.

Likewise, the rest of the city’s taxi fleet was allowed to drop passengers off at the airport, but not make pickups.

The airport authority decided to break up the taxi cartel in order to grab more revenue. It raised the fee cabs pay to access the airport, while opening access to all taxis in the city. The result is a $1-million-plus cash windfall for the airport authority.

There will be more cabs, but consumers will pay the price, as the new access fee will be tacked on to the price of a ride.

The airport taxi drivers objected to the loss of their coveted cartel and launched a strike against their employer, Coventry Connections - a company with a near-monopoly of its own on the city’s taxi dispatch industry.

It is a hopeless fight for the airport cabbies, whose licences have tumbled in value on the open market. Their exclusivity is gone forever. Last week, the city and the airport secured a court injunction, ordering striking cabbies to stop blocking airport traffic.

Rampant regulatory excess remains, not just in Ottawa but across Canada. The long-standing practice of limiting taxi licences continues to restrict supply and artificially inflate the value of cab tags. And the consumer pays the price.

In Canadian cities, there are typically 10 to 20 taxis per 10,000 people, far fewer than in many major cities in North America, leaving the suburbs and poorer neighbourhoods badly underserved. In Washington, for example, there are more than 100 taxis per 10,000 people, compared with 15 in Ottawa.

Somewhere along the way, municipal authorities in Canada lost their way.

It’s no wonder so many Canadians are embracing Uber, whose smartphone app uses GPS and electronic billing technology to seamlessly link customers and independent divers. Scarcity inflates prices, but it also creates opportunity.

The Ottawa airport’s fee grab is a step backward that will inevitably drive more consumers to Uber. What the industry needs is common-sense regulation that focuses on providing a safe, efficient and standardized level of service, not in creating cartels and restricting the supply of an essential service.

Ottawa, like many cities, is now wisely exploring ways to bring Uber into the regulatory fold. Mayor Jim Watson has promised action by the end of the year. Toronto and other cities are looking at creating a new class of licences.

Cities should stop limiting supply and open the market to an unlimited number of licences. At the same time, regulators should make commercial insurance mandatory for all drivers, perhaps by building the cost into reasonably priced licences. And forget about costly safety checks for Uber vehicles, as some cities have proposed - these are already mandated for all cars in most provinces.

It’s not about tightening up on Uber. It’s about loosening the reins on everyone in the cabbie industry.

In the end, rewriting the rules is the only answer - not because Uber demands it, but because it’s sensible and consumer-friendly public policy.