Taxis are an important element of mobility in the overall transportation network of any city.  They should be considered part of a city’s array of mass transit services, an alternative to single-occupant auto trips.  Nationwide, taxis carry at least 40 percent more passengers that all other mass transit combined.  Since taxis are more expensive than other transit services, they obviously offer something that other transit modes do not.  In particular, taxi services are important to certain segments of the population - seniors, housewives, the disabled, and the poor each account for a much higher share of taxi trips than their share of the population.  Most other riders are business of tourist visitors.

Given the importance of taxi services to its residents, city governments should take every effort to ensure that nothing impairs local taxi markets.  On April 1^st residents of Anchorage will vote on whether or not to open up their taxi market.  And in Denver, the state legislature is facing the same question.  There is a great deal of evidence that more open and competitive taxi markets are more valuable to the community.  The last 15 years has seen a broad literature documenting the outcome of regulatory and other changes that increase competition in municipal taxi markets.  In fact, a review I wrote of all the studies done by economists on taxi deregulation found that of the 28 articles, nineteen concluded that deregulation is beneficial (on net), two conclude that the results are mixed, seven conclude deregulation is net harmful

There is much to be learned from studying the success stories rather than reacting with fear because of some failures.  In general, more open and competitive taxi services tend to mean higher service levels (in terms of total taxi hours in service), less waiting time for a taxi, a greater variety of services, lower operating costs in the industry, and higher quality service, than is found with monopoly taxi service.  The net result is increased usage - more people use taxis for more trips - which means greater mobility for local residents.  The city will also benefit from having a larger and more vital taxi industry, with greater employment and income opportunities.  In many case, the city may also benefit from greater tax revenues from a larger and growing taxi industry.

Looking at all of the evidence on opening up taxi markets, I reach a number of conclusions.

1.  Taxi deregulation has worked in many cities.

v  Many cities have deregulated in the last two decades, and a complete survey of the literature shows that in some cases it worked well, and in others there were problems that led to some re-regulation.

v  Arguments based on the results of one, two, or three studies do not tell the whole story—and even studies critical of deregulation concede that sometimes it works.

v  The lesson is that we should be learning from the deregulation successes .

2.  The Lynchpin Study Critical of Deregulation, by Price Waterhouse, is Flawed.

v  The study did not condemn deregulation, as is commonly claimed, but concluded that “the effects of taxicab deregulation have ranged from benign to adverse, depending on local conditions and markets.”

v  The study did not precisely define “re-regulation.” Many of the cities it studied re-imposed restrictions on entry, limiting the number of taxis allowed to operate, while others simply imposed a maximum fare.  After ‘re-regulation” many of the cities studies were still more market-oriented than before they deregulated.  And re-regulation was not without its faults—a 1996 review of taxi policies Seattle found that re-regulation to restrict the number of taxis had already begun to create a new set of problems.

v  The study did not compare what happened to fares in the two sets of cities. Fares did not go down in either re-regulated or deregulated cities—between 1985 and 1992 average fares increased 17.4% in deregulated cities and 17.3% in re-regulated cities.

v  Other studies of the same cities reach different conclusions.  For example, another study of deregulation in San Diego concluded that the overall effect of deregulation was better for customers.

3.  Fast-Growing, Spread-Out Cities are the Most Likely to Benefit from Deregulation.

v  Many of the cities that have remained deregulated are growing cities, while those that re-regulated were mostly slow-growth or declining cities.  Cities that stayed deregulated grew by an average of 22.7% while cities that re-regulated grew by only 2.1%.

v  In growing cities, arranged rides are usually 75 percent or more of the market, and it is arranged rides where deregulation is most often successful—the problems that lead to re-regulation have most often occurred in the taxi stand markets and at airports.

v   It is the tragedy of regulation’s one-size fits-all approach that problems in on part of the market lead to restrictions on all.  A more sensible approach is to deal directly with the problems with the taxi stand and airport markets and leave the rest of the market minimally regulated for safety and perhaps maximum fares.

4.  The Politics of Taxi Regulation Makes Decisions Difficult

v  Who comes to testify on behalf of regulation—the industry.  Little wonder, as they have the most to gain from restrictions on prices and especially entry—no one wants more competition if they can avoid it.

v  Who loses from price and entry restrictions? Taxi riders—estimates of the cost to passengers of taxi regulations range as high as $800 million nationwide. Especially the poor without cars, the elderly, the disabled, and others who now and then need affordable door-to-door transportation services and would benefit from a competitive market. That is why ministers for black and hispanic community churches, who’s congregation cannot get a ride home after late night services, and organization’s such as the Urban League, plead for an open and competitive taxi market.  Also, there are the taxi drivers, current and would-be.  No matter how good the job market, there are those who would drive a taxi part-time or as a second job were it not for the restrictions on their options.  One certain fact of all past deregulation has been more taxi drivers with the opportunity to make a go of it.

5.  There are Positive Case Studies to Learn From.

v  In 1994 Indianapolis undertook a more sweeping deregulation—removing limits on licenses, setting only a maximum fare and new stringent safety requirements. Today the city could not be more pleased with the outcome.  Since deregulation: 1) The number of licenses taxi companies tripled from 26 to 75; 2) Of the 49 new companies, 40 are minority or women owned; 3) Average fares have dropped 7%; 4) The number of customer complaints has declined; 5) Waiting times have dropped; and 6) Before deregulation there were 392 licensed cabs, but only about 200 operated on a given day.  Now roughly 500 cabs operate each day.