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COWLEY: Too few cabs in city? No, too many

By Alan Cowley

Published September 5, 2008 at 12:05 a.m.

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Have you tried to get a cab on the streets of Denver, couldn't, and thought, "There aren't enough cabs"? This is Denver and Colorado's problem right now as the Public Utilities Commission wrestles with the implications of HB 1227, a law passed this year that keeps taxi regulations intact for most of Colorado, but establishes a new environment in eight counties along the Front Range. In this new environment, three new cab companies have applied to offer service in the metro area.

But the problem isn't that there are too few cabs. The problem is that there are too many.

When there isn't one to be found, you might be surprised to find that at that moment there are hundreds of cabs sitting at Denver International Airport, waiting two to four hours to pick up what cab drivers consider lucrative fares.

As the legislature and the PUC try to figure out what to do, the media and hundreds of cab drivers sitting for hours at DIA and paying high overheads to cab companies cry "Deregulate!"

For the cab drivers, allowing more cab companies and cabs on the street (deregulation ), would - in their minds - give them the opportunity to escape the high weekly payoff to the existing cab companies and "go independent." They falsely believe that this would substantially lower their costs and make them more money. To the legislators and the media, more cabs must mean more cabs everywhere on the streets of Denver.

But that is a fallacy.

The problem lies in the deregulation of the cab industry that occurred in the late '70s and early '80s.

In 1977 the three existing cab companies - Metro Taxi, Yellow Cab and Zone Cab (not the drivers) - owned all the cabs. Each day, taxis were put on the streets in seven- to 12-hour shifts. These shifts were staggered, a certain number each hour to meet demand.

But in 1978 the state legislature and the PUC began deregulating the industry. At first the cab companies were allowed to sell a few cabs to the drivers. Quickly the cab companies discovered that they could lower their costs by shifting the cost of vehicle acquisition, maintenance and insurance directly to the drivers. In doing so, they further discovered that this made the cab drivers virtual captives to the cab companies, because drivers now had invested great sums of money.

This dramatically lowered the personnel turnover at the cab companies and lowered recruitment and training costs. The cab companies increased their profits and within a few years they sold almost all of their cabs to the drivers and sang the blessings of deregulation.

Thus began the service problems to the public that today has everyone crying, "Deregulate! Deregulate!"

The problem with this deregulation is that cab drivers are independent contractors. According to federal law, this means that drivers cannot be told when or where to work. Their work cannot be directed. So cab drivers queue up at the airport for hours, fishing for the big fare while grandma at King Soopers watches her ice cream melt.

A few years ago, Colorado tried to fix this problem by adding more cab companies and cabs to the streets of Denver. To Metro, Yellow and Zone, the PUC and the state legislature added the Freedom and American cab companies. This did nothing to improve service as the new cabs headed to the airport for the big fares. Then, because there were too many cabs on the streets divvying up too few trips, Zone Cab and American Taxi failed and were bought out by Metro Taxi.

The answer to Denver's problem is re-regulation. The cab companies must be forced through driver attrition to not resell a cab when the cab owner-operator quits or retires. They must maintain that cab and put it out on the streets of Denver as an hourly, day-leased vehicle, staggering shifts to meet the demand for service by the cab-riding public. Then and only then will Denver gradually see a return to the balance between cabs and customers, ensuring the public has a ride everywhere, not just at the airport. Then Grandma can have her ice cream and eat it too!

Alan Cowley is a former cab owner-operator and longtime cab manager at Denver Yellow Cab. He currently operates a small transportation company in Denver-Boulder.

Comments

  • September 5, 2008

    12:50 a.m.

    Suggest removal

    mikeyg writes:

    Nice try, Cowley, but that's all hogwash from a goose who's sitting on his own personal golden egg!

    The deregulation you speak of is a crock. Cabs have no business being regulated by your PUC cronies who give you whatever you want to keep real competition from the market. This is America - a nation built to greatness on the free market, yet cab company owners were able to persuade lawmakers that private transportation of a few willing buyers needed virtual monopolies like utilities that go into every home. Hogwash!

    And the rate increases the PUC always approves on behalf of their pocket-lining buddies running Yellow, Freedom and Metro are obscene. And this was when gas was under $2 a gallon. I can only imagine how much they've hiked fares with a believable excuse to peddle. Competition solves it. Why shouldn't any entrepreneur with a car be able to charge willing riders? Just like with Southwest Airlines coming to town, giving true low-cost alternatives to consumers will drive rates down for all. But that would keep the Mr. Cowley's of Denver from the life of luxury owning a government protected business provides for them.

    Cab availability? Ever try calling a cab on holidays or weekend nights? You'll wait hours on the busy ones, quicker to take the bus or ride a bike most of the time. I remember waiting in LoDo one New Year's for two and a half hours before we finally bummed a ride from a stranger.

    Yes, Cowley, there are too FEW cabs in Denver and nothing Adam Smith's free markets won't fix.

  • September 5, 2008

    7:44 a.m.

    Suggest removal

    Mike_In_Hartsel writes:

    To Alan Cowley, let the marketplace decide. If the revenue isn't there for more cabs then they will seek other employment. It's that simple. The type of regulation you want that would "solve" the problem would have the city telling cabs when to work and where to work. That's the definition of a cab driver being a government employee.

  • September 5, 2008

    9:55 a.m.

    Suggest removal

    Elwood writes:

    Mr. Cowley,
    If they were regulated, you could get stuck on the grocery store shift for months on end, and be kept away from those lucrative DIA routes.

  • September 5, 2008

    11:47 a.m.

    Suggest removal

    yaakovwatkins writes:

    Last Friday there were no cabs available. They wouldn't even give me an estimate of when one might break loose.

  • September 5, 2008

    2:09 p.m.

    Suggest removal

    cabodvr writes:

    wow! mikeyg - I haven't heard so much innuendo and unsubstantiated and baseless attacks since the conclusion of the 2 political conventions. Last time I checked it was the legislature and not the PUC that established the concept of regulated competition. You think open competition solves everything in the taxi cab industry? Look at the jurisdictions that have attempted that. Unfettered competition not only drove out the smaller undercapitalized companies, but in the long run led to less competition, which resulted predatory pricing and in less competition with a taxi industry more screwed up than when it was partially regulated. Not my opinion - just fact. See, Minneapolis, Las Vegas, etc.

  • September 5, 2008

    3:44 p.m.

    Suggest removal

    mikeyg writes:

    easy there, cabodvr!

    Last time I checked the lawmakers worked in the...legislature, not the PUC. Before you get snippy with your posts try reading the one you're responding to.

    And, um, don't expect me to take the word of someone like yourself who profits from the current setup over the actual experiences of customers. Sorry, but paying $20 to go two miles from downtown to Uptown is no bargain and definitely would come down with free market competition. And waiting over two hours after calling repeatedly for a cab would not happen with free market competition.

    You lose!

  • September 5, 2008

    4:12 p.m.

    Suggest removal

    BetterEducated writes:

    Dear Al,
    I am going to mention a single name: Harlan Balaban.
    Who would absolutely and completely agree with you.
    Please join me in letting tears come to your eyes when we mutually recall this former general counsel of several years, for Yellow Cab and other local taxicab companies (he is in Florida, I hear).
    I worked for "Mr B" well over 30% of my life at the time, and the memories are among my most dear.
    It doesn't matter what feedback you get on this issue, YOU know and I know and Mr. B knows, you are 100% correct on every point. Residents who are heavy on the politics and light on the facts should ponder this:
    As a kid, I watched Mom call a cab. As an adult, I watch this VERY awkward scheme. Someplace in the middle was the word Deregulation, heartily supported by those who rarely, like Mom, needed to call a cab.
    XOXOX to you, Sir!!! Kathy

  • September 5, 2008

    4:14 p.m.

    Suggest removal

    Denverite91 writes:

    Cowley is right, due to the fact that they are independent contractors you can add all the companies that you want and all they will do is go sit out at DIA such as the case with Freedom Cab. I am not sure if you have ever tried calling their dispatch line but there really isn't a dispatch line just as would be the case with any new company. You will not lower rates because the companies make their profit off the drivers and not the public. The drivers pocket the fare and tip so I can just imagine how much money these drivers are actually making. If an event such as the DNC is in town, the companies will not make any money off the event unless drivers show up to work for that particular event. Deregulation only benefits the drivers while the public will suffer. If you were to add companies you would be decreasing the number of drivers who currently contract with the current companies. That would mean longer wait times in outlying areas. Every other city that this has been done in has quickly reversed their decision when people started forming one person companies with no insurance, felony records and stealing from every customer that hopped into their vehicle. This is actually a very scary situation for the residents of Denver if this was to happen.

  • September 5, 2008

    5:01 p.m.

    Suggest removal

    BetterEducated writes:

    Denverite has hit it on the head:
    Recipe for Disaster:
    1. Add one dark night to an isolated location
    2. Stir in Unknown Passenger, Unknown Driver and Unknown Vehicle.
    Blend Well.
    We are stuck with the first two ingredients, and the first third of the second. It's stunning, how vulnerable drivers AND passengers are. And so are the drivers among them, if their vehicles fail.
    The taxicab industry began as, and should have remained, a closely-regulated public utility.

  • September 5, 2008

    5:04 p.m.

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    BetterEducated writes:

    Oops, make that "the first ingredient, and the first third of the second." :-)

  • September 6, 2008

    2:14 a.m.

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    555 writes:

    Cowley, you are too late the world around you has changed. did you said (more compettition will make drivers get hungery) you are wrong. stop crying for the drivers and come up better reason to stop comptition.

  • September 6, 2008

    2:59 a.m.

    Suggest removal

    555 writes:

    Today in denver Metro 1650 cabs.
    State books say 942 cabs.Where are the cabs coming from? who is cheating the state and putting more taxicabs on the road.There is no new cab company in denver for 16 years now.
    I wonder if the PUC knows only how to fight and close front doors from the new applicants.I don't believe PUC don't know how to check the back door and how to check how many taxicabs in denver today.do not be fool by "there should be 942 cabs at any given time"govornment has more eyes and more ears.