Taxi economics report suggests 3 ways for Ottawa to manage Uber

A report on taxi economics commissioned by the City of Ottawa to help shape policy on the changing industry suggests three ways to manage ride-hailing service Uber — including abandoning the city's strict limits on available taxi licences.

• Taxi economics – old and new
• ​Taxi vs. Uber customer experience

The city currently limits the number of taxi licence plates issued to one for every 784 residents, according to the taxi economics report compiled by Hara Associates.

The report suggests that Ottawa could get rid of its policy for a fixed number of plates but set "a significant annual licence fee for new plates issued." Older licences would continue to be renewed at the previous fee, the report suggests.

A second alternative would see Uber drivers pay the city a fee for each trip, something which could have "a significant cumulative impact — the equivalent of restricting plates," the report said. The fee-per-trip model would ensure part-time drivers are not paying more than full-time drivers, according to the report.

A third alternative would be to monitor taxi performance, increasing the number of taxi licences if the service is deemed too slow. That proposal would require an investment in data analytics, the report said.

Limiting taxi numbers has 'poor reputation'

The report was posted online today along with another report focusing on customer experience. Four other reports were released earlier this month to help the city shape its future taxi policies.

The current limit on the number of taxis is meant to prevent the taxi market from becoming flooded, the report said, which can lead to safety concerns like drivers working longer hours to eke out a living and avoiding repairing vehicles because they can't afford to.

However, despite the idea's "valid policy origins," limiting the amount of available plates has a "poor reputation" and as cities grow "the limit is rarely increased fast enough to keep pace with demand," the report said.

The report suggested that when work is plentiful, drivers under the current model are free to choose the best hours and busiest locations, leaving a shortage of service during other times and in certain neighbourhoods, especially the suburbs.

A shortage of taxis in San Francisco led to the creation of both Uber and Lyft, which have now spread across North American and beyond. Uber was launched in Ottawa in October 2014.

Life's savings threatened by Uber

Taxi drivers in Ottawa who invested in plates when the value was high may now see their life's savings or retirement plans threatened as new drivers chose to operate under the unregulated Uber service rather than pay for a pricey plate, the report detailed. 

The ease of the Uber app, which allows customers to see their ride coming on a GPS map, pay automatically on a credit card and rate their driver after the ride, contrasts sharply with the traditional taxi experience. 

The cost of a ride is generally lower with Uber as well, though surge pricing during times of high demand can drive the cost up. Tipping is also not necessary with Uber, as payments are automatic.

The report suggests that traditional taxis could compete with Uber more effectively if it had more fare flexibility, especially during peak and off-peak periods.

Difference in costs

The report also found that the lower Uber prices have little to do with its lack of plate fees, as its drivers must pay a $1.50 safe ride fee to Uber plus as 20 per cent of the fare. The table below, from the report, compares the expenses of taxi and Uber drivers in Ottawa based on a five-kilometre trip.

The report found that the cost of insurance might be the most significant expense facing taxi drivers rather than Uber drivers, along with taxi regulations that include inspections, cameras and dispatch equipment. 

The terms of Uber's insurance are not public, though the company states that it has coverage of up to $5 million that does not include passengers and third parties, and that it is working on developing insurance coverage. The table below compares extra expenses of taxi and Uber drivers in Ottawa based on a five-kilometre trip.