Thinning Densities and Safety Ramifications: Lessons from the Taxicab World

Expert witnesses are taught not to testify about what others are thinking. Yet I know what most readers were just thinking: “What in God’s name does Density have to do with Safety or Liability?” The answer and its explanation are a bit complex. But they apply just as severely to the motorcoach industry  as they do to the taxicab  industry  and the recently  incursion  of what  many call  “The Uber Phenomenon.” In truth, as I will explain below, this phenomenon has infected the motorcoach industry years ago, is only getting worse. And not only are we doing nothing to stop this phenomenon, but we have failed to even recognize its presence among us.

Dynamics of Density

I suspect most readers have tuned into the recent phenomenon of Uber’s invasion into the taxi- cab sector – an entry which, because of ignorant and/or unconcerned public officials, threatens to decimate the already highly-competitive nature of the taxicab industry. Because most taxicab services are governed by abstract fixed rates (X dollars/cents per trip – known as the “flag drop”) plus Y dollars/cents per mile  – that do not remotely reflect how costs are incurred (on a combination of per- hour, per-mile and fixed cost bases), density is everything in the taxi business. Density (and how a sys- tem and its taxi units respond to it) governs whether a company or driver can even “break even,” much less earn enough money to remain in the business.

In simple terms, the thicker the combination of user and fleet density, the closer any given vehicle is likely going to be to any given pickup, and the lower the percentage of non-reimbursable “dead-head mileage”  that will be incurred. However, when the fleet density is over-saturated, the exact opposite occurs: Supply exceeds demand, and vehicles float around aimlessly (or “post” awaiting a dispatched call), increasing deadhead mileage and decreasing the percentage of miles of vehicle movement for which they will be reimbursed.

These dynamics are thousands of years old, since they are the exact same dynamics that govern the principal labor-management issue in most restaurants: Waiters and waitresses want fewer of them so that they can serve the maximum number of tables (and obtain the most tips). In contrast, restaurant owners want enough waiters and waitresses to optimize responsiveness to patrons. As a proxy for a restaurant owner or manager, local government officials, public utility commissions and similar individuals and organizations govern the number of vehicles allowed to enter a community’s service area – effectively (corruption notwithstanding) balancing the needs of potential passengers with the need for drivers and vehicle owners (often not the same) to earn enough money to remain in the business.

Bastardizing the Balance

In most communities, the volume of vehicles allowed to enter the field is triggered by a dynamic known as “public convenience and necessity.” This often operates in open-market, demand-responsive  modes like  taxi,  limousine  and non-emergency medical  transportation  (NEMT)  service  by a would-be  vehicle  owner’s submittal  of requests for  additional service,  or statements of demand. Destinations or facilities poorly served submit letters to the appropriate government agencies requesting more units of service because those in existence  – either because there are not enough of them or

because the reliability of existing services is poor and needs some stimulation from new competition  – are not meeting their or their clients’ needs. It is at this point of the process where corruption and ignorance so often enter the picture, distorting the balance between supply and demand, and translating into reliability, safety and liability issues.

The Uber phenomenon has generally  been welcomed  by the unwitting public,  particularly those digitally-inclined, since one can summon the nearest Uber vehicle via an “app” on one’s cell- phone – a particular advantage in those cities or boroughs, like Manhattan, which do not allow taxis to be dispatched. Consumers unaware of the deficiencies in the hiring, training and monitoring of Uber vehicles tend to welcome them as an often lower-cost alternative to traditional taxi services. Yet far more important than these problems is the dysfunctional impact of this barrage of unneeded vehicles on Uber’s competitors.

The most vivid example is clearly New York City, where the right to enter the taxi business had, until recently, cost each additional entrant roughly $1,000,000 per vehicle  – the amount charged to obtain what is referred to in New York City as a “taxi medallion.” But purchasing a medallion from the local government is not the only way to enter the market. The alternative is to simply buy a competitor’s medallion  – since doing so does not affect the volume of vehicles in the service area, or the balance between supply and demand. As such, buying a taxi medallion is  an investment  – and one whose purchasers expect to remain somewhat stable with a slow growth in value, with the City protecting these dynamics from abuse by simply preserving the medallion-based entry system.

For some reason that escapes me, Uber users do not have to purchase medallions to operate in Manhattan (where medallion cabs do), thanks’ to the ignorance, apathy or corruption of the City’s mayor or other officials. As a consequence, they have poured into Manhattan (yellow cabs cannot operate in the other boroughs, served instead by lime-green taxis not required to purchase medallions, while also not permitted to pick up passengers in Manhattan), thinning the density of traditional taxi service such that the value of a “medallion” has decreased, in fewer than six months, from roughly $1,000,000 to $700,000.

This decrease has, in effect, lowered the value of the slightly more than 13,000 “yellow cabs” deployed by approximately $40,000,000, a complete filching of their owners. Thus, as a liability matter, these taxicab owners have a “cause of action” against the City, and I am drooling to serve as their expert witness against the City  and its  agencies  that may have played  a role  in this  “open entry” process in the fishbowl-sized lawsuit I expect to eventually erupt.

But the inequity and waste from this phenomenon – ranging from lower income for drivers to a decline in air quality (as now-under-utilized vehicles deadhead throughout the City in search of passengers) – has widespread consequences in numerous other areas. Already, many taxicab drivers — who pay close to $200/shift for the right to lease a taxi, given the enormity of its owner’s cost to obtain a medallion to operate it – are abandoning this practice, and simply licensing their own personal vehicles  as Ubers – for practically  no cost – and pocketing  the money that formerly  went to the medallion owners. Otherwise, traditional taxi drivers already working six or six-and-a-half 12-hours shifts a week to eke out roughly $30,000 per year in gross income are beginning to starve to death.

Even apart from the equity issues, many of those driver-lessees who abandon the medallion taxis to deploy their own vehicles will increase the overall taxi fleet size, compounding the dysfunctional consequences further. These consequences will include increased traffic, a decline in air quality, and a shift among thousands of taxi drivers from the Lower Middle Class to the Poor. The overabundance of new taxis are likely to erupt into literal fistfights with traditional taxi drivers.

Density and Safety

As noted above, the liability consequences are almost certain to erupt  – hopefully with  the injunctive relief that would put an end to the problem almost immediately (i.e., the denial of Ubers permitted to operate within the service area). But unless and until this happens, the safety consequences are more elusive. Even now  – in dozens of years taking taxis throughout the country, beyond merely New York City  – I cannot recall a single incident where, upon entering a taxi, it did not zoom off before I could affix my seatbelt. Dangerous merging, weaving, speeding and constantly extreme acceleration, deceleration and braking – each movement decreasing the ride time by precious nanoseconds, which in thousands of episodes, translate into higher profits for the driver are the norm.

And the higher the cost of leasing the vehicle, the more frantic and risky these drivers must operate in order to earn a bare-bones living. If and when their percentage of deadhead time increases even more, one can only expect this behavior to become more hyperbolic and more dangerous. The vast majority of passengers who arrive at their destinations alive may achieve slight benefits from the faster service. But they will do so at significantly increased risk.

Implications for the Motorcoach Industry

Fortunately, the high cost of motorcoach vehicles, combined with the limited number of potential passengers and the sluggish growth that most companies experience, have suppressed the perception that the taxicab industry’s dynamics have similarly affected those of the motorcoach industry. However, this has been changing in recent years at an alarming rate that has gone unnoticed by regulatory agencies, since the entry of motorcoaches into a service area is not governed by any remote notion of public convenience and necessity  – largely because motorcoaches are an interstate phenomenon.

But the emergence of low-cost motorcoach service in recent years is a genuine, carbon copy of the Uber phenomenon, about which traditional motorcoach operators have been able to do nothing for years, particularly in the environment of deregulation since 1982. And, this phenomenon was further compounded by the motorcoach industry’s exemption from shift inversion limits when the Hours-of-Service requirements were amended more than a decade ago – an exemption that permitted the lowest-cost, lowest-quality and least-accountable operators to enter the business in competition with the majority of companies steeped in traditions ranging from top-of-the-line vehicles and well-trained drivers  to  indoor vehicle  storage, enlightened  customer service,  computerized  maintenance and skilled (and somewhat ample levels of) management.

We have seen the impacts of the shift inversion exemption in the form of an explosion of catastrophic motorcoach accidents, mostly by small charter operators with  limited choices for driver assignment and no realistic inclination to decline a trip, irrespective of its fatigue-related risks. But this problem has grown as the number of low-cost services have entered the market, thinning the effective density of potential passengers for those companies already in service  – and with no reasonable way to control or limit entry into the market. Similarly, at the vehicle level, we are witnessing a noticeable shift from “high-end,” integral motorcoach vehicles to body-on-chassis conversions, whose construc- tion does not offer the same level of safety as an integral vehicle of the same mass, and whose pneumatic suspension systems are largely “shoehorned” into vehicles whose truck chassis were designed to operate on leaf-spring suspension systems.

Opening One’s Eyes

The motorcoach industry need not be wary of the Uber phenomenon that is decimating many cities’ taxicab industries. We have been experiencing the very same dynamics for years now, while barely offering a whimper or a peep of resistance.

We are not addressing the consequences of these dynamics intruding into our industry: Lower- cost vehicles, the increasing number of vehicles at the expense of thinning the density of our overall fleets (much less after a decade that replaced most 40-foot motorcoaches with 45-foot models), and the impunity with which certain operators ignore the scientific realities of fatigue, and do so legally since they face no constraints over when they begin work from day-to-day (i.e., shift inversion)  – other than the fact that eight hours must pass from the end of one’s shift to the start of his or her subsequent shift – irrespective of whether any of it is spent sleeping.

One need only pay a snippet of attention to the dynamics occurring in the motorcoach industry. The Uber phenomenon is not a new trend to keep an eye on. It is already a phenomenon deeply- entrenched within the motorcoach industry. But we tend only to look at isolated fragments of it in seemingly different spheres and trends. But if one examines them collectively, it is clear that the future we fear has already been the present for years. We have not only failed to do anything about it. We have failed to even recognize the size and shape of the problem.

The opinions expressed in this article are that of the author and do not necessarily represent the opinions of NATIONAL  BUS TRADER, Inc. or its staff and management.

Publications: National Bus Trader.