Ghaleb Ibrahim just wanted to own and drive his own taxi cab. He had the means to operate a safe and insured car, but a law passed by Milwaukee in 1991 capped the number of taxis allowed on the streets to just 321, or 1 for every 1,850 residents. (It is one of the worst ratios in the country; Washington, D.C., for example, has 1 cab for every 90 residents.) Ibrahim had two choices: He could try to purchase a permit, which would cost him nearly $150,000, or he could rent a cab for a hefty monthly fee. Instead, Ibrahim decided to sue the city, calling the cap an impediment to his right to earn a living.
In May, Judge Jane Carroll of the Milwaukee County Circuit Court issued an injunction preventing Milwaukee officials from denying taxicab permits to qualified drivers. Arif Panju, an attorney with the Institute for Justice (IJ), which helped Ibrahim and other cab drivers with their legal challenge, said cities like Milwaukee have long protected cab company monopolies at the expense of entrepreneurs. One firm, for instance, owns half the cabs in Milwaukee. "These regulations," says Panju, "hold back competition."
Milwaukee is not unique: A number of major cities recently have seen their taxi services roiled by charges of monopolistic practices. In Atlanta, 300 cabbies have filed a federal lawsuit against the city, claiming that companies have “fiefdom-like control” of the cab permitting system. An ordinance passed in 1995 caps the number of taxi permits issued at 1,600. As a result, cabbies have to pay a sizeable weekly fee to lease a permit. Similar demands for reforming outdated taxi permitting and medallion systems have hit Boston, New York, New Orleans and San Francisco.
Meanwhile, mobile technology has allowed new firms with names like Uber, Lyft and Sidecar, to leapfrog over the traditional taxi system and let anyone with a smartphone app schedule a ride with drivers who have spare room and want to make some extra money. These ride-sharing services have sparked protests in Los Angeles and led other cities to crack down on them, claiming the vehicles are unlicensed and illegally operating a "for hire" service. New York has set up sting operations to stop people from using them. In Austin, Texas, the city council has recommended that ride-sharing services using mobile technologies be "required to work within the current City Code." Seattle is evaluating the services, while local cab companies ask for "protection" from what would be more competition.
At the same time, after decades of decline, cities like Boston, San Francisco and Washington, D.C., are seeing their populations grow again. Residents of these cities want more taxi service. Yet, with the exception of D.C., the number of cabs in many of these cities has been capped at a rate that was set years ago. Cities regulate cabs to ensure vehicles are safe and drivers are experienced, but of late these regulations have created obstacles for those who want to enter the business, allowing control of the cab business to stay in the hands of a few big companies who have little interest in more competition.
These ride-sharing services are beginning to disrupt the old business model that has kept many independent cab drivers from working. And so far, cities have resisted the new services. That's probably not a wise decision. "Cities need to embrace the technology," says IJ's Panju. "It will create jobs and opportunities. Cities have to stop practices that protect a few large monopolies."
Just as technology has changed how we get our news, listen to music, read books and watch TV and movies, it will change how we hail a cab. Cab companies may not like what's happening, but it may be better to embrace change rather than resist it.