When it comes to city regulation, it’s only fair that all private transportation operations play by a similar set of rules. But it makes little sense for Honolulu to regulate the old and new guard of for-hire cars with outdated restrictions.
Last week, during a City Council Budget Committee hearing on Bill 35, a proposal that aims to restrict taxicabs and ride-hailing services on issues like surge-pricing, baggage fees, insurance and security, the issue of so-called price variation practice was tagged as the key reason committee members advanced the bill.
Ride-hailing companies such as Uber and Lyft adjust prices based on supply-and-demand innovations tied to smart-phone technology. High demand, such as that touched off when nightclubs and bars close, can prompt a surge in pricing. That, in turn, prompts more new-guard freelance drivers to hit the streets, making more cars available, and cueing a return to a standard fare.
The standard fare is calculation of base fare, time rate and distance rate. When prices are surging, a multiplier is folded in. For example, you might see surge at 1.8x. So, a fare that is usually $10 would be $18. In any case, the exact fare is set before a passenger buckles up and a trip gets underway. This sort of practice is seemingly more transparent than the guesswork that comes with climbing into a cab without knowing when the meter will stop ticking.
During the hearing, taxi operators pointed to a recent incident in which surge-pricing was employed during pickups for military members coming off the USS Theodore Roosevelt and the USS Bonhomme Richard — with military members reportedly paying as much as $221 to get from Pearl Harbor to Waikiki.
City Councilwoman Kymberly Pine decried it as a case of “predatory pricing,” underscoring a need to clamp down on the largely unregulated ride-hailing business model. Efforts to tweak transportation regulations to cover ride-hailing companies have intensified in the past few years, but the city has yet to provide a set of new regs that satisfies all parties.
Pine urged a boycott — until ride-hailing outfits fall in line with restrictions that include a cap on surge-pricing, anyway. That response seems a bit overdramatic. In the interest of a workable and evolving marketplace for transportation operators, a cap should be limited to emergencies in which public safety is at issue. For example, in 2016, a surge-pricing cap was in place during a New York City snow storm.
Overall, though, supply-and-demand pricing is not unique to ground transportation; think about peak-time pricing for airlines or hotels, for example. Further, the military members described in the cited incident were not without options. A group of riders could have divvied a fare. Or riders could have opted for a city-regulated cab. While the old-guard is apparently less agile in ability to quickly ramp up a supply of drivers, their meter rates do have caps. In this case, taxi operators claimed their drivers at the scene were limited to charging a maximum meter rate that was far below the ride-hailing surge.
So, in the absence of an emergency, which matters more: cost or convenience? New York City is now weighing that question with the crafting of a pilot program that allows some city-regulated cab drivers to use surge-pricing and to offer up-front cost estimates, like their counterparts Uber and Lyft already can. The program was prodded by the growing popularity of ride-hailing, which has left the city’s yellow cab industry teetering on the brink of insolvency.
Honolulu, too, should consider phasing out constraints on traditional cab services. If new regs are needed for both taxis and app-based services, they should focus on public safety matters — ensuring that drivers have clean records in areas of moving violations or serious traffic infractions as well as criminal convictions — and environmental sustainability.
The goal should be to create more viable options for riders. Any reforms should build on what’s thriving — and aim to avoid regulating innovators out of the marketplace.
