(CN) — Like most cities, Los Angeles has a strict cap on the number of taxicabs that are allowed to operate. Since 1990, that cap has been set at 2,364 — this for a city with a population of just under 4 million. That imposed scarcity led to high prices, but it also opened the door for ride-hail services like Uber and Lyft to establish themselves as cheap, convenient alternatives.
Now, LA is poised to give those regulations a major overhaul.
“We basically have rewritten the taxicab rule book,” said Jarvis Murray, the for-hire administrator at LA's Department of Transportation, who oversees the city’s taxi fleet as well as its private ambulances and electric scooters. “In Los Angeles, we’ve always had a closed market for taxis. Now, we’re gonna open up the market.”
The new regulations, more than a year in the making, were given tentative approval by the city’s Taxi Commission on Thursday. The rules will be published next week, and will be finalized by the commission in a month or two. Some of the rules, like the lifting of the taxi cap, will need to be approved by City Council before they take effect.
Unlike New York, which sells taxi medallions, which can be bought and sold by drivers, LA operates a taxi franchise system. It has licensed nine different companies to operate cabs. Each one has a limit on how many cabs it can have in its fleet, and each company must paint its cars a particular color.
Once the new regulations go into effect, new companies will be able to apply for permits to operate a fleet of taxicabs. Each company will have to maintain a fleet of at least 100 cars. And companies will be able to paint their cars whatever color they like, saving them money.
“That’s something the industry was really clamoring for,” said Murray.
Perhaps the biggest change, at least in the short term, will be that taxi drivers will have to give customers the price of the ride up front, before the ride begins. This is a main feature of ride-hailing apps, and gives customers the ability to compare prices before hailing a car.
“You get in the vehicle, and the driver will tell you the price,” said Murray. “As opposed to now, where you watch the meter. You’re always worried the driver is going to take the long way.” The new rules, he said, will “incentivize the cab driver to finish your trip as soon as possible.”
The new rules will also allow drivers to drive for more than one company, as they do for ride-hailing apps. And the city will work with third-party apps to allow them to access the city’s entire fleet of tax cabs, allowing customers to easily hail a cab via smartphones, in much the same way they would call for an Uber or a Lyft.
Uber began operating in Los Angeles in 2012. Since then, taxicab business is down 75%, according to the LA Department of Transportation. Unlike in other cities, riders are not allowed to hail cabs on the street in Los Angeles. Prior to apps, the only way to call a cab was to literally call one on the telephone.
Customers found found Uber and Lyft far more convenient and far cheaper, too, since ride-hailing apps operated independently of the city’s taxicab app. The two startups became locked in a price war, each one burning astonishing amounts of cash to subsidize rides, artificially lowering prices. Taxicabs couldn’t compete.
But during the pandemic, ride-hailing apps have suffered a reversal. Would-be drivers are more reluctant than ever to work for Uber and Lyft, thanks in part to the fear of Covid but also to the rise in wages in other sectors of the economy. As a result of the driver scarcity, the price of riding an Uber or Lyft has never been higher, and customers face much longer wait times for a ride. That presents an opportunity for the taxi industry to claw its way back into the habits of customers.
“Ultimately, what I think customers would like is reliable service,” said Anne Brown, an assistant professor of community and regional planning at the University of Oregon. “It doesn’t matter what the transportation is, they want reliability and a short wait time. Taxis don’t often provide that.”
One reason for that, she said, might be the relative scarcity of cabs in Los Angeles. But it will also be important to get the technology right, something ride-hailing apps have excelled at.
“It depends on how many more taxis there are, but also on the ability to hail them,” said Brown.
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