Peter Blake

Mile High Cab: You first must compete against bureaucracy and courts

Mile High Cab has spent four and a half years and over $200,000 just to get to the beginning.

It has had to fight a battle no one should have to fight in this country: Getting governmental permission to try and start a business.

At least that fight was successful — presuming the Public Utilities Commission eventually does what the Colorado Supreme Court told it to do Monday: Grant Mile High a “certificate of public convenience and necessity.”

The high court ruled unanimously that the PUC erred when it denied the would-be cab company the certificate, a decision that was subsequently affirmed in Denver district court.

icon_op_edThe PUC took its sweet time just saying no. Mile High filed its application to operate taxi service in metropolitan Denver in September 2008. A leisurely year later, after a 13-day hearing, an administrative law judge (ALJ) recommended that the PUC deny the application — even though he conceded that the company met the standards for operational and financial fitness.

The problem, said the ALJ, was that the 150 cabs Mile High wanted to put on the street would cause an “oversupply.”

And how would he know that? The existing cab companies told him so, presenting testimony that more cabs “could very well result in impaired services, higher rates and ultimately the type of destructive competition” the PUC is supposed to prevent.

It’s preposterous that the companies you want to compete with are allowed by law, even encouraged, to intervene in the case, providing “evidence” that they’re adequately handling demand and that your business isn’t needed.

“There’s no reasons for the PUC to be making this determination in the first place,” said the Institute for Justice’s Robert McNamara, one of Mile High’s attorneys. “We don’t require a a government agency to decide whether a city has too many restaurants.”

The PUC’s role in transportation is founded on upside-down economics, where competition leads to worse service and higher prices instead of the reverse.

The case was kicked around for several more years at the PUC and in district court. The supreme court hear oral arguments last November.

In its Monday ruling the court noted that a state law passed in 2008 requires the PUC to find by “a preponderance of the evidence” that granting Mile High a certificate would be “detrimental to the public interest.” Instead the PUC found nothing more than “a substantial possibility” that competition would be harmful.

Believe it or not, the law used to be even worse. Until 1994, the taxi business was a “regulated monopoly,” meaning an applicant could get a certificate only if it could prove to the PUC that existing service was inadequate.

Then the legislature established the doctrine of “regulated competition,” which allowed companies to enter the market unless the result would be an “oversupply” of cabs. Existing companies always argued there would be, and the burden of proof was still on the applicant.

Finally, in 2008, the legislature shifted the burden to the PUC. It passed a law saying there was a”rebuttable presumption of public need” for a new service, provided it passed financial and operational muster. Opponents would have to demonstrate the newcomers would be “detrimental to the public interest.”

In the Mile High case, they couldn’t. Now the company can finally start sending time and money on equipment instead of lawyers. By the way, it probably couldn’t have afforded the appeal to the high court had not the Institute for Justice, a national public-interest law firm, volunteered to take on the case for free. The institute, which concentrates on fighting over-regulation and protectionism by state governments, also helped Freedom Cabs get a certificate in 1993.

Mile High’s victory doesn’t mean it will start operations soon, according to company treasurer Mekonnen Gizaw. “We’re not ready,” he conceded. “It’s not easy after four years.” Of the 150 drivers who want to join Mile High, many are immigrants from east Africa who are already driving for Yellow and Metro, two of the four companies allowed to operate throughout the metro area.

The decision won’t necessarily make it easier for future applicants to get operating certificates. Mile High’s lawyers are afraid the PUC and existing taxi companies will peruse the opinion for the “magic words” they can use next time to reliably reject future applicants.

The problem is that the PUC and the original cab companies see their role as protectors of the status quo, not promoters of competition. Witness how they are currently trying to revamp PUC rules so that Uber Technologies, which provides an app linking existing limousine companies with those seeking rides downtown, will have to get a certificate as a taxi company — even though it operates no cars.

“It’s difficult and expensive” for an entrepreneur to get into the taxi business in Denver, said Tom Russell, Mile High’s local attorney. He is spending this school year lecturing at the National University of Ireland in Maynooth, County Kildare. He noted that the nearby town of Celbridge, population 20,000, has five taxi companies while the Denver area, with 2.5 million people, has only four.

Russell has testified at the legislature, trying to get taxi laws loosened. “I’m a left Democrat,” he told me by phone this week, “but Colorado Republicans have better ideas about how to free entrepreneurs to create jobs than Democrats.”

Said McNamara: “The legislature should take steps to eliminate this entire farcical process.” If the PUC should be involved at all, it should determine nothing more than the applicant is financially sound, then allow it to proceed.

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