Denver’s Yellow and Metro cabs want to merge? Great. Let ‘em. It’s a free country and if you want to merge, merge. If the new quasi-monopoly makes you too fat and happy and overpriced, the competition will eat you alive.
Oh, it’s not a free country? The competition needs permission from your wholly owned subsidiary, the Public Utilities Commission, to expand its taxi fleet — or even to go into business?
Then maybe the merger is not such a good idea. Indeed it exemplifies everything that’s wrong with regulated transportation. The marketplace, imperfect as it is, would still work better than state regulation, which always tends to protect incumbents against competition.
Metro Taxi has 492 permits and Yellow Cab 300, making them the two biggest firms in the metro area. They are followed by Freedom Cab, with 250 and Union Taxi, with 220. Another company, Mile High Cab, won a Colorado Supreme Court decision in April allowing it to go into business with 150 cabs, but its 4 1/2-year wait to get a certificate has caused havoc within the organization and some of the founders are fighting each other in court.
In addition, says Robert McNamara of the Institute for Justice, the PUC is “stalling” and not heeding the high court’s mandate to issue a certificate. IJ helped Mile High win its case at the high court.
Now about those cab numbers: “There’s a false precision to that,” maintains transportation lawyer Ray Gifford, a former chairman of the PUC. “The truth is, no one knows how many cabs are on the street at any time.”
But if it weren’t for limits, no matter how erratically enforced, drivers might flock to the company that charges them the least to use cabs. The monthly rental fees — covering insurance, dispatch, radios etc. — vary widely and are in some dispute, but apparently Yellow and Metro charge from two to four times as much as Union, which is a co-op.
“The whole cab system is incoherent,” said Gifford. “There is a statute that prohibits the PUC from regulating the lease rates.”
He estimated Union’s monthly rental at $900, compared to Yellow and Metro’s $2,400 or so. But it’s even worse than that, said Jamal Said, president of Union. He claimed his own company charges $913 a month and the Big Two charge $800 a week, or $3,200 a month.
Mekonnen Gizaw of Mile High claimed Union charges closer to $1,600 a month but says that’s still only about half of Metro’s and Yellow’s rates.
Whatever the figures, the limits on fleet size tend to keep the lease rates higher than they need to be. If any company could put out as many cabs as they wanted, competition would force lease rates down as drivers flocked to where they could get the best deal.
Gifford is not involved in the proposed merger — at least yet. But he seems to wish he were. “I’d love to make mischief in it,” he said.
And how would he do that? If regulated companies want to merge, he said, you’d could play “a traditional regulation game with them.” If they claim that combining would save them, say, $10 million in management costs and other efficiencies, “we say we want $5 million for ratepayers.”
That would require either a drop in metered rates or PUC control over lease charges, neither of which the law now authorizes.
There hasn’t been a merger in about a dozen years. The last one involved Metro taking over a failing Zone Cab Co.
The relationship between the cab companies and the PUC might best be described as a sort of “Stockholm Syndrome.” The “hostage” companies seem to fall in love with their “captors,” the regulators. And vice versa.
Whenever a would-be taxi company applies for an operating certificate, existing cab companies are invited to protest, and they invariably do. They claim the public’s needs are already being met and there is no “need” for a new company.
Historically applicants have had to prove a “need” for their services before going into business, a requirement no other would-be entrepreneur has to show to government. The burden of proof has been shifted to the protesters, but the result seems to be the same. The PUC sides with the established firms.
Yet while existing cab companies protest new competitors, they are not shy about trying to expand their own fleets. This happened as recently as 2011. Yellow proclaimed there was no need for Mile High Cab’s entry, while simultaneously seeking to expand its own fleet by 150 cabs. Happily, they didn’t get away with it.
The PUC should turn down Yellow’s purchase of Metro as long as the current laws are on the books. But that won’t solve the basic problem. What needs to happen next is for the legislature to free up entry into the taxi business entirely, just as it has freed up limousines and trucking. All the PUC should be entitled to do is regulate safety and insurance.
When that happens, Yellow and Metro should be able to merge if they want to, without the PUC having any say.
Longtime Rocky Mountain News political columnist Peter Blake now writes Thursdays for CompleteColorado.com. Contact him at firstname.lastname@example.org You may re-publish his work at no charge and without further permission; please give full credit to Peter Blake and www.CompleteColorado.com