Changing the Ottawa Taxi Monopoly

Posted on 27. Mar, 2015 by in Transportation

The Taxi system in many large cities in North America is broken. Unfortunately Ottawa is among these. Through the historical over-reliance on regulation as means to create a safe, quality, and consistent experience, Ottawa has managed to create the very climate they set out to avoid.

Only with the recent entrance of Uber’s taxi service into the Ottawa market has any meaningful debate about the quality, price, and structure of Ottawa’s sub-par taxi system been highlighted.

The problem with Ottawa taxi system starts with the little known fact that a company called Coventry Connections owns all of the major taxi fleets in Ottawa. This illusion of a collaborative effort in Ottawa to stifle competition in order to keep prices high, profits up, and the quality of service low.

The second major problem lies in the structure of the taxi licensing system in Ottawa. There is a fixed number of taxi licenses that have been issues by the City of Ottawa. These licenses do not expire and can be resold by the owner. Taxi license can fetch over $200k due to demand of taxi licenses far surpassing their availability. This high cost creates a huge barrier to entry for potential taxi drivers. With these high prices large companies like Coventry Connections are able to buy up the majority of the licences.

Beyond the more fundamental concern about whether a city should have the authority to be able to tell me whether of not I can use my car to offer people paid rides comes the more realistic question of how to reform the current structure of taxi licencing in Ottawa.

The City of Ottawa is in dire need of a complete restructuring the taxi system to make it open, more accessible, and more competitive.

Firstly, the city needs to move to a yearly, or bi-yearly, licensing scheme similar to that of regular license plates. By forcing taxi drivers to renew their license on a frequent basis the city will be able to constantly evaluate individual drivers, and the functioning of the taxi system as a whole. Any fundamental issues with the structure of the taxi system can be fixed through the licence renewal process. These renewable taxi licenses will also be non-transferable to help address the current issue of licences being hoarded.

There should be no limit on the number of taxi licenses that the city will issue. This will immediately address the current monopoly and curb the hoarding of licences that is so prevalent.

The cost of a taxi licence will be set so as to cover the administrative and regulatory compliance costs associated with the taxi program.

By not limiting the number of licenses issued, and by making it affordable to register as a taxi, anyone will be able to do so. Many people will rush to register for licenses, operate their taxis, and charge what they want for their service. The market will then decide what the viable number of taxis is, a price that the market has determined passengers are willing to pay, and where the drivers feel they are earning enough to stay in business.

The pricing of taxis in Ottawa is also a major concern. Should the open market establish acceptable fare rates then there should be no need to establish any form of price ceilings. If the market fails to foster a more competitive pricing environment then the city would need to implement a set pricing structure. In its simplest form this could be calculated using the projected cost of running a taxi/km and then allowing for a certain mark-up.

All of these changes to the way taxis are licences will in no way detract from security and transparency that is required and demanded. Taxis will still be required to include approved fare measuring equipment, cameras, GPS location, and undergo routine maintenance. Drivers would have to complete routine driving competency tests and pass thorough background checks. The new taxi system will be just as safe, if not safer, compared to the current system as the passengers would have actual choice over which cab they feel safer riding in.

This new taxi system will allow the market to safely expand and explore new pricing and business structures which will help the city break free from the monopolistic taxi environment that has for so long held ransom the passengers of Ottawa.

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