Brown’s taxi reform veto protects Uber’s competitive advantage

by Steve Blum • , , ,

Disruption.

Cities and other local agencies will retain their current authority to regulate the taxi business. Governor Jerry Brown vetoed assembly bill 650 today. The measure, by assemblyman Evan Low (D – Silicon Valley), would have moved taxi regulation to an undefined state agency. Brown thought that was going too far:

This bill removes significant regulation of taxicabs by cities and counties and declares the intent of the Legislature to transfer the regulation of taxicabs to the state.

This bill fundamentally alters the long-standing regulation of taxicabs by cities and counties and makes the determination that this responsibility should be shifted to the state. I do not believe that such a massive change is justified.

The problem with Brown’s analysis is that a massive change has already happened. Transportation network companies – Uber and Lyft, in other words – are regulated at the state level and have done massive damage to the traditional taxi business model. Which depends to a large extent on high prices and low service expectations that are made possible by the artificial limits on taxis that are 1. imposed by local governments and 2. vigorously supported by operators and unions. But once market-driven competition appeared, that cosy relationship turned into a death embrace, making it impossible for the taxi industry to respond. Low’s bill would have gone a long way toward levelling the playing field.

AB 650 might have had a better shot if a tentative agreement to change the way transportation companies of all kinds are regulated in California hadn’t collapsed in the final hours of the legislative session. It was part of much larger package of reforms aimed at overhauling the way the California Public Utilities Commission regulates utility companies. Two bills that survived the collapse – senate bills 215 and 512 – are still under consideration by Brown. He has until the end of the day on Friday to make up his mind.