So-called “ride-share” companies like Lyft, Sidecar, and uberX have been praised for their innovative services, and there’s no doubt that these Transportation Network Companies (TNCs) are in the midst of transforming the car for-hire industry. Competitive prices, convenient app-based booking and payment, and a superior user experience are quickly changing consumer expectations, forcing the old regulated taxi industry to evolve and/or die.
Meanwhile, consumers aren’t the only ones benefiting from the TNCs. While these companies’ unregulated (and illegal) rush into the market has disrupted the traditional taxi and for-hire industries, creating much hardship for many drivers, other drivers have availed themselves of the opportunity to free themselves from the taxi owners and the hefty leasing fees they impose. At the same time, a whole new class of part-time amateur drivers have entered the field, hoping to earn extra cash from their personal vehicles in their spare time.
But while the TNCs appear in the short term to have created more winners than losers, the question remains whether the long term impact will be as rosy as TNC boosters promise. Will consolidation amongst the TNCs—almost inevitable in an uncapped market—result in higher prices for consumers and lower margins for drivers? Have former taxi drivers, newly invested in driving for the likes of Uber, merely exchanged one master for another, but now absent the protections of the old regulatory system?
For while the TNCs’ technology may be innovative their corporate structure is not. These are top-down, venture-backed corporations whose primary legal obligation is to serve the interests of shareholders. If TNC executives decide to raise or lower prices, increase their fees, change their terms of service, or boot drivers out of the system for whatever reason, neither drivers nor customers have any say nor any recourse.
Which is why a truly innovative taxi and for-hire system would be one that removes capital from its dominant role within the industry by empowering participants to compete with each other within a cooperative network that no one individual or corporation can ever own. And no, this isn’t some socialist fantasy. Things like this actually exist. For example, the Internet.
We’re not even talking about developing a piece of software here. We’re talking about creating a standards organization that defines and publishes an Application Programming Interface (API) for connecting drivers with riders through a completely open network. Entrepreneurs would be free to create apps and or application services for booking and tracking vehicles, processing payments, providing insurance, rating drivers and riders, and any other function the API defines. And this is not about shutting out established TNCs like Lyft, Sidecar, and Uber—they would be free to interconnect their booking and payment networks as well.
In the same way that a VISA card issued by any bank may be used to purchase goods at any store using any merchant service provider, our open network would allow any rider to book any vehicle through any TNC via a single preferred app. Drivers could potentially log into and drive for any or all TNCs at the same time, forcing the TNCs to compete for drivers and riders in real time. And innovation would no longer be limited to what a handful of executives choose to implement; such an open network with low barriers to entry could unleash services and efficiencies that have yet to be imagined.
This sort of chaordic organization (a term coined by VISA founder Dee Hock) could provide the perfect alternative to the half-regulated/half-unregulated system we have today—an alternative that upgrades the organizational structure of our for-hire industry along with the technology and the service standards.
So how do we get there? It could be done through a not-for-profit. Or the city could appoint a citizen committee representing various interests and areas of expertise to draft the network standards and define the API. The city could also incentivize (or even require) taxi, for-hire, and TNCs operating within the city to connect to this open network once it is online. Certainly our struggling taxi industry has a reason to participate if it hopes to compete with its Wall Street backed rivals.
But the larger point is that there is a way to embrace the technological innovations the TNCs offer without ceding control of our taxi and for-hire industry to Silicon Valley startups and their venture capital backers. At least, it’s worth a try.