Toronto’s Beck Taxi shows industry how to take on Uber

Protesting. Lobbying. Whining. Worldwide, the taxi industry has not come off especially well in their fight against ride sharing service Uber.

In Edmonton, they arranged a convoy of more than 100 cabs. Public safety is in danger, they argued.

In Paris, they staged an “escargot protest”. Unfair competition, they claimed.

In Barcelona, they threatened violence.

What the taxi industry had been missing, of course, was that Uber’s interface is simply not that hard to co-opt.

“Ultimately, whether governments preserve the rights of the wealthy to control taxi licenses, the great advantage of Uber has been superior customer service and offering that instead of the traditional taxi model will re-level the playing field, said former analyst Brian Piccioni in these pages. “This is also why Uber is just a car service, and not the stupidly overvalued “tech” company people seem to think it is.”

Now, a Toronto-based taxi company is finally figuring out that what their customers want is a cab company that feels like Uber.

Beck Taxi, says one operator, has been testing an app that will show passengers where their cab is on a map.

“It’s kinda like (Uber), but more legal,” said fleet operator Sam Moini, who operates the licenses for 30 cabs.

The Toronto Star reports that Beck, which operates a fleet of with a fleet of 1,850 vehicles, has confirmed the app does indeed exist, but declined the opportunity to provide more detail.

This, says Piccioni, is the proper market response to a disruptor.

“Instead of the widely reported histrionics designed to maintain the archaic taxi system, offer consumers a reliable and predictable alternative,” he says.

If taxi companies seem overwhelmed by the challenge from Uber it’s because the industry has operated the same way for more than a half century, with a dispatcher coordinating a fleet of drivers from a smoky bullpen.

But the change that the industry resisted for so long is now coming all at once.

“The pace of technological change hitting the taxi industry is absolutely astounding,” John Duffy, publisher of Taxi News told Torontoist recently. “For a long time, taxi companies have been using a very outdated 1950s business model, and to a certain extent have been forced, kicking and screaming, to upgrade the systems because of the new competition.”

The dispatch system itself is being phased out in favour of GPS enabled tablets.

Tablets and apps are the visible part of the iceberg for legacy taxi operators. What lies beneath the surface impairs their ability to compete at a more fundamental level.

What’s really fueling the anger of taxi operators? It’s the potential for a correction in the value of taxi medallions, licenses to operate a cab in what is often an industry fiercely protected by municipal quotas.

These licenses to operate a cab fetch upwards of $700,000 in Boston and more than a million dollars in New York City. The value of medallions has more than doubled since 2009 and has outperformed the S&P 500 in that period. That’s in a bull market, too.

All this protection has proven to be bad for consumers.

In Vancouver, where the B.C. Passenger Transportation Board has not issued a new taxi license for 25 years, the cost of a license has soared to more than $800,000. This means a shortage of cabs and an inflated price. Vancouver passengers pay more for a cab than in Toronto or Montreal and 73% more for a five kilometre ride than passengers in Washington, D.C.

Hail a a cab and you are hailing a rolling caravan of fixed costs. Tap open your Uber app and a driver will arrive without the same burden. It’s the reason Uber’s pricing beats a taxi almost across the board, and it’s the real reason taxis are protesting Uber in cities across the world right now. Ultimately, Uber and ride sharing services like it will drive the cost of taxi medallions down to a point where the industry can compete, price wise. Until then, well, imitation is the sincerest form of flattery.