Do Canada’s taxi drivers have a place in transportation’s changing future?

Locked inside a nondescript filing cabinet at one of Toronto’s municipal buildings is about $13-million worth of taxi plates their owners have allowed to go dormant.

It’s called “putting the plate on the shelf,” something drivers have traditionally done to save money on insurance when they fall ill, go on vacation or are scrimping for a new vehicle. But it has become an increasingly routine tactic among cabbies who have done the math and concluded they just can’t earn enough to make driving a taxi worthwhile after covering day-to-day expenses.

Mubashar Ahmad’s plate could soon be among them. The 62-year-old is still making a living but says he continues to drive only because he needs to pay off his vehicle, a debt being whittled away at the rate of $600 a month.

“I financed it – I didn’t have money to buy it,” said Mr. Ahmad, who started driving a taxi a few years after arriving from Pakistan in 1990 and bought his plate in 2014. “When the vehicle is paid I’ll throw the plate at them,” he said angrily about the city’s regulators, his frustration with the business becoming evident.

The city’s storage cabinet now has about 300 plates lined up in rows. They’re not abandoned and, so far this year, have been left dormant an average of 58 days before being retrieved. At the current rate, almost 1,000 will rotate through this cabinet over the course of the year, a 150-per-cent jump over the annual average of the decade prior.

It’s one more sign of a taxi industry in crisis around the world, as a business model that operated under a regulatory umbrella that limited competition was smashed open by Uber, Lyft and other interlopers.

The drivers in Toronto’s taxi industry hold out hope that regulators will agree that these ride-hailing companies need to be reined in to create a more level playing field for everyone. They worry about paying their bills, amid sharply reduced revenues, and about the plunging value of a standard taxi plate, which city staff say is down almost 70 per cent in a decade.

Transportation network companies (TNCs), the industry term for ride-hailing firms such as Uber and Lyft, tend to have very happy customers. But governments in a number of jurisdictions are struggling to manage the negative spillover effects associated with these companies and are resorting to a range of tactics.

Shaken by a series of cabbie suicides and alarmed by worsening traffic congestion, this summer New York became the first major U.S. city to restrict the number of licences it issues for TNCs, capping it at 80,000 for a year. In Quebec, the government had plans to compensate taxi owners who have lost money on the value of their plate. In Britain, London tried to push out Uber last year by refusing to renew its licence for not being “fit and proper,” only to have a judge grant the firm a probationary licence this summer. In Toronto, the city is engaged in a council-mandated review of the bylaw that opened the door to ride-hailing companies, with a report due next year.

Tracey Cook, the executive director of municipal licensing and standards for the city of Toronto, said that just about everything is on the table, including a possible cap on ride-hailing licences. But she warned that this will be a long process.

“Do I think at the end of this review that we’re going to have 100 per cent of the work done? Highly unlikely,” she said in a recent interview. “I think this is something that … is going to continue to evolve, and we are going to have to continue to evolve our regulation accordingly, right? There is a lot of talk about mobility as a service and the next evolution of mobility and how people move around and options that people want, so I think it’s just one of those areas we’re going to be continuing to look at.”

There’s an urgency to doing so properly. The power of ride-hailing companies is expected to grow as they race to develop autonomous-vehicle technology, diversify into bicycle- and scooter-share services and look for ways to work with urban transit systems. In some small markets, they may play the role of principal transit provider. And the companies certainly make no apologies for the relentless nature of their business model.

“I believe that this is a service that’s made cities a better place, and sometimes the birth of new services does hurt people, does hurt individuals, but it doesn’t mean that it’s not moving society forward,” Uber chief executive Dara Khosrowshahi told the editorial board of The Globe and Mail in September.

“The question is: Is society here to serve taxis or are taxis here to serve society?”

Taped to the back window of an independent taxi regularly parked on a residential street in downtown Toronto was an uncompromising message: “Uber is NOT here to stay!” The cabbie kept that sign there for years after the ride-hailing company had pushed its way into Toronto, stubbornly defying the reality being created around him.

Among many cabbies, though, there’s a grudging acceptance that TNCs are not going anywhere. But they remain unhappy, particularly those ensnared by evolving rules. Many switched to Toronto Taxicab Licence (TTL), wheelchair-accessible vehicles because the city told them the whole fleet would go that way, only to have Uber appear.

“I followed the rule. I converted my car to TTL, to Wheel-Trans, and then two months after they changed the rules,” said Nadussie Araya, 50.

He has been driving for 11 years and believes people are reluctant to flag his big, wheelchair-accessible vehicle, pushing his earnings down 60 per cent in the past few years. Still, he has to keep driving to make his vehicle payments and it keeps him too busy to take a side job.

“I’m working seven days a week and 14 hours, 12 hours a day,” Mr. Araya said. “We can’t make money. Eventually we’ll give up.”

Selling a plate and getting out of the business was once a more attractive option. There are still sales between private individuals, but the bottom has fallen out of the market. According to city of Toronto data, the average price for a standard plate this year is about $43,000, down from an average high of $228,000 in 2012.

Abdul Marun Ahadi bought his plate in 2011, near the top of the market in Toronto. City figures – based on self-reporting of private sales – show that the average price for a standard plate that year was about $210,000. But that average included some that changed hands for nominal amounts, obscuring the real value of the asset.

That was also the year Uber launched. At the time, though, the firm was barely on the radar; it operated solely in San Francisco, used only luxury vehicles and cost more than a taxi. The global juggernaut it would become was years away.

Mr. Ahadi paid $305,000 for his plate – the highest price that year, though the following year a plate sold for $360,000. He covered most of the cost through a line of credit, borrowed $50,000 from a friend and paid a small part from his savings. He has paid off about $80,000 and notes that he has saved the more than $20,000 a year he was paying to lease a plate. But his investment is worth a fraction of the original cost.

Such losses are at the heart of a class-action lawsuit filed by three drivers against the city of Toronto.

“The city knew that plate owners were relying on the value of the taxi plates and the income derived therefrom for their financial well-being, such as into their retirements (the city itself made those promises by calling the taxi plates ‘pensions’),” the plaintiffs allege in their statement of claim, which has not been tested in court.

“Taxi plate owners would have never invested in the taxicab industry absent the above circumstances.”

The suit, filed in July in the Ontario Superior Court of Justice, seeks $1.7-billion for investment and income losses. The lawyer listed on the suit could not be reached, but a spokesman for the plaintiffs said it has not been certified.

The city has said it will defend. But there is no indication that either Toronto or the province will follow the example of Quebec, which announced this summer that people who had lost money on their taxi plate would be eligible for compensation payments of as much as $46,700.

A galling twist for many taxi drivers is that, in addition to plunging plate values and the fact the pool of customers is being spread among more competitors, the job is also getting harder because of greater congestion.

Toronto has issued almost 70,000 licences for drivers of companies such as Uber or Lyft.

“The public was clear that they were not being properly served, or not being served in the way that they wanted, by the taxi industry and they wanted choice,” said Ms. Cook, the city’s licensing chief. “[Uber] presented a choice, and they [the public] flocked to it. It was like trying to stop a tidal wave with a spoon.”

It’s never clear, though, how many TNC drivers are on the road at any given time or where and when they are most heavily concentrated, making their congestion impact hard to assess. One aspect of the review under way in Toronto is to consider the effect of ride-hailing services on traffic, and research done elsewhere suggests they are making it worse.

In a report out this summer, U.S. consultant Bruce Schaller noted that TNCs transported about 50 million passengers a week in the United States last year, up 37 per cent from the year before. And he found that these trips are adding to congestion rather than reducing it.

“About 60 per cent of TNC users in large, dense cities would have taken public transportation, walked, biked or not made the trip if TNCs had not been available for the trip,” he wrote.

It was partly in response to this trend that New York introduced its temporary cap on ride-hailing licences this year. Department of Transportation commissioner Polly Trottenberg said the move was the result of the human toll on drivers, made starkly clear by a number of suicides, but also the effect ride-hailing was having on traffic and transit.

“It has provided a lot of convenience, there’s no question … but there were some real what we call externalities that were becoming apparent,” Ms. Trottenberg said in an interview during a visit to Toronto in September.

“Some parts of the U.S., okay, Uber and Lyft are potentially looked at as ways to reduce vehicle traffic. But in New York, unfortunately, in a lot cases they’ve taken people off of transit [and added traffic]. And that is – that’s for us just an unsustainable trend.”

In Vancouver, where the provincial government is grappling with how to adapt taxi regulations to allow for the introduction of ride-hailing, there’s much concern about the possible effect on congestion.

“Can you imagine putting an extra thousand cars in downtown Vancouver, with all the bike lanes? You wouldn’t move,” said Vancouver Taxi Association spokeswoman Carolyn Bauer, who is also the general manager of Yellow Cab. “It’s too small – it’s a big little city.”

Although Uber is not currently operating in British Columbia, its appearance elsewhere has cast a shadow over the Vancouver area. The value of a share, which gives someone the right to drive a taxi, has dropped dramatically. Sales of shares are not officially tracked, but Mohan Singh Kang, president of the B.C. Taxi Association, says the decline is half or more, while Ms. Bauer says it’s hard to know the value of shares, which used to sell for hundreds of thousands of dollars, because almost none have changed hands. And there have been other problems.

“The spectre of Uber a few years ago actually, you know, the drivers started looking at different professions,” Ms. Bauer said. “Some of them went into driving buses.”

As the industry waits for B.C. to introduce new taxi regulations, a study commissioned by the government offers a clue to what the future may hold. The report, from Hara Associates, offers ideas that would buttress the industry. Among them: recognizing the need for more taxis, financial assistance for purchasing wheelchair-accessible vehicles and price flexibility in off-peak times.

“The approach of most jurisdictions has been to leave taxi regulation unchanged, and give the whole of the unexploited market to [ride-hailing firms],” the report notes. “This leaves the taxi industry in the worst of both worlds – a decline in the value of their businesses while regulatory restrictions continue to limit the ability to compete with the new alternative services.”

British Columbia’s go-slow approach has managed to keep ride-hailing at bay so far. But other jurisdictions haven’t had the same success, as the companies pushed in without regulatory approval, establishing a presence and creating conflicts and issues that politicians then struggled to manage.

Now, as ride-hailing companies go from strength to strength – Uber is expected to go public this year and was valued in August at US$72-billion – the viability of the taxi industry is in doubt in many cities.

Asked if his company owes a debt, either moral or financial, in return for the damage wrought by Uber, Mr. Khosrowshahi pivoted to the benefits the firm has brought to customers.

“I think that the regulations that allow competition have created a service that, you know, we believe is far superior,” he said. “You know, societies move and industries are made and lost and it’s part of the cycle of things. And I do think it’s up to the government to make sure that people who get hurt have the chance to come back.”

Kristine Hubbard, the operations manager at Beck Taxi and the third generation of her family in the business, says she’s angry and upset over what has happened in Toronto and is no longer sure the traditional industry model will make it. But she noted that her firm, the biggest brokerage in Toronto, is still busy. And by acting as a matching service between customer and driver and licensing the Beck brand to drivers, she argues, their approach is not dissimilar to that of Uber.

“Those comments – oh, we’re all going to die out here and the taxi industry is bleeding – I thought: Why are they saying that? [Uber is] a taxi company. This is a taxi service. Why are you acting like we can’t compete with them? And so that’s what we’ve decided to do. You know, you can give up or you can compete. You can complain or you can compete.”