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Ottawa is proposing to deregulate the existing cab industry and start fresh with two distinct categories that will be subject to minimum standards related to vehicle safety and insurance.Reuters

The City of Ottawa is embracing Uber and other ride-sharing services, proposing a major reform that is already infuriating taxi drivers who fear the value of their city-issued permits will plummet.

In a move that will be closely watched by cities across the country and internationally, Canada's capital city is proposing to deregulate the existing cab industry and start fresh with two distinct categories that will be subject to minimum standards related to vehicle safety and insurance.

Existing licensed cabs will continue to have exclusive rights to pick up passengers who hail a ride on the street or at taxi stands. However, the city says it will not compensate taxi drivers for any loss in value of their taxi permits, which have been worth hundreds of thousands of dollars each because the city restricted their supply.

The draft plan, which the city says is based on overwhelming public calls for change over several months of consultations, will be voted on by council on April 13. If the plan is approved, the new rules will be in place June 30. Until then, Uber remains an illegal service and the city will continue to enforce existing bylaws.

The City of Ottawa's announcement comes as Toronto is also expected to soon announce its own plan for dealing with the city's taxis and ride-sharing services. Officials with the two cities have been working closely together on their plans in recent months, so it is possible Ottawa's approach provides an indication of where Toronto is headed.

Ride-sharing programs such as Uber are creating dramatic change for municipal governments around the world as the popularity of the services forces city planners to weigh their impact on existing taxi rules, traffic patterns and public transit use.

Under Ottawa's proposed plan, passengers would maintain the formal right to complain to the city for poor taxi service, but no municipal complaint process would exist for ride-sharing services, which will be categorized as Private Transportation Companies. The city is describing ride-sharing – which connects passengers and drivers via a cellphone app – as a "buyer beware" option that will be subject to a basic level of regulation.

"This is not fair what is happening here and we will not tolerate it. This is my promise," shouted Unifor Local 1688 president Amrik Singh outside council chambers after hearing about the plan for the first time. Mr. Singh represents about 1,800 licensed taxi drivers in Ottawa.

Coventry Connections president Hanif Patni, who heads the city's main taxi-dispatching company, said the plan will hurt drivers who invested their life savings so they could enter the business. Mr. Patni said there are currently 1,187 taxi licences in Ottawa, and purchasing one prior to the arrival of Uber would have cost more than $300,000.

"Of course drivers would be livid by that, and we have to be concerned about the viability of the taxi drivers and the viability of the taxi companies," Mr. Patni said, adding that it is too soon to discuss potential legal action.

Uber Canada spokeswoman Susie Heath provided a cautiously optimistic response to the city's plan, issuing a statement that commends Ottawa for recognizing "the public demand for new technologies and for working diligently to find accommodation through regulation."

She said the company would have more to say in the coming days.

Canadian cities and provinces have taken dramatically different approaches in response to ride-sharing.

Vancouver announced a moratorium on ride-sharing companies in the fall of 2014, and Uber has been urging the British Columbia government to update provincial rules. Montreal has seized more than 200 private vehicles in response to allegations of illegal ride-sharing. Toronto and Ottawa have both laid charges in recent years against drivers connected to Uber, but the company has continued to operate.

Calgary updated its bylaws last month, but Uber responded that the company could not operate in the city under those conditions. Uber had urged Calgary to adopt an approach similar to Edmonton's, where council approved a plan in January requiring Uber drivers to pay a fee of 6 cents per ride, rather than Calgary's proposed annual fee of $220. Ottawa is proposing a per-ride charge of $0.105 to cover enforcement costs.

One of the most challenging issues facing municipalities is the treatment of taxi "plates" or licences. The number of available taxis in the market has long been limited by controlling the number of plates. This scarcity has meant the plates hold considerable value and are sometimes rented out as an investment by plate owners who do not drive the taxis themselves.

The arrival of ride-sharing services has hurt the value of these plates. A November, 2015 study by the federal Competition Bureau said the value of a taxi plate in Toronto declined from $360,000 in 2012 to $188,235 in 2014, and that similar decreases have occurred in other cities.

The Competition Bureau urged municipal regulators against simply banning services such as Uber and Lyft, calling prohibition a "blunt" instrument. Instead, the bureau recommended that restrictions on existing taxi operators be eased and ride-sharing operators should have to comply with more regulation in areas such as background checks, vehicle safety and insurance.

In the words of the bureau, a "light" approach to regulation should apply to both the existing taxi industry and the new ride-sharing companies. City of Ottawa officials said they used the Competition Bureau as a guide for its proposed regulations.

Under the city's plan, existing taxi rules would be reduced. For instance, there would no longer be standards related to a vehicle's interior or trunk size, and the maximum age of a taxi would rise to 10 years from eight. The same maximum age would apply to ride-sharing vehicles.