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Why Uber is the best thing to happen to Toronto’s taxi industry

Following the Toronto taxi industry's battle with Uber is like an extended, real-life version of The Jerry Springer Show: There have been street fights, name-calling and threats galore. But on this episode, the stakes are much higher than who fathered a baby – we're talking about billions of dollars, thousands of careers and the future of the city's transportation system.

A key city hall committee recently voted against legalizing Uber in Toronto, setting the stage for an incendiary city council debate this week. As usual in the ground-transportation industry, no one's happy. Uber feels like it's being hobbled by horse-and-buggy-style rules. The taxi industry feels like the public-safety bar has been lowered.

As a long-time observer of the Toronto taxi system, I have followed the conflict with keen interest. Back in the 1990s, I spent more than a year investigating Toronto's cab-licensing system, which had turned some people into millionaires, and others into the modern equivalent of feudal serfs.

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Last summer, I tried Uber, and decided that it might finally cut through the Gordian knot of misguided regulation and self-interest that has entangled the cab industry. Thanks to lax oversight by city hall (and some outright corruption back in the fifties and sixties), city cab licences had been turned into cash cows: Absentee licence-holders rented them out to working drivers, often through a network of shadowy middlemen.

Now Uber was offering an alternative. Although I did see problems with Uber (extortionate "surge pricing" during periods of high demand and a lack of commercial insurance, for example), I came to the conclusion that it was a better mousetrap, and would disrupt the traditional cab industry in the same way that digital cameras had changed the film business.

My Uber story last July brought a flood of e-mails, many of them from cabbies. One of them was George Prowten, who saw Uber as an exploitative predator: "If it was a level playing field – hey, may the best company win. But it's not. I have to follow the rules and Uber skirts the rules, taking the market share.

"What if I decided to open up a strip club and compete here against a popular club? Do you think I could just put a sign on my front lawn, sell beer and lap dances out of my house without correct zoning, liquor, or adult-entertainer licences to undercut everybody else on the price of beer and lap dances since I have zero expenses? … that's what Uber has done in my industry."

But one veteran Toronto cabbie driver called Uber his saviour, allowing him to escape the grind of 12-hour shifts in a rented taxi that paid dividends to an absentee plate-holder: "I am no longer charged an astronomical price to drive a taxi…. I can take a day off – take my kid to his hockey practice and my daughter to her after-school activities without the fear of being charged. I have a choice."

Behind all the arguments and fights at city hall is the long, strange history of the Toronto cab business. In theory, the industry was simple. To operate a taxi, you had to have a city-issued licence, also known as a taxi plate. At the time, there were 3,477. But almost no one used their plate to operate a taxi. Instead, more than 78 per cent of the plates were rented out by absentee owners. A number of them lived in Florida. A few were in Israel and Arizona.

There were doctors, Bay Street tycoons and airline pilots. Most hired "designated agents" who handled the rental of their plates. Together, the owners and the agents skimmed off about 30 per cent of the cab industry's revenues, which jacked up fares and cut into the income of working drivers.

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Several drivers described themselves as serfs. The description fit, given that much of their income went to licence-holders who passed their plates on to their descendants, much as the landholders of 11th-century England once had.

Sheryl Lipton, a Toronto dentist, inherited two plates from her father, who had driven a cab for 40 years. Dr. Lipton's father got his plates when his name finally came to the top of the list in the 1970s. Now his daughter was collecting rent from them. Speaking in 1998, she defended her right to derive income from the licences: "I don't see that this licence is any different than a store," she said. "If my father owned a store he could give it to me. How is this any different?"

As you might expect, Toronto taxi licence-holders have been loath to give up their plates. Some are widows who have depended on their husbands' plates as their sole source of income. Some are cabbies who mortgaged their homes to buy a plate. Others are investors.

Until Uber came along, it looked like the Toronto taxi-plate business might last forever. Although the city tried to stop plate leasing after my stories were published in 1998, the plate-holders threatened to sue – and they had a compelling argument. Even though plate leasing was against the law, the city had allowed it to go on for so long that it had become common practice, and people had invested in the system. If the city killed off the plates, it could be on the hook for $1-billion-plus payout to plate-holders.

The arrival of Uber has accomplished what the city never could. In September, 2012, one of Toronto's taxi licences sold for $360,000. By 2013, the average selling price of a cab plate had fallen to $153,867. In 2014, it was $118,235. Not long ago, it was rumoured that a plate sold for $65,000, and there is no bottom in sight.

Not surprisingly, taxi-industry stakeholders have waged a long campaign to stop Uber. As they rightly point out, Uber currently enjoys a tilted playing field, because it doesn't follow the same rules as the traditional cab industry.

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"Their competitive advantage comes from avoiding taxes and safety standards," says Rita Smith, executive director of the Toronto Taxi Alliance. "They can do things cheaper."

The most common adjective that gets used against Uber is "illegal." The descriptor may be technically correct, but to anyone who understands the history of the Toronto taxi industry, it's freighted with irony. As I learned through nearly two years of reporting, the system that eventually made a Toronto taxi plate worth $350,000 was rooted in outright corruption. On the record, cabbies admitted to paying off city officials in the 1950s.

That was then. The taxi universe I described in 1998 has been gradually altered. The abuses I documented were the fault of previous administrations, but they embarrassed the city, and it has worked to correct them. The Toronto Taxi Alliance says at least 50 per cent of the plates are now in the hands of working drivers.

So what should happen next? The Toronto Taxi Alliance believes that Uber can be stopped, and uses public safety as the argument against the digital interloper. "Uber is Netflix," says Rita Smith. "The taxi industry is VHS. But the argument breaks down when it comes to safety. Your drunk teenage daughter doesn't pour herself into the back seat of a VHS player."

Others aren't so sure. Derek Stacey, a Ryerson economics professor who has followed the taxi battle, says a new generation of consumers prefers the Uber model to the traditional industry.

"Younger generations are more comfortable with a sharing economy," he says. "The city won't be able to stop it. Ultimately, they'll have to figure out how to make it work."

Tracey Cook, executive director of Toronto's Municipal Licensing and Standards office, has the unenviable job of untangling the complex issues that are woven into the cab-industry battle. She must look into the eyes of wheelchair-bound widows, deal with angry cab drivers and with high-paid lobbyists.

Here's her take: "A lot of people have committed their lives to this industry. We're trying to respect that, but things are changing like never before. If the citizens want something new, should we stop it? What are we here for? What are we trying to accomplish? Our responsibility is to the public, not the cab industry."

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About the Author
National driving columnist

Peter Cheney launched his driving column after 25 years as an award-winning feature writer, investigative reporter and news correspondent. His writing steers clear of industry jargon to focus on human experience and the passion of driving. More

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