Amended TNC Fee Structure – Why I Voted No

Earlier today Council passed amendments to our Livery Bylaw. It was widely accepted that this amendment will pave the way for UBER to return to the Calgary market. I voted against one of the amendments that had to do with the fee structure, and you deserve to know why.

Attached below are copies of the reports that Council considered this morning:

livery-industry-improvements-november-28

summary-of-proposed-bylaw-amendments

I believe that Transportation Network Companies (TNC) are a fantastic technological advancement for our transportation network. I believe that TNCs will flourish in Calgary and that they will provide great value for Calgarians. While UBER is the best known of these companies, they are not the only show in town. There were a number of TNCs that were active in the Calgary market under the pre-existing bylaw.

I believe in the power of competition.  Bylaws that govern things like our Livery industry set the market standard. What was proposed at Council earlier today was a tailored bylaw that specifically catered to a specific player in the market. The existing bylaw has been in place for months now and it has allowed some TNCs to operate here in Calgary. UBER could have been one of them, but the bylaw was not to their liking. I do not believe that the existing bylaw was cost prohibitive for UBER or that it would have been overly onerous for them to navigate.

I worry that developing a bylaw that specifically caters to the most profitable company in the industry potentially jeopardizes the competitiveness of other companies in the market. These bylaw changes could see a monopoly over the TNC market and could have an impact on the level of service that Calgarians deserve.

Bylaw Changes

Under the old bylaw each TNC driver would pay an upfront cost of roughly $220. These fees would go towards The City costs for licensing and program administration requirements for the driver to be approved. The business unit for our Livery enforcement is cost-neutral. In order to take the burden off tax payers, the $220 paid by a driver cover the full costs to approve a driver.

Uber-2

The new changes see TNCs charged a small fee up front ($15 per driver), a sliding scale administration fee and a fee of 20¢ per trip. The TNC still needs to find a way to pay the full costs so that the program remains cost-neutral.  Let’s hypothetically say that a TNC employs 1,000 drivers. These 1,000 drivers would incur a cost to The City of roughly $220,000. If the per ride rate does not recover these costs, the TNC would need to cover the difference. If the per ride rate exceeds the costs, the TNC would be refunded.

This is where I have the issue:

UBER in particular has told us that they typically retain drivers for a 3-6 month period. There is a higher concentration of drivers for peak times of the year (Christmas, New Years, Stampede, etc.) and less drivers for the rest of the year.

Moving to a per-ride fee essentially means that longer term drivers (those that may serve for a year or more) are subsidizing those drivers that are only active for a very short period of time. This also means that in the short term The City would be subsidizing drivers that are not able to generate enough trips to cover their start up costs.

In my opinion the old system could have worked for UBER, worked for drivers and most important –worked for tax payers. A TNC company could cover the costs up front from their drivers ($220) and collect the cost back from their drivers over a period of time. This would encourage more drivers to commit to driving for a TNC long-term.

TNCs and a Brave New Calgary

It is important to note that TNCs has been operating in Canada for a few short years. TNCs have only been appropriately regulated in municipalities like Edmonton and Ottawa for a few months. Most municipalities across North America are grappling with what the most appropriate regulations are to create an environment where TNCs provide the highest level of service to residents.

I want to be clear; my vote today was not a vote against UBER. My vote today was a vote for competition. When I say competition, I am not referring to the taxi industry. I believe that TNCs have issued a strong challenge to the taxi industry. Without innovation and growth, the taxi industry is going to have issues competing in this brave new world of transportation.

I am concerned that tailoring a bylaw for one company in particular sends the wrong message. Calgary should be a market that embraces competitions and allows for many TNCs to operate and be profitable. Having a system that meets the needs of a single company isn’t best for the market and in the long run it isn’t best for consumers.

My colleagues and I questioned administration hard during our deliberations on this item. When asked about who would stand to benefit from this amendment we were essentially told these were the changes that one particular company was looking for. We now have a tailored bylaw that stands to benefit a multi-billion dollar business. I have no problem with big profitable corporations, but I worry that a monopoly over the entire market provides little opportunity for other entrants in the market. Competition is good for the consumer and it is good for Calgary.

I’ve recently been talking about population growth in SE Calgary and how more transportation options are needed to properly sustain our growing communities. While TNCs do not move people with the same volume as mass public transit, I believe they are still an important part of the transportation mix. I welcome UBERs re-entry into our market, and I hope other TNCs enjoy equal levels of success here in Calgary.

I appreciate that there are many that may not support or understand why I voted this way on the fee structure. I voted with my conscience and my belief that Calgary needs to embrace a competitive market place. We may not always agree on every issue, but you have my commitment that I will be prepared to offer an explanation for my vote.