1. 28
Ridesharing vs.
Traditional Taxis:
What are
Municipalities to
do?
Cab operators protest during rush hour in Toronto at the corner of Bay Street
and Queen Street, December, 9th
2015.
By Thomas Barakat, Policy & Advocacy
OGRA

2. OGRA MILESTONES WINTER 2015 / 29
The 2008 financial crisis left many highly educated and skilled
millennials struggling to find meaningful employment. Many
of them resorted to entrepreneurship as a mean of survival,
but also as a way of utilizing their skillset to engage in
meaningful work. Mobile technology as part of the broader
knowledge economy allowed this group to develop new
business models for their start-ups. Some of these start-ups
have successfully reached scale and are now revolutionizing
and challenging many aspects of the traditional economy. The
highly-publicized success of start-ups such as Uber, Airbnb,
and TaskRabbit have inspired many new technology
entrepreneurs to mimic this type of business model and has
brought into the mainstream what has now been dubbed “the
shared economy”.

3. 30 / OGRA MILESTONES WINTER 2015
The shared economy has been defined as a socio-economic
ecosystem built around the sharing of human and physical
resources. It includes the shared creation, production,
distribution, trade and consumption of goods and services by
different people and organizations.1 The shared economy has
always existed, but recent advancements in technology have
allowed it to rapidly proliferate. The disruptive potential of
technology enterprises operating in the shared economy, or
what we’ll call
Shared Economy Facilitators (SEFs), have caught many
traditional service providers (TSPs) like deer in the headlights.
Municipal governments in Ontario and across the globe are
no exception.
SEFs such as Uber and Airbnb have become popular as a result
of their convenience and low cost when compared to TSPs in
the taxi and hotel industries. However, TSPs have argued that
costs are lower for SEFs as a result of the largely unregulated
environment in which they operate and are thus not
competing on an even playing field. SEFs have been able to
skirt bylaws thus far by arguing that they are technology
providers and not the direct providers of services themselves.
Municipal governments are now being forced to try and
reconcile the popularity of these SEFs on the one hand and
the uneven economic playing field for TSPs on the other.
It seems that the logical solution would be a free market one:
allow SEFs and TSPs to compete on a level playing field and let
consumers decide which is superior. However, a multitude of
other factors including public safety, insurance, taxes, and the
skirting of bylaws complicate this process.
Economist Joseph Schumpeter once spoke of “a process of
industrial mutation that incessantly revolutionizes the
economic structure from within, incessantly destroying the
old one, incessantly creating a new one.” This was known as
creative destruction. Schumpeter argued that creative
destruction is “the essential fact about capitalism.” It is easy to
view the SEF vs. TSP battle through this lens: if municipal
leaders are able to do so, they will not attempt to reconcile the
two industries through incessant overregulation. In fact, it can
be argued that overregulation has been the leading factor in
the stagnation of TSPs which in turn made them extremely
vulnerable to new ideas, new technology, and new business
models. The way forward should be one which allows
innovation, competition, and an even playing field – while also
bringing the rule of law to the Wild West environment that
SEFs are operating in.
Ridesharing vs. Traditional Taxis
Ridesharing services such as Uber have disrupted the
traditional municipally-regulated taxi industry. Traditional
taxi drivers have been visibly upset and have staged protests
and rallies as their ability to earn a living is jeopardized.
Although one can sympathize with an individual losing their
primary source of income, the various taxi systems across the
province were far from perfect prior to the introduction of
ride-sharing services such as Uber. Most were (and continue
to be) highly regulated municipally-backed monopolies. As a
result of the lack of true competition, service suffered. This
has allowed Uber to become popular very quickly. Perhaps
traditional taxi drivers should not be directing their anger at
Uber drivers, but at the heavily-regulated municipally-backed
taxi system instead. It should not be discounted that the entry
of a technology-based ridesharing mobile app operating in a
grey area is the primary reason that the traditional taxi
industry is even considering reform.
Ridesharing services such as Uber have disrupted the
traditional municipally-regulated taxi industry.
Traditional taxi drivers have been visibly upset and
have staged protests and rallies as their ability to earn
a living is jeopardized.

4. feature
OGRA MILESTONES WINTER 2015 / 31
Consumers make decisions on a number of factors, with price
being one of them. If they felt they were receiving a superior
experience in a traditional taxi, then a higher fare could be
justified. However, many Uber users argue that they receive a
superior experience in an UberX car at a lower cost.
Monika, a young professional who lives in Toronto’s Liberty
Village calls Uber a godsend. “I Uber everywhere, I don’t even
buy a (TTC) Metropass anymore. It’s so much cheaper and
more convenient than a normal cab. I can order an Uber
through my phone, watch it as it approaches on my screen,
and I don’t have to worry about payments since my credit card
is already on file,” said Monika.
In terms of cost, an easy first step for municipalities could be
to reduce the base cost of a taxi fare. The City of Toronto has
recently done so by reducing the base fare by $1.00. Yet many
continue to prefer Uber as it is more convenient and provides
an overall superior customer service experience.
Traditional taxi drivers argue that most municipalities have
bylaws that force them to pay for licensing, commercial
insurance, and vehicle inspection, while Uber drivers don’t.
Furthermore, Uber drivers don’t pay taxes (Uber drivers are
considered independent contractors and thus only pay taxes if
they earn more than $30,000 in a calendar quarter and over
the last four consecutive calendar quarters). Thus, the
traditional taxi driver argument that the playing field is not
equal is completely justified.
Although traditional taxi drivers are hamstrung in their ability
to compete with ridesharing services such as Uber, they do
control many aspects of the quality of a ride. Some interesting
observations have been recorded from taxi passenger
complaint data in New York. The number of complaints per
taxi trip has declined since the proliferation of Uber in the city.
A chart2 from The Technology Policy Institute’s Scott Wallsten
demonstrates this. Additionally, data from Chicago has
indicated that complaints about air conditioning, “broken”
credit card machines and rude drivers has also declined.3
It seems as if the newfound competition has forced traditional
taxi drivers to deliver a better customer service experience.
Robert, a Toronto area taxi driver for over thirty years, said
that what upsets most traditional taxi drivers is the fact that a
group of unlicensed workers are entering the market illegally
while they must continue to follow municipal bylaws as they
always have. “If a group of unlicensed accountants or doctors
began offering services through a mobile app, would that be
legal? Probably not. Standards, rules, regulations, and licenses
are put in place to protect the public, so why are Uber drivers
allowed to bypass them? It also jeopardizes the ability of
people who are abiding by the rules to make a living. How is
that fair?” In the pre-Uber era, drivers who picked up
passengers for a fare, but were not municipally licensed, were
referred to as bandit taxis and were illegal. Many have argued
that Uber drivers are basically technology-enabled bandit taxis
and should be treated as such.
The highly regulated traditional taxi industry not only
benefitted taxi companies, but municipalities as well. Until the
market disruption by Uber, municipalities had been happy to
collect revenues from the taxi industry for driver licensing,
owner licensing, and brokerage licensing. The limited number
of plates issued by municipalities also led to plates being sold
for tens of thousands of dollars – even hundreds of thousands
in Toronto – which meant that average taxi drivers (most of
whom are new Canadians) could never dream of actually
buying one. Those who were so lucky are now seeing the value
of their investment plummet. Many had invested in these
plates as their retirement plan, as traditional taxi drivers don’t
receive a company pension. As the old system unravels,
municipal leaders must ensure that whatever it is replaced
with is much more competitive, but with an even playing field.
Federal Commissioner of Competition John Pecman has urged
municipal governments to relax regulations on taxis rather
than crack down on ridesharing services such as Uber. After
having consulted with municipal governments, The
Competition Bureau issued a white paper questioning why
some regulators are attempting to stifle a shakeup in the $1.2
billion taxi industry. Instead, the Bureau has argued for an
even playing field between the traditional taxi industry and
the newer ridesharing industry. More specifically, Pecman has
called for an end to oppressive taxi regulations, including strict
pricing structures and licensing systems, to give the traditional
taxi industry the flexibility required to compete with
ridesharing services. To counterbalance, he has suggested that
Uber drivers be allowed to pick up street passengers, while

5. 32 / OGRA MILESTONES WINTER 2015
taxis be able to adopt something similar to Uber’s
controversial surge pricing, which raises prices when demand
is higher.
Provincial Intervention?
The provincial government has been cautious in its approach
to the issues surrounding the shared economy, perhaps in an
attempt to allow municipalities to handle matters within their
own jurisdiction. However, Tim Hudak, MPP (Niagara West
– Glanbrook) has introduced a private member’s bill, Bill 131,
Opportunity in the Sharing Economy Act, 2015, that would allow
ride-sharing, home-sharing, and parking-sharing services to
operate legally.
Hudak has argued that these services give consumers more
choice and empowers Ontarians to earn extra income off of
assets they already own. Although many of these services,
Uber in particular, have prompted some fierce debates in
municipalities, under the terms of Bill 131, municipalities
would not be able to ban SEFs. Instead, this Bill seeks to end
city-by-city battles against SEFs by legalizing them all at once,
province-wide.
If successful, this Bill would eliminate the patchwork of
municipal bylaw regulations by creating a new class of
business called “transportation network companies”
(ridesharing companies). Each municipality would continue to
“The Competitive Effects of the Sharing Economy: How is Uber Changing Taxis?” by Scott Wallsten
Tim Hudak, MPP (Niagara West –
Glanbrook) has introduced a private
member’s bill, Bill 131, Opportunity in
the Sharing Economy Act, 2015, that
would allow ride-sharing, home-
sharing, and parking-sharing services to
operate legally.

6. OGRA MILESTONES WINTER 2015 / 33
feature
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have the power to license transportation network companies
(such as Uber), but would no longer be able to prohibit them
from operating.
The Bill would seem to respond to some of the criticism from
traditional taxi drivers with regard to the lack of regulation for
ridesharing drivers. If passed, ridesharing drivers would be
required to have an operating permit issued by the ridesharing
company. These drivers would also need to have a valid motor
vehicle licence, valid automobile insurance, and no criminal
record. The ridesharing company would have the ability to
impose conditions on operating permits that it issues and can
revoke or suspend them, without any hearing, if it had
reasonable grounds to believe that the driver contravened the
Act or the regulations. Furthermore, anyone caught driving a
ridesharing vehicle without an operating permit would receive
six demerit points, the same penalty for driving a traditional
taxicab without a municipal licence, thus bringing some
uniformity to the industry.
Hudak has also called on Ontario Finance Minister Charles
Sousa to develop an “affordable, comprehensive insurance”
specific to ridesharing services like Uber. Currently, all taxi and
limo drivers who carry passengers for compensation in
Ontario must carry the OPCF 6A insurance endorsement; no
professional is allowed to drive without it. Hudak also added
that some major insurers in the United States have already
developed new products to cover companies and drivers that
offer ridesharing services and that it’s time for Ontario to do
the same. “The Minister needs to direct the Financial Services
Commission of Ontario to act now. There are over a million
rides per month and growing in Ontario. If the Americans can
do it, why can’t we? Let’s ensure adequate coverage for
everyone from the moment they sign onto a ridesharing app
until the passenger is dropped off,” said Hudak.
On January 6th, 2016, Aviva Canada announced that it will be
launching coverage for drivers that carry paying passengers in
their own vehicles. In a statement, Aviva stated that it was
“Responding to the growing use of ride-sharing services and
the need to protect both passengers and drivers.” What
differentiates this new type of coverage from the OPCF 6A
endorsement is that it is only available for those who spend up
to 20 hours a week participating in ride-sharing.
Looking Ahead
It is unclear whether or not the Opportunity in the Sharing
Economy Act, 2015, will ever become law as it will require
support from the government benches. However, what is clear
is that the shared economy is here to stay. With regard to
ridesharing vs. traditional taxis, it is in the best interest of
both parties to meet somewhere half way. Municipalities must
loosen restrictions and deregulate the near monopolies now
enjoyed by most traditional taxi companies in order to better
allow them to compete fairly with ridesharing companies.
Conversely, some rules and regulations must be established
for ridesharing companies in order to bring order to the Wild
West-like environment in which it currently operates.
Capitalism works best when healthy competition exists:
creating an even and open playing field will allow the
traditional taxi industry to reform itself to compete with
ridesharing companies who are currently offering the
innovation and jolt that the industry so badly needed.
1 Matofska, Benita: “What is the Sharing Economy?” http://
www.thepeoplewhoshare.com/blog/what-is-the-sharing-
economy/
2 Wallsten, Scott: The Competitive Effects of the Sharing
Economy: How is Uber Changing Taxis? https://www.ftc.gov/
system/files/documents/public_
comments/2015/06/01912-96334.pdf
3 Badger, Emily: “Why taxi drivers are suddenly getting nicer”
https://www.washingtonpost.com/news/wonk/
wp/2016/01/05/why-taxi-drivers-are-suddenly-getting-nicer/