November 12, 2012

Denver Taxi Cab Company Tries Hailing The American Dream

By: Robert McNamara

How long should it take to get the government’s permission to open a small business?  A few days?  A few weeks?  Try four years if you want to start a new cab company in Denver.

That’s how long Mile High Cab has been struggling to get the state’s permission to start getting to work.  A cooperative owned by a group of longtime local taxi drivers, Mile High has experience, funding, and a great plan to offer better taxi service to the Denver community.  The only thing it doesn’t have is the government’s okay—and that has proven to be all the difference.

At first blush, taxi driving seems like the perfect business for lower-income entrepreneurs.  It doesn’t take a lot of start-up capital or formal education—it just takes some basic business sense and a killer work ethic.  And, for years, it has been exactly that:  a tool for immigrants or low-income people to start pulling themselves and their families up the economic ladder.

Unfortunately, the only problem with starting a taxi business is the one Mile High encountered in Colorado:  Here, like in most places, it is illegal.  From coast to coast, American cities and states continue to restrict entry into their taxi industries according to laws established at the beginning of the twentieth century.  These outdated laws have only one purpose—to protect established taxi businesses from competition—and they work exceptionally well.  The results are predictable: worse service for customers and fewer opportunities for entrepreneurs.  Little Rock, Ark., has exactly one taxi company, and it is illegal to start a second.  In New York City, a “medallion” (which gives the holder the right to operate a taxicab) now sells for a cool million dollars.  That is not a million dollars for a taxi business—for cars, insurance, dispatchers, etc.—it’s a million dollars just for the government’s permission to be in business.

For a long time, taxi regulation in Colorado was no different from most places:  The law made it almost impossible to open a new taxi business.  As a result, for nearly 50 years, the city has made do with only two cab companies  (and since 1995, in response to a lawsuit by my organization, the Institute for Justice, three), and would-be entrepreneurs, have been left out in the cold—much like the underserved passengers they’d like to pick up.

But in 2008, the state legislature took a big step toward improving things.  Under reforms adopted that year, the state Public Utilities Commission (which regulates cabs) is supposed to let entrepreneurs in Denver start up unless the entrenched taxi companies can provide concrete evidence that a new taxi business would harm the public.  Since that kind of evidence is hard to come by, this should be great news for grassroots entrepreneurs like Mile High.

The problem with that theory is that the Commission doesn’t see things the same way.  Since the 2008 reforms, the state has let one new company into the Denver market, and steadfastly refused to let anyone else play.  Not because there is evidence that more taxi service will somehow hurt Denver’s consumers, but just because the Commission thinks there is a “possibility” that the city already has enough cabs.

Now that the state legislature has finally come to its senses and reformed its anticompetitive taxi laws, unaccountable state bureaucrats cannot be allowed to trample on the economic liberty of the city’s taxi drivers.  That is why, this past week Mile High’s drivers stood alongside lawyers from the Institute for Justice to ask the Colorado Supreme Court to order the Public Utilities Commission to stop locking new businesses out of Denver’s taxi market based on nothing more than a “possibility” that the city might not need more taxis.  And once the Supreme Court gives the order, Mile High (and other companies like it) will be able to compete fair and square for the loyalty of Denver’s cab-riding public.

At four years and counting, that won’t be a minute too soon.

Robert McNamara is a senior attorney with the Institute for Justice, which represents Mile High in its legal challenge.  IJ represented Freedom Cabs when it, too, worked to break into Denver’s taxi market.

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