Like many longtime taxi drivers in Seattle, Tegegne Mersha thinks of his career in two distinct phases: before Uber and after.
When Mersha, an Ethiopian immigrant, started driving in 2010, a year before the first black Uber cars hit Seattle, business was so brisk he could park near the Westin Hotel at 6 a.m. and have $60 or $70 in fares by 8.
With the $200 or more he took home each day, plus the money from renting his car to another driver for the night shift, Mersha earned more than enough to justify the $100,000 cost of the taxi license he’d purchased on what was then a thriving gray market.
Since Uber and other ride-hailing companies arrived, Mersha’s fortunes have swerved sharply. The 48-year-old father of three now rarely takes home more than $100 a day in his Orange Cab. And that $100,000 license? “It’s zero now,” Mersha says, shrugging. “It’s zero.”
Yet Mersha hasn’t given up hope. Like many of his colleagues, Mersha believes that taxis’ misfortunes stem in part from the unfair advantages Uber and Lyft enjoy over the heavily regulated taxi business. He thinks that if local politicians re-leveled the playing field, his industry — and his own fortunes — could recover. “That’s the dream,” he says.
That’s not as far-fetched as it might seem.
For months now, city officials, including representatives of the mayor’s office and the City Council, have been quietly talking with industry officials and labor leaders over policies that affect the ground transportation business.
Among the ideas that reportedly have been discussed are regulatory changes that might help taxi drivers better compete against Uber, Lyft and other so-called transportation network companies, or TNCs.
None of the participants have offered details, and it’s hardly clear when or even if a proposal will emerge.
But in the meantime, even without the city’s help, Seattle’s taxi business appears to be in something of a comeback.
As Uber and other TNCs have unleashed an all-out price war against the taxi companies, many were predicting their outright extinction.
Instead, most of those companies, including Yellow Cab, Orange Cab, E-Cab, Farwest Taxi and Green Cab, are still on the road. In fact, the fleet of taxis licensed by the city has actually grown 22 percent, to 844, since 2015.
Total taxi industry revenues, after plunging 56 percent between 2012 and 2015 to $43.9 million, crept back up to $52.5 million for 2018, the most recent year for which the city keeps data.
“By several key measures, the taxicab industry in Seattle appears to have bottomed out and is now slowly recovering,” notes Craig Leisy, who until 2017 oversaw regulation of the city’s taxi, TNC, limo and towing sectors, in a recent book that uses Seattle as a case study of the TNC-taxi conflict.
Granted, that modest bounce hasn’t translated into renewed prosperity for Seattle-area taxi drivers, most of them immigrants, who have seen earnings plunge.
And certainly, some of what has kept the taxi business alive is a buffer of legacy customers — for example, government agencies, such as Metro, that contract with taxis to transport disabled or low-income passengers and must use professional, drug-tested drivers.
But there are other factors at play that might suggest there’s a future for Seattle’s taxis.
One is that the taxi industry itself responded to the TNC threat by making real, if modest, improvements.
There were technology upgrades: Dispatching is now partially automated, and some taxi companies have their own apps.
The industry has also cleaned up some of its less savory customer practices, such as refusing to pick up shorter, low-dollar fares or scamming drunk passengers. “There was a lot of mistreatment” of customers, said Amin Shifow, general manager at Yellow Cab, during an interview last fall. “We got cocky.” (Shifow did not respond to repeated requests for a second interview.)
But Seattle’s taxi business may also be benefiting, if indirectly, from the fact that its adversaries — the TNCs — are also struggling.
There are mounting signs that the very weapon Uber and other TNCs used so devastatingly against taxis — below-cost fares — may itself be unsustainable.
By cutting fares to roughly half of what taxis charge, the TNCs took more than half of taxis’ business in Seattle. But those ever-cheaper fares required the TNCs to not only absorb huge losses but also steadily cut their own drivers’ pay, which eventually provoked a driver backlash.
That resistance has contributed to an overall slowing of TNCs’ once-rapid expansion, which has freaked out investors. Uber, which went public in May, last month reported a second-quarter operating loss of $1.3 billion and has seen its share price fall 29 percent since a June high. Lyft lost $644 million and has seen its share price drop nearly 40 percent.
In other words, while many of the taxi industry’s wounds were self-inflicted, at least some of their lost business reflects TNC fare pricing that was not merely aggressive, but probably unsustainably so. That has led some industry experts to predict that TNCs will have to raise their fares.
Even a modest increase could make traditional taxis modestly more attractive, especially among certain customers, such as people without credit cards, or senior citizens who may never have trusted TNCs in the first place.
Combine that with taxis’ legacy business, such as the semi-exclusive contract that taxis have at Seattle-Tacoma International Airport through 2021, and taxis might have an actual niche. At the very least, Seattle’s cabbies should be able to “hold onto the equilibrium market share they are at right now,” says Harry Campbell, a Los Angeles-based TNC industry expert who writes The Rideshare Guy blog.
Still, “holding on” isn’t the same as growing. Campbell and other experts say that the taxi business in Seattle and elsewhere faces too many structural limits to grow much beyond its current diminished state.
Technology will always be a limiter. Though large firms, like Yellow Cab, which has around 380 cars, have a phone app, many customers still call in their orders through central dispatch systems.
Nor can taxis match the short wait times that come from being able to flood a city with cars. “At every shift, 15,000 [TNCs] come out and they can cover every building,” said Michael, a 63-year-old Seattle Yellow Cab driver who gave only his first name. “There’s no limit.”
That points to taxis’ other big disadvantage: they are heavily regulated, while TNCs largely are not.
Starting in the 1980s, Seattle and King County imposed taxi rules that governed everything from the number of cabs to where they could pick up fares to the minimum fares they could charge.
Regulation was lucrative. The cap on numbers meant plenty of business for each driver: in 2012, the average Seattle taxi driver was grossing $398 a day, according to city statistics.
Such earning potential, combined with the fact that licenses were limited in number and transferable, turned those licenses into a valuable asset; by various accounts, by the early 2000s, would-be drivers were paying anywhere from $80,000 for a city-only license to as much as $360,000 for a multizone license that also allowed for airport pickup.
At their peak, the licenses had a collective value of at least $125 million, said Chris Van Dyk, a longtime taxi industry consultant and lobbyist.
But almost overnight, those massive benefits turned into liabilities when the TNCs arrived with a product that was not only cheaper and more convenient, but much harder to regulate: the city of Seattle’s 2014 attempt to cap TNCs was abandoned after the TNCs gathered enough citizen support to mount a voter referendum against the cap.
Given that history, some Seattle politicians think the city owes taxi drivers some assistance.
“We allowed Uber and Lyft to play in an unregulated market that legally we should have been regulating,” said City Councilmember Mike O’Brien, who has long argued that the city has an obligation “to figure out how to make that up.”
Devising such assistance is easier said than done.
In recent years, the city has considered requiring TNC drivers to charge the same minimum fare as taxis must charge, but that idea has faltered under TNC pressure. Likewise for a city effort to allow drivers to unionize: As independent contractors, they’re barred by federal law from unionizing.
In the current discussions, several proposals are said to be on the table.
Some council members are reportedly considering legislation, supported by the Teamsters, to impose some minimum level of compensation for independent contractor drivers. “They essentially want to turn the TNCs into taxis,” says one person familiar with the discussion.
In March, the Mayor’s Office acknowledged that it was exploring whether to impose a congestion fee “to manage the impact of ride-sharing companies on our downtown,” as spokesman Mark Prentice put it at the time.
Although the Mayor’s Office reportedly wants the fee to pay for affordable housing, taxi industry officials have argued for a different use:
Van Dyk says that for five years, the city should pay most of the congestion fee revenue, which he estimates at around $30 million a year, to drivers as compensation for the lost value of their now worthless taxi licenses.
O’Brien, though he agrees that drivers deserve some compensation, downplays the prospects for “significant transfers to make that happen.”
But many drivers would settle for smaller, field-leveling tweaks that either loosen regulations on taxis or tighten them on the TNCs.
Many drivers, for example, want the city to lower the minimum fare, $2.70 to $1.70, or to allow taxis to adjust prices with demand — so-called “dynamic pricing” — as Uber and Lyft can. Others say TNCs should be required to carry the same expensive commercial insurance that is mandated for taxi drivers.
If regulators closed some of those gaps, taxi drivers say their experience, driving skills, and knowledge of the city would become a competitive advantage.
“If [TNCs] were to be regulated as we have been regulated, we could absolutely beat them,” says Salah Mohamed, a 44-year-old Yellow Cab driver who has been involved in advocating for drivers. “That I know, 100 percent.”
But even modest changes would be difficult, given the politics. The city just launched a pilot program for “smart taxi meters” that would support dynamic pricing, “if allowed by regulation in the future,” but it’s not clear whether labor groups would support a policy that potentially lowers wages.
For many drivers, the real question is whether any of these potential changes — regulatory easing, or government compensation, or higher TNC fares — can come soon enough.
A key reason Seattle’s taxi business has survived this far into the age of Uber is simply the grit and desperation of the taxi drivers, many of whom have made up for declining fares by working much longer hours, or by taking side jobs.
Swaran Singh, a 60-year-old Indian immigrant who has driven cabs for more than 30 years, most recently for Farwest, says he now works from 8 a.m. to midnight six days a week, and recently started a landscaping business as a way out of taxis. “I have no choice,” he said, with a shrug.
Some taxi drivers have even switched to Uber, though many older cabbies believe that is a route to even lower wages. One driver, parked across from the Westin, says he has friends who drive for Uber and make $6 an hour. “It’s modern slavery,” he says.
Other drivers seem to be hedging their bets.
Tegegne Mersha, who says he is still paying off the purchase of the now-worthless license, still believes that city officials could restore the taxi business if they would “limit the Uber, the number.”
But if they don’t, Mersha has a Plan B, and one that might make use of some of driving experience that he has picked up over the years: he plans to become a Metro bus driver.
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