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Bad Regulations and Better Responses, Part 6: Industry and Association Responses

As Originally published by National Bus Trader, December 2015.

By: Ned Einstein
Tel: 212-766-1121
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As NATIONAL BUS TRADER readers following this series have noted, our judicial system seems to be "running the table" with TNC-related issues. The $220,000,000 settlement of a case against FEDEX effectively eliminated the notion of an "independent contractor" in its six states. And the California courts are soon likely to boot out Uber. The FEDEX case in the U.S. Court's 10th Circuit effectively rippled a TNC's ability to deprive its drivers of a regular employee's costly array of fringe benefits. This settlement is likely to soon play out in the other nine "Circuit" encompassing the other 44 states. And if Uber is booted out of California altogether, on top of the FEDEX settlement, the TNC threat will be diminished significantly.

At the other extreme, as noted in Part 5 of this series, our executive and legislative branches of government have done little to stem the tide of this invasion. At the local end of the spectrum, New York City has opened the floodgate to as many TNC taxis as wished to enter the service area. This is a pretty sizeable flood controllable only by how little the TNC and traditional taxi drivers are willing to work for, as their densities are being thinned and their deadhead time and mileage grows, minute by minute. At the Federal level, in contrast the FMCSA's recent rulemaking (going into effect on January 1, 2017) will shift far more responsibility - and liability - to a prime contractor compared to its subcontractor. This rulemaking was presumably intended to make a service provider think twice about which subcontractors it engages to handle its overflow.

Limiting the choices is likely to hamper flexibility in some regions of the country, although newcomers are likely to "fill the slots" over the long haul. So there was some grumbling in the industry over this legislation. But far more importantly, these regulations create big problems for TNCs entering the motorcoach market with their traditional "no-management/low-safety" model. It is one thing for a wild, common motorist with a $15,000/30,000 insurance policy to maul a pedestrian. But it is not the same when a 57-passenger motorcoach's driver falls asleep at the wheel and rear-ends a slow-moving 18-wheeler, or crashes through the guardrail of a bridge and rolls down an embankment or into a creek.

Industry Responses: Talking the Talk

While all this, good and bad, has been going on, the most vocal contingency in the battle against the TNCs has been members of the taxi and, mostly, limousine industries themselves. While far more at the "talking stage" than the "walking stage," at least industry leaders and their "umbrella organizations" are speaking up, particularly at the State and Federal levels. Among the highlights of activity this last year or so:

  • On August 20, 2014, the National Limousine Association (NLA) issued its position paper's Summary Statement on TNCs, noting that "The NLA opposes treating TNCs as if they are outside of the traditional passenger transportation industry and thus exempt from having to comply with legal and insurance requirements designed to protect passengers and the public." This paper's details practically laid out a template for the next batch of attorneys to follow California's lead.
  • A few days before, at the Summer National Meeting of the National Association of Insurance Commissioners (NAIC), the NLA participated in a panel discussion about TNCs, where it shared the position paper noted above. Making insurance carriers aware of the risks was no small accomplishment.

This is particularly true given the FMCSA's rulemaking when it applies to a large passenger vehicle required to carry a lot of insurance, and held to the "highest standard and duty of care" as a legal principle in all or most states.

  • The NLA's Technology Committee's mission was cited as ensuring ". . . the NLA uses technology to its full capacity in an effort to recruit and retain members." One can only wonder how strong the NLA's website and its members' "apps" will be compared to the UberKoach app or apps likely coming.
  • At the state level - where its Public Utilities Commission failed year earlier, the Greater California Livery Association began "working" the halls of Sacramento for only the second "lobbying day" - because the one the year before was "so successful." So successful was it that a full third of San Francisco's traditional taxicabs were gone a few months later. Either "the Halls" were empty, no one was listening, or those who did listen appear to have done nothing in response to the outcry. But at least the industry was talking.

Thanks largely to Limousine, Charter and Tour magazine, the statements of individual taxi and limousine company owners were given a voice, along with some poignant editorial comments. As examples:

  • At the jointly-sponsored LCT-NLA Show East, one of the finest chauffeurs on-call noted that he had left Uber because he had "worked himself harder for lower pay," and also lost most of his money. Some anecdotes from that meeting, cited by LCT's Martin Ronjue, included the fact that " . . .Uber drivers must work long hours and days just to make ends meet." TNC vehicles wear out faster, and maintenance gets "skipped" due to the need to squeeze in more discounted rides. The NLA actually engaged a PR firm to point out that the safety of chauffeured service vastly exceeds that of TNC's. I can only wonder to whom these consultants are pointing this out. Yet I also recall shouting, in numerous NATIONAL BUS TRADER articles, that safety sells. Does it? The degree to which TNCs penetrate the motorcoach market should provide a good test.
  • An editorial in the January, 2015 issue of LCT noted that TNCs did not perceive of driver problems in the long term - because their vision of the future included driverless cars. Quoting Travis Kalanick, Uber's CEO, "Uber will eventually replace the people who drive its cars with cars that driver themselves." Will we soon also have driverless, 45-foot motorcoaches? If so, well-run and creative traditional motorcoach carriers will lose yet another edge.

Are these organizations, their members and their magazines simply crying "Wolf?" Has any of these activities accomplished anything? Hard to tell. But one thing is for sure: TNCs are not the only new players with an eye on the charter and tour markets. Bobit Business Media had insightful and almost overwhelming coverage of TNCs in its Limousine, Charter and Tour magazine in 2014. It is somewhat a consensus in the limousine industry that, with or without TNCs, successful limousine owners will increasingly expand into the motorcoach charter and tour sectors - as they have already begun to do with both large body-on-chassis conversions and small, integrally-constructed motorcoaches.

Yet my two-person firm's office manager/research assistant spends a good deal of her time on social media and website SEO. Do you have even a moderately-sized company with no one with these skills?

Huge versus Unnoticeable

As the reader should have noted from the chronology above, even the taxi and limousine industries did not begin lobbying at the Federal level until June, 2014. Instead, they futilely chipped away at state and local regulators. Only the FMCSA (not even with the same agenda) and our judicial system helped keep the TNCs at bay. Keep in mind how this unfolded in New York City at the executive level - where Uber was not only given the red carpet, but a red carpet as long as it needed, and one its driver did not have to pay very much to drive onto.

We almost always buy either Coke or, Pepsi. Those are what most of the stores, bars and restaurants carry. But the limousine and taxi industries are starting to see new colas all around them. And while these colas may not be as good for your health or safety, you can summon one to your doorstep literally by pressing against an icon on your cell-phone. Your company's sub-regional "app" may help you retain many of those customers in your small service area who would likely use your company's service anyway. But this app will not get you many new customers these days because those outside your service area will not likely have it. But also because your crummy little app is not a household name.

No one buys ketchup. We all buy Heinz "catsup." No one buys tissues. We all buy Kleenex. Following suit, everyone will remember the name UberKoach - or whatever the giant TNC chooses to call its nationwide "network" of charter and tour companies. These realities are a particular problem in an industry where business grows very slowly, mostly through word-of-mouth, and largely because few of us ever do anything creative. Unless the entire motorcoach industry forms a network reachable by a single "app," your business will diminish when UberKoach arrives. Remember, as I have been pointing out article after article: To "win," UberKoach does not have to capture every rider. It only needs to thin your density. Because after a certain point, it will become too thin for you to survive. And when you abandon it, or it shrinks enough, your competitor's density will fatten up like a corn-fed hog on recreational marijuana.

Working with one's competitors is "the new" working against them. We may not have to do much different at the operating level. But we must have a universal app, and a meaningful universal affiliation. And we must find a way to exclude the dangerous, ignorant and sloppy operators from this network. The FMCSA just gave us a huge boost to do this. As one should know by now, it is not wise to kick a gift horse in the mouth. Better to throw it a kiss (or perhaps support its objectives a bit more regularly and more aggressively).

Next time around - the final installment in this theory - I'll share with you some things you can do to compete with the "robots." Before then, it might help to review Part 2 of this series - to glimpse again at the fortune a creative service provider can gain almost overnight with a single brilliant idea - yet how quickly a myopic regulatory agency can snuff it out if it does not adjust to changes.

So before the next installment of this series arrives, you might think about humming a few bars of "I'm in the Mood for Change." Because if you are not in such a mood, you may soon be in the mood for loss.

The opinions expressed in this article are that of the author and do not necessarily represent the opinions of NATIONAL BUS TRADER, Inc. or its staff and management.

Ned Einstein is the President of Transportation Alternatives, a passenger transportation and automotive consortium engaged in consulting and forensic accident investigation and analysis (more than 600 cases). Specializes in elderly, disabled, schoolchildren. Mr. Einstein has been qualified as an Expert Witness in accident analysis, testimony and mediation in vehicle and pedestrian accidents involving transit, paratransit, schoolbus, motorcoach, special education, non-emergency medical transportation, taxi, shuttle, child transport systems and services...

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