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Bad Regulations and Worse Responses: Part 1 - Introduction

As Originally published by National Bus Trader, June 2015.

By: Ned Einstein
Tel: 212-766-1121
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Like every mode of public transportation, and for almost every aspect of our society, the motorcoach industry has, over the decades, been affected significantly by regulations. Some of these experiences were challenging yet produced dramatic results that, among other benefits, have saved us money. One terrific example is that modern motorcoaches dump perhaps one percent of the particulates into our environment than they did a mere two decades ago. Here, the regulations, though challenging, were at least realistic. But our industries' (and other bus modes') responses to it - effectively our engine manufacturers - were far more important than the regulations: Their responses were magnificent.

Such has not always been the case. In general, some regulations have been helpful, others have not been. Some (like three-minute idling limits) are annoying, and sometimes, unrealistic. In NYC, they just became obscenely punitive: Beginning April 1, 2015, the City's countless under-employed citizens armed with cell-phones can capture proof of an excessively-idling motorcoach, and submit the evidence to the appropriate regulatory agency, they can recoup 50% of the often several-hundred-dollar fines collected from these vehicles' owners - fines which grow with every successive episode. Given the fact that our engines burn so exponentially cleaner than they did two decades ago, this pogrom's accomplishments are trivial, and the program reeks of nothing but political bravado and industry harassment.

In between such extremes lie the majority of regulations and responses. Not surprisingly, there has been considerable disagreement among members of our community and the regulators about the contents and consequences of many of them. But the more important story is how our industry has responded to these regulations.

Questionable Goals and Serious Risks

Because of the sudden urgency of anticipating a radically-new regulatory environment being created in response to a new and rapidly-expanding form of service (Transportation Management Companies), the series of installments to follow will call upon the members of our community - operators, manufacturers, suppliers, insurance carriers and even journalists - to begin thinking about, and developing, responses to regulations that have yet to be created. This is a new and unique situation I doubt we have ever before faced. But it is a serious-enough situation to command us to do a far better job than we often have in responding to new regulatory provisions, and changing our operating environment and duty cycles to mirror them.

The phenomenon triggering these regulations, and the responses to incursion into traditional public transportation territories, have differed radically from State to State. The penetration of new, profitable and often far-more technologically-sophisticated versions of existing services have been coined, by their creators, as "Transportation Network Companies" or "TNCs."

Those TNC's with the most public exposure and deepest impact on our existing services - both here and in at least 50 other countries -- are exemplified by largely-Google-controlled Uber. Another similar creature is Lyft. But what members of our community may not know is how deeply this phenomenon had devastated the first mode it began penetrating - the traditional taxicab industry. What few motorcoach owners may also not know is that TMC's have also begun to dabble in our community: One California Company, Blinkcar, recently began a pilot program to provide charter service, deploying large body-on-chassis minibuses.

If this experiment proves profitable, it makes sense that we will soon face spiraling competition from less-costly services deploying full-size, body-on-chassis "cosmetic" motorcoaches (commonly referred to as "over-the-road" buses) - marketed brilliantly, and outfitted with digital technology (such as "apps" provided free to potential Uber passengers). Yet these services, in most case, also rely on underpaid and marginally or untrained driver, with no fringe benefits, little or no training, marginal insurance coverage, and in most cases, no industry "entry fees."

Thinning Densities and Diverting Passengers

For a quick glimpse of what is likely in store for us by the TNC's impact on our industry, we merely have to look at what has happened to the nation's taxicab industry from the intrusion of TMCs into their market. I will deal with this subject, in more detail, in a subsequent installment. Otherwise, TNCs have had their most intense and disruptive impacts on the traditional taxi industry within the past six months.

As a context for understanding how disturbingly and uncontrollably the TMC phenomenon has impacts the taxi industry, we need merely look at the ways in which mayors and city councils try to balance supply and demand - by limiting the number of taxies in a given service area so that (a) their customers can obtain taxi service with relative ease and at affordable costs, while (b) the service area is not so flooded with vehicles that their drivers do not spend most of their time "deadheading" in search of passengers (losing money, polluting our air, and wearing out our roads in the process). Most cities optimize this balance by controlling the entry process - often charging nominal fees, monitoring the quality of service, creating standards for drivers and owners (usually not the same people), and only allowing additional vehicles to enter the market to improve upon the delicate balance of supply and demand.

The barely-regulated entry of Ubers, Lyft and other TNC's into the traditional taxi market occurred virtually unabated. Most cities and States were unprepared for it, and the differences in the regulations their elected officials created in response to it have been noteworthy. In the past, the entry of traditional taxicabs has been rigidly enforced, and regulatory agencies have been established to monitor, evaluate and enforce driver, owner and vehicle compliance with the regulations created for them. In comparison, those few regulations created for the new TNC's (covered in a subsequent installment) have often been vastly different in almost every aspect, from training to insurance requirements - with entry levels rarely addressed at all. Few constraints have been placed on TNCs at all, much less fairly and successfully. Instead, the explosion of TNCs into our public transportation environment has effectively caught local and State governments with their pants down.

Most adversely affected has been New York City's Manhattan borough, where entry into the taxi business carefully monitored to strike a balance between supply and demand. As recently as six months ago, entry into the taxi business required the purchase of a taxi "medallion," which cost roughly $1,000,000 per vehicle. To cover this investment, drivers commonly pay $200 per 12-hour shift to lease a taxi, and often work 72 hours a week in six 12-hour shifts to carve out a marginal living of roughly $30,000 or so - before taxes. Now, with their densities thinned substantially by the deluge of unregulated, usually "owner-operated" Ubers (most taxicab drivers cite a 30% decrease in ridership), traditional taxi drivers are literally being starved out of the business. Not surprisingly, many drivers are abandoning their jobs in traditional taxi companies and jumping into their personal cars to become Uber drivers -- avoiding the exorbitant fees required to amortize the obscene cost of traditional taxi medallions.

But traditional taxi drivers were not the only victims of this unabated intrusion. While Uber drivers may eke out a bit more profit in certain service areas (in other cases, they are paid $12/hour for an 8-hour shift), the owners of NYC medallion cabs have taken an economic bath. Most NYC taxi owners possess hundreds of vehicles, some owning close to or more than 1000 vehicles (an investment that had risen to a billion dollars in value only a short while ago). In six months these investors' "medallions" have been devalued by 50 percent. At this rate, and with densities so thin that soon almost no traditional driver can even afford to operate one, the value of these medallions could bottom out to practically nothing. They could be gone by Christmas.

Knocking on the Doorstep

Because of the public transportation industry's uneven record in reacting cleverly to regulations - good, bad and obscene - the motorcoach industry is at great risk of being eaten alive by the TNC phenomena. But before it is devoured, even a slight thinning of its density will compound other problems, including burdensome regulations, affecting the industry - like recent requirement for the installation of three-point seatbelts. Add to this the talk about dynamic rollover testing (and the weight that may likely have to be added to a motorcoach roof's structure to pass such tests), plus the fact that States are increasingly placing motorcoaches on truck scales (because overloaded axles cause dramatic damages to roadway surfaces). If all these things come to pass - and many or most are likely to - we may soon have to both remove seats and deal with thinner passenger densities -- in vehicles of higher cost and with fewer seats. How long do many of you think you can stay in business under such constraints?

Future Installments and Future Insights

Clearly, it is to our advantage to crease a template for regulating the TNC's entry into our business, and working politically at the State and local levels to see that such templates are used as models for creating regulations that will keep us "In the Game." Another less-likely approach would be to dramatically alter and exponentially modernize our industry's structure - although this is easier said than done.

The next dozen or so installments of National Bus Trader will examine the regulations imposed on a spectrum of public transportation modes, and provide a brief analysis about how these modes have responded to them. Frankly, most modes have done a poor job at this, and their members -- operators, manufacturers and suppliers alike -- have suffered greatly - just as New York City's taxicab owners and operators have suffered greatly from the combination of its costly medallion system and the unabated, medallion-free entry of Ubers into the Borough of Manhattan. The questionable NYC medallion system has made taxi owners vulnerable to incursions from outside services for which no entry requirements - much less any fee-based entry requirements - have been asked to comply with. As a consequence, these new services (and others like them) hold a phenomenal advantage over existing services, and may (and likely will) put them out of business almost effortlessly - and almost certainly before these traditional services manage to react to these dynamics.

It is my hope that we can learn from glimpses of the many poor regulations imposed on public transportation services, and the less-than-perfect responses so many of their target audiences have made to these regulations and the operating environments that they have altered, often dramatically. These regulations (or the lack of them when and where they were needed) can define an environment in which our survival will be difficult. From this analysis and history of mostly failure, we can begin to learn how to both prevent unfair and intrusive competition, and to learn how to both prevent unfair and intrusive regulations, and how to respond to them if and when they emerge.

George Santayana, the revolutionary liberator of Mexico and famous philosopher, poet and novelists is credited with an observation that has often been repeated and paraphrased: "Those who fail to remember the past are doomed to repeat it." If we to fail to learn from both our past failures and successes, we are bound to fail as well. While I myself generally commute by commuter-express motorcoach between my Manhattan and country office weekly, this highly subsidized intercity bus trip is at little risk of being replaced by a TNC operator. But if I decide to take a tour or charter trip, I shudder at the notion of having do so in a TMC coach.

Perhaps, as the bus community we are, littered with experienced and often brilliant members, we can catch this impending disaster before it strikes us down. Or we can adapt in ways that will give the new players a run for their money. But this will take a lot of thought, a lot of work, a lot of political activity, and likely some financial investment. And it may take a few lawsuits along with way. It will certainly take leadership. But if we do nothing, we are likely to go the way of last year's taxi industry -- which may soon be just a memory.

So we must do something. It is my hope that looking at milestone regulations imposed on follow modes, and their reactions to them in the past, will provide both some insights into, and stimulating ideas about, what we can do to keep this menace from gobbling up our industry alive. But if we stand idle against this new wave of highly-digital with lower costs, better user-to-system interfaces, and far lower requirements for vehicles, maintenance, regulatory compliance, training, management, safety and insurance, we will be mere fodder for their invasion. This is especially true if our regulators undervalue our superior vehicles, safety, customer service, and decades of experience but, instead, simply accommodate an ignorant general public of existing and potential passengers hypnotized by a cadre of attractive but superficial features that wean then away from services of far more genuine value.

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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