App-based ride services lure drivers from S.F. cab companies

Sal Albowyha checks under the hood of a DeSoto cab at the end of its shift in the company garage in S.F. Sal Albowyha checks under the hood of a DeSoto cab at the end of its shift in the company garage in S.F. Photo: Sarah Rice, Special To The Chronicle Photo: Sarah Rice, Special To The Chronicle Image 1 of / 27 Caption Close App-based ride services lure drivers from S.F. cab companies 1 / 27 Back to Gallery

Nearly everyone who's tried to catch a cab on a Saturday night in San Francisco or summon a ride downtown from the Sunset knows that the city's taxi system has been badly stressed for years. And now, with the influx of unregulated competition from Uber, Lyft, Sidecar and other transportation network companies, the cab business is beginning to crumble.

Taxi companies are having trouble filling shifts, veteran drivers are bailing out and going to work for the app-based ride services, and people interested in hauling folks around the city for a living are heading to the upstart startups instead of the cab companies.

"Every cab company I know of is having a huge problem filling shifts - including mine," said Hansu Kim, owner of DeSoto Cab Co.

Kim estimates that a quarter to a third of all taxi-driving shifts are going unfilled. "I couldn't possibly begin to quantify it," said Christiane Hayashi, the San Francisco Municipal Transportation Agency's director of taxis and accessible services. "The taxi companies don't even know. But what I can see is a serious problem related to driver shortage."

But business is apparently booming for the new ride services, which have thousands of cars on the streets and are on a hiring spree, with billboards and online ads enticing drivers with promises of making up to $40 an hour and setting their own schedules.

How many new cars are for hire is impossible to determine because the companies aren't required to report the numbers or names of the drivers or vehicles they put on the streets - and they aren't talking about the details.

Taxi drivers, who have been taking photos of license plates of ride service cars, estimate the number at 3,000. Some industry observers think that number may be closer to 5,000 - and growing as the new ride services engage in lively recruiting campaigns.

"They've flooded the streets with too much supply," said Trevor Johnson, a taxi driver and a director of the San Francisco Cab Drivers Association. "It's already the Wild West out there. Go down Polk Street on Saturday at 10 p.m. and every car out there is for hire. It's gridlock."

State PUC sets rules

San Francisco's Municipal Transportation Agency, which oversees all things transportation-related, including taxis, would like to regulate the ride services - and the cab industry has repeatedly called on it and the Police Department to do so. But the state Public Utilities Commission, which regulates passenger carriers such as limousines and buses, has asserted jurisdiction, and cleared the road for the services to continue.

After a series of hearings, the commission last fall issued regulations requiring each company to obtain a license from the PUC, conduct criminal background checks and establish driver training programs, have zero-tolerance drug and alcohol policies, and conduct 19-point vehicle inspections. They also must have a minimum $1 million worth of insurance for each driver and vehicle, on top of a driver's personal insurance. That minimum is more than what's required of taxi and limo companies. But there's also been confusion and concern over when drivers are covered and whether their personal policies cover them.

Before new drivers can get behind the wheel of a taxi, they have to go through a four-day private taxi school plus a single day of MTA training.

Taxi drivers and cab company owners have a long history of not getting along, but they're united in their opposition to the newcomers. They say the PUC regulations are minimal, essentially allowing anyone to haul passengers for money in their personal cars with a minimum of rules and red tape. That makes it easier for ride services to hire drivers, they say.

"Who wants to go through the process of getting a license and going through training when you can just get a couple of apps and start picking up people in your 1999 Mazda?" Kim says.

While the new ride services are battering the taxi industry, they're a boon for folks just wanting to get a ride around town - even to longtime taxi aficionados like Lee Houskeeper, a publicist who doesn't own a car and considers himself friends with Luxor Cab Co. owner John Lazar.

Houskeeper, who takes cab rides daily, said he became a convert to UberX, one of the new mobile phone services, after Lazar installed an app on his phone and asked him to check out the competition. Houskeeper said it's usually easier, cheaper and speedier to summon a ride with Uber.

Upside and downside

"Aside from the convenience of hailing a ride with your smartphone, they come rather quickly, you can tell when they're coming and you get great receipts," he said. "Plus, these drivers are so enthusiastic and most of them drive new cars."

The downside, Houskeeper said, is that many of the drivers are new and often don't know their way around the city, relying almost entirely on GPS.

"You have to put up with the fact that most of the drivers started yesterday - or in the last two months," he said. But that's a small price to pay for the savings, Housekeeper said. His most common trip - a ride from his Twin Peaks home downtown costs $17 or $18 with Uber compared with $25 in a cab - unless the service is using its controversial "surge pricing" when rates double or triple when demand spikes.

"It's a significant difference," he said, noting that he feels badly about deserting his friendly cab company. "But I've weaned myself from taxis."

While the dramatic shift in the local ride business is clearly affecting taxi companies - especially their ability to attract drivers - the long-term impact is less clear. Taxi companies say they and their drivers are still making money - especially from people who flag them down on the streets.

And the MTA is still selling medallions - taxi licenses - and increasing the number of cabs on the streets. Last year, 1,500 taxis were on the streets, but that has increased to 1,900 this year and will rise to 2,100. For years, despite widespread complaints about the dearth of taxis, drivers fought against more medallions, arguing that it would affect their ability to make a living.

"We have ourselves to blame," Kim said. "As an industry, we did not meet the service demand," said Kim. "For years, every survey showed we were undersupplied by at least a thousand cabs."

'People still want taxis'

But is it too little too late? Dan Hara, a taxi consultant in Ottawa, issued the report in April that MTA relied on when it boosted the number of medallions. Hara recommended putting up to 800 more cabs on the streets. He thinks the industry can survive in San Francisco and elsewhere.

"People still want taxis," he said. "There is a demand out there. The taxi industry will survive, but it will have to change."

Hayashi also believes in the taxi business, and said the MTA is trying to help ensure its future. In addition to selling more medallions, it's cutting red tape to make it easier to hire drivers and get them behind the wheel quickly, and it hopes to persuade the PUC to allow the MTA to limit the number of ride-service cars in the city and require a decal to prove a vehicle has passed inspection. All taxis are now outfitted to take credit cards, and soon all will be connected to Flywheel, a mobile phone app that allows people to hail cabs.

"I'm hoping this crisis elevates the industry into one that provides much better customer service," Kim said.