OTTAWA —To many economists and consumer advocates, the debate over whether to let Uber, the hyper-aggressive $18-billion San Francisco upstart shaking up the global taxi industry, operate in B.C. should end in a resounding yes.

More competition and choice should, in theory at least, mean better service and lower prices in cities like Vancouver, where it’s often maddeningly difficult to find a cab.

So why are B.C. provincial and municipal politicians, who represent millions of people, tripping over themselves to defend a relatively tiny number of taxi licence owners?

Uber, which uses a smartphone app to link customers to semi-independent drivers, suggest it’s all about politics.

They say a powerful industry “cartel” using lobbying and campaign donations to keep up protectionist barriers around an outdated industry model.

Defenders of the status quo argue it’s a question of fairness for existing taxi owners and drivers, and consumer safety.

Whether it’s based on a principled policy stand or just hardball politics, that political support has been on display since Uber, which was blocked by the B.C. government when it tried to enter the market in 2012, recently began running ads in B.C. seeking drivers.

B.C. Liberal Transportation Minister Todd Stone promised a major sting operation to catch and fine Uber drivers if the company launches operations without permission — though the utility of fines is questionable, given Uber’s willingness to pay them for their drivers.

Then New Democratic Party leader John Horgan one-upped the Liberals by proposing legislation to toughen fines for those who violate provincial legislation governing the industry.

“Online companies should not be allowed to bypass these rules, putting passengers at risk and undercutting our locally owned taxi industry, which supports thousands of B.C. families,” Horgan said.

Vancouver politicians have also been outspoken industry defenders.

Geoff Meggs, Vancouver’s lead councillor on the issue, said the city is obliged to protect holders of taxi licences which were originally acquired for fees of a few hundred dollars, but now can fetch close to $1 million.

The Vancouver industry, made up of Yellow Cab (249 taxis), Blacktop (197), Vancouver Taxi (77) and MacLure’s (65), has agreed under pressure from the city to modernize to meet increased demand, according to Meggs.

“So having won that commitment from the taxi industry, I’m not ready to turn around and say, ‘Let’s bring in some new player from outside the regular system who could liquidate their investment in 12 months.’ ”

The question of compensation for licence holders also comes up. There are no legal precedents obliging governments to compensate licence holders after deregulation, states a 2007 report by the Paris-based Organization for Economic Cooperation and Development. However, the report notes how politically difficult it would be to deregulate.

Taxi owners are politically active and often “an articulate and well-organized political bloc, which made it difficult for politicians to take on the issue and introduce change.”

Even ordinary consumers who allegedly pay higher prices in a regulated market might sympathize with current licence holders, said Benn Proctor, a Simon Fraser University graduate whose recent master’s thesis levelled a devastating critique of taxi regulation in Vancouver.

“Some members of society would believe it patently unfair to cause severe financial losses to anyone through regulatory change.”

However, the argument for choice is attractive from the point of view of fares alone.

“Anything that gives consumers more choice in the area of transportation, and in the taxi industry in particular, is very welcome,” said Bruce Cran, the Vancouver-based president of the Consumers’ Association of Canada.

Proctor said licence owners profit at the expense of consumers, especially “low-income people and elderly people who use taxis more than other groups.”

The OECD report states strict government regulation in most cities around the world decreases supply, hikes prices, and transfers wealth from consumers to licence holders.

“Rising licence values represent continuing and increasing transfers from consumers to taxi licence holders as a result of the policy of supply restriction,” said the OECD, a think-tank funded by Canada and 33 other wealthy countries.

Critics note that in B.C. and elsewhere, the taxi industry donates money to politicians of all stripes, hires high-cost lobbyists, and engages in other political activities to expand its clout.

An added factor in B.C., they say, is the significant political influence of the Indo-Canadian community that is a big player in the regulated B.C. taxi industry.

“Clearly, the taxi industry has governments and politicians in their pocket,” said economist Jonathan Rhys Kesselman, who holds the Canada Research Chair in Public Finance at Simon Fraser University’s School of Public Policy.

•

Carolyn Bauer, general manager at Yellow Cab and head of the Vancouver Taxi Association, said politicians are just enforcing the law rather than taking sides.

“There isn’t a politician in British Columbia who is going to say it’s OK to break the rules,” she said.

Ottawa-based economist Dan Hara, an industry expert who has done contract work cities and the taxi industry, said his support for a regulated industry is based on the need to protect the public interest and public safety.

The industry was regulated during the depression of the 1930s — and re-regulated after failed experiments in opening up the industry in some U.S. cities in the 1970s and 1980s — to guard against price-gouging and unsafe vehicles driven by untrained and sometimes uninsured drivers, according to Hara.

And some media coverage about Uber has fuelled those concerns, including a focus on the company’s ‘surge’ pricing policy that allows for much higher charges during busy periods, resulting in some shocking charges. Earlier this month in North Carolina, a woman was charged $432.34 for a ride that was more than eight times the fare charged by regulated cabs.

“We have to make a place that doesn’t bring back old, known evils, which is the unlicensed, uninspected, uninsured taxi drivers,” Hara told The Sun.

Hara warns about safety and insurance issues, citing the Dec. 31, 2013, death of a six-year-old girl who was hit in San Francisco by a Uber driver.

Uber, insists it is not a transportation company, but a service provider linking consumers to independent drivers. It said it wasn’t legally responsible for the girl’s death because the driver wasn’t transporting a passenger at the time.

As for the gouging allegation, spokeswoman Arielle Goren said Uber uses a “dynamic pricing model” or “surge pricing” that allows higher charges during morning and evening rush hour, bad weather or on special days like New Year’s Eve and Valentine’s Day.

She said users are notified in advance that surge pricing is in effect and noted that the company has agreed in writing not to violate New York State’s law against price gouging — which takes effect when there are major disasters.

On safety, the company stresses that drivers are carefully screened in terms of their driving and criminal records, and customers are sent a text message before the ride with a photograph and passenger rating of the driver, she said.

There is also the broader argument that more cars on the road “means never hanging out on a dark, deserted street corner trying to catch a ride,” the company said.

•

Both sides play politics as well as argue about policy.

Proctor calculates the taxi industry has made at least $146,000 in contributions to different parties — the Liberals and NDP provincially, and Vision Vancouver and the Non-Partisan Association municipally — since 2006.

That doesn’t include the recent disclosure that the Vancouver Taxi Association donated $53,500 to Vision and $32,875 to the NPA — a huge leap from the $12,000 contributed to the NPA and $6,000 to Vision in the previous election.

The industry also spends money to bend political ears in the corridors of power.

Craig Jangula, one-time aide to former B.C. Liberal minister Mary McNeil, has since early September had 10 meetings with ministers and other officials to discuss the taxi association’s desire for a “clear and predictable regulatory regime that ensures safe conditions for passengers and maintains a level playing field for all operators to ensure the long-term health of the industry.”

Uber has been no slouch on the lobbying front either. In August, it hired David Plouffe, U.S. President Barack Obama’s 2008 campaign guru.

His job: Sell the company to “policy-makers and the public” while fighting against the “Big Taxi cartel (that) has used decades of political contributions and influence to restrict competition,” according to Uber chief executive Travis Kalanick.

In Vancouver, about the same time, Uber recruited Earnscliffe Strategy Group’s Bruce Young and Brittney Kerr to bend ears in Victoria.

•

An added dynamic in B.C.’s Lower Mainland is ethnic politics. The Indo-Canadian community is a crucial player in major political events such as mass membership drives during leadership battles in federal and provincial parties.

“The Indo-Canadian community (is) a powerful stakeholder group and voting bloc, and politicians have shown they don’t want to get on the wrong side of that group,” said Proctor, author of the SFU master’s thesis.

Bauer and Mohan Kang, head of the B.C. Taxi Association, downplayed the role of ethnic politics.

“I fully agree, yes, the Indo-Canadian people are more active in politics,” Kang said.

But on the debate over Uber, “politicians are looking at the larger picture, what society wants,” Kang said.

“If there wasn’t a public safety issue, they wouldn’t take a stand.”

Indeed, Uber also faces resistance in cities where immigrant groups have less political clout. In Ottawa, for example, the city has taken a strong vocal stand against the company and has already charged two Uber drivers.

Montreal Mayor Denis Coderre has denounced Uber as “illegal” and vowed to stop it, while municipal officials in Toronto have sought a court injunction against Uber, alleging the company jeopardizes public safety with untrained drivers who use vehicles not authorized for taxi work.

Despite the criticism, Uber has created a sense of inevitability that it will ultimately get its way, and its $18-billion market valuation suggests the approach is working.

It claims to operate in 230 cities in 46 countries, including Montreal, Ottawa and Toronto.

And it has shown a willingness to swat away fine-imposing authorities like flies, using its enormous resources to pay their drivers’ fines.

One Uber driver in Ottawa, an Ethiopian refugee and deacon in a Coptic Christian church, says he can earn $60 to $80 a day.

But he acknowledged he is concerned about getting caught and fined, though he said he hoped Uber would cover that cost.

The company’s gambit appears to be to enter a market without permission — a Vanity Fair profile quoted an early Uber investor as saying of CEO Kalanick: “It’s hard to be a disrupter and not be an asshole” ­— and then to create enough of a loyal following to make it politically difficult for authorities to oust it.

That dynamic was boosted lately when two Hollywood actresses, Jennifer Morrison and Lana Parrilla, urged Vancouverites on Twitter to support Uber.

So while Uber must overcome legal hurdles if it is to survive in Canada, it is a company that has captured consumer interest and has a wave of momentum that may be hard to stop.

poneil@postmedia.com

Twitter.com/poneilinottawa

Click here to report a typo or visit vancouversun.com/typo.

Is there more to this story? We'd like to hear from you about this or any other stories you think we should know about. CLICK HERE or go to vancouversun.com/moretothestory