Reviving Austin's Cab Industry
ATX Co-op Taxi splits the difference between traditional taxis and ridesharing
By the first Saturday night of South by Southwest, traveling around town had become a disaster for new visitors. On their way out of Austin-Bergstrom International Airport, streams of incoming conference attendees began to realize that the two most well-known transportation network companies – Uber and Lyft – no longer operate in Austin, the effect of the city's May 2016 vote to uphold certain ridesharing regulations. Making matters worse, that Saturday night the city's budding ridesharing scene faced outright disaster when two of its fledgling companies – Fasten and RideAustin – crashed for the entire evening in a failed effort to keep pace with the demand. Coastal techies went berserk. Some pledged online never again to attend the conference. Said one attendee to KUT that weekend: "We ended up having to stand on the street like it was 1995 to get a frickin' cab."
It was certainly a good night for the taxi industry, though. The city's four franchises don't rely on smartphone technology, and were therefore available to pick up the slack when the two TNCs went out of commission. Head out into the Downtown streets that night (or the arrivals level downstairs at ABIA) and you would have seen yellow, white, and blue taxicabs whipping around for new fares. Most prominent, perhaps, were the relatively new lime green cabs belonging to ATX Co-op Taxi. The cooperative franchise, which first went into service last October after a lengthy bout of negotiations with City Council, believes it can combine the stability of street-hail pickups with a commitment to TNC-style technology that more traditional cab companies now lack.
Such a commitment recently manifested in the form of ATX Taxi, the co-op's ride-hail app, which hit iOS app stores last Monday. (Google rejected the bid for reasons pertaining to intellectual property. Co-op board members are currently working on a fix.) The app is modeled much like your standard TNC template. Should it ever fail, as happened with Fasten and RideAustin during SXSW, the co-op can fall back on its full-time dispatch system – staffed with call-takers at an office just like any taxi franchise.
"This is the main reason why we are even created," said Nega Taddesse, a board member. "We don't want to throw away the old traditional taxi service way. But we will also try to be technologically advanced."
Getting to this point has been an uphill battle. Before the co-op was approved, there were efforts from existing franchises to squash any deal from happening. In May 2015, for instance, Yellow Cab circulated a petition to "Preserve Austin Taxi Drivers' Living Wage," with the presumptive warning that a fourth taxi franchise would ruin the longstanding industry. It didn't work. Last summer, after Council approved a resolution to establish the taxi co-op, executives from existing franchises engaged in stall tactics designed to thwart the co-op's progress, telling drivers that it would take months to remove contracted equipment from their cars so that they could join the co-op. The imposition posed an immediate threat to the co-op's future; the city had required that the new entity put the bulk of its permits to use fairly quickly. Co-op organizers threatened to remove the other franchises' systems themselves. Taddesse said the other companies' warnings of delays went away shortly after that.
"[The franchises] still see us as protesters," he says. "They still don't think we are their business competitor now. They don't believe that it's over. And we still have to fight them."
"We Have Not Been Lying"
Austin's private transportation scene drove on a different road map as recently as three years ago. Uber, the largest TNC in existence, had just begun bulldozing its way into the market in time for South by Southwest in 2014. Uber, along with Lyft, its primary international competitor, took up permanent (albeit illegal) residence in the city that June. At the time, the three local cab companies – Yellow Cab, Austin Cab, and Lone Star Cab – had grown used to the dreaded business of squeezing more permits out of City Council, then an at-large body prone to making somewhat illogical concessions for particular franchises (check "Council: Call Me a [Lone Star] Cab!" April 13, 2007).
It would take the city roughly one year to realize the ways in which its strict limits on the number of cabs on the road had been rendered effectively obsolete by the presence of Uber and Lyft. In the era before TNCs, taxi companies unevenly split roughly 900 permits, and it was a rigorous process going before Council to secure more. The TNCs rode into the market without that restrictive barrier to entry. Council eventually passed language making it easier for companies to request additional permits. A 2015 update to the franchise agreements created certain performance metrics (like providing rides to the disabled) that companies could hit to earn more permits. In a Statesman article that March, Yellow Cab General Manager Ed Kargbo issued the city a big I-told-you-so: "The cab companies have been making the argument for years that there was a need for more taxicabs in Austin. [The city] finally found out that we have not been lying."
The city at the time was seeing renewed energy from taxi drivers, who'd awoken from a lengthy bout of industry complacency to find that drivers were quickly losing customers to Lyft and Uber, a decrease in income only magnified by the steep weekly terminal fees that drivers must pay out to their contracting company. Mayor Pro Tem Kathie Tovo, the only holdover from the at-large Council, said momentum began building for industry change before TNCs. She noted the evolution of the Taxi Drivers Association of Austin, the local cabbie union, which was founded in 2009 and partnered with the AFL-CIO in 2013.
"I would really attribute it more … to the drivers themselves becoming more active, more engaged, more organized, and really joining together and advocating for policy changes," she said. "We worked with them to incorporate several of the ideas they suggested into our policies, such as having a clean-up fee. There are a couple of provisions along those lines that addressed some of the needs from drivers who were really struggling financially to make ends meet."
After the re-formed 10-1 Council took over in 2015, the TDAA successfully lobbied to authorize the creation of a brand-new fourth taxi franchise. ATX Co-op Taxi was born from those discussions. It was built to honor a single mission: Each member holds an equal stake in the company. Decisions are made through a voting process, and everybody's vote counts as equal. Members are governed by a nine-person board, which focuses on co-op policy, and each board member selects an appointee to an executive committee (still in formation). Everyone involved with the co-op drives a cab. Because of that, said Hassan Aruri, a former Yellow Cab driver and TDAA board member who now serves on the board of the new co-op, even field actions taken by leadership will be made for the benefit of the entire membership. What's good for drivers is good for drivers.
Since its October launch, the co-op has been the center of driver optimism. Its drivers (as well as a few straw-polled from other franchises) expressed hope that the taxicab industry is now not only here to stay, but in a position to flourish among the TNCs, while at the same time protecting membership interests. "We're not really a private company out there to suck people's money that's not ours," said Aruri. "We're out there for social justice."
The Rubber Meets the Road
The co-op began in October with only 25 drivers in its fleet. Now its lime green taxis are a staple at the airport. Drivers cruise down thoroughfares and Downtown streets. Like Yellow Cab before them, the co-op has successfully used its eye-catching color to boost its on-street marketing. "It kind of had people asking, 'Who is this company? Why am I seeing all these cars everywhere?'" noted Lee Davila, a staffer in the city's Transportation Department.
The co-op's headquarters on Cameron Road offers a glimpse into the enthusiasm drivers have built up in that short time. Drivers rush in and out of the office, filling out information, and going through the process of onboarding as full-fledged members. That includes getting outfitted with a tablet to handle transactions, running a cool $179 each, or around $80,000 for the entire fleet. (The co-op claimed a membership of more than 500 drivers when this story went to press.) That's just one technological investment the co-op has made. Members have also put resources into a newer version of the standard MTData dispatch system. Yellow Cab, said Aruri, uses an older version of that same program. The co-op's model is similar, but has earned positive feedback from tenured drivers.
The co-op has also incurred operational costs. Members hired a general manager to free the board's time up for policymaking (and running fares). But the majority of membership fees go to commercial insurance, which accounts for $53 of each driver's $131 weekly terminal fee; a little over $6,000 from drivers paid to the co-op every year. Aruri, who's been an Austin cabbie for six years, said he used to pay Yellow Cab between $16,000 and $17,000 a year – more than $300 in weekly fees.
When the co-op was created, the Austin Transportation Department equipped it with 548 permits, the most of the four local companies. According to city staff, Yellow Cab currently claims the second highest number of permits (514). Austin Cab has 240; Lone Star has 161. But co-op members question whether the other companies today continue to run at full capacity. City staff can only confirm the estimated number of permits a franchise has, not how many cars each company puts on the road. Representatives from Yellow Cab did not return requests for comment on this story, but the number of drivers defecting that franchise specifically to join the co-op leads Aruri to believe that the other two are having a hard time keeping drivers, an assessment Austin Cab General Manager Ron Means doesn't dispute.
"Of course we are [losing drivers]," said Means, by now a lifer in the local cab game. "Because the city gave out 548 permits to an untested group of people who are charging a lower rate and promising ownership to these guys. Everyone wants to be an owner."
Who Doesn't Want To Be An Owner?
But Means will not concede that the ATX Co-op is the new way forward. What its members don't understand, he said – and haven't understood throughout the co-op's onboarding process – are the potential liabilities it will face when its drivers run into trouble. Means also warned against the hidden costs of running a franchise – like accidents and driver misconduct – that you don't learn until you've run one. "The problem is [the co-op] promised them this low rate, but [the drivers] don't realize they could lose everything they have," he said.
Means said he hopes the co-op stays in existence. The alternative, he said, would hurt the market. He also recalled wanting to form his own co-op in 1984 with drivers from Harlem Cab. The idea didn't come to fruition, he said, due to intervention by the other companies. (His family ended up buying Harlem out, and renaming it Austin Cab.) "We didn't understand the nature of the business," Means recollected. "We didn't understand the costs. We didn't understand the liability. There was a lot of stuff we didn't know. And it's a lot of stuff those guys don't know. They're going to find out one day. They're going to get a big lawsuit, and they're not going to be able to pay it. And it's going to be a big problem."
Taddesse called the idea that the co-op doesn't have sufficient insurance "absolutely false." He said Means' charge is another example of the cab companies thinking "we are just a bunch of cab drivers that just got into a business that we don't know." In addition to liability insurance, co-op drivers are also protected with bodily injury coverage. The co-op offers full insurance coverage to those who wish to buy it.
Lone Star Cab, which won approval from Council in 2007, was conceived as a "hybrid" of the corporate and co-op models. Drivers could choose to buy shares of the company, or simply drive for it, as they did for other franchises. It didn't offer automatic ownership share like the structure at ATX. Solomon Kassa, who runs the company, said Lone Star Cab restructured in 2012 in an effort to make more money. Doing so was made difficult by regulations Council imposed on the company, particularly the strict caps on permit allocation.
Kassa declined to speculate when asked if the co-op's model could be sustainable. He questioned its actual influence, charging that members "didn't change the service" and have done nothing to fill any service gaps. What concerns him more, he said, is what he calls a "double standard" in how the co-op and the other franchises are treated by the city. None of the other companies had the benefit of the "blank check" the co-op was given with so many permits, he said.
So just how successful has the co-op been? The Chronicle filed an open records request to obtain ridership statistics for the three franchises and the co-op over the last six months to find that out. The request remains pending after one of the franchises asked that their statistics be kept private, and sought a ruling from the state's attorney general. An official with the Transportation Department said the franchise's request for an AG ruling is a precedent set by Uber, which successfully argued to the AG that such information is proprietary. Means warned against the validity of such data anyway, especially when it comes to the number of drivers each company currently has on the road. "They're going to lie to you," he said. "Don't even bother writing numbers down, because they're not going to tell you the truth."
The Final Phase
Means, Kassa, and co-op members agree that the industry would rather continue working in the age of TNCs. The co-op's board believes it can survive alongside the new ridesharing movement. Doing so will require that drivers rebuild their reputation as dependable stewards after years of accusations that they provide poor customer service. The sleek interface of the TNCs made cash-only cabs, without access to superior navigation – and whose driver might balk at a short fare – stand out in stark contrast.
"We have to clear this image about this industry, and the cab drivers," said Aruri. "There is really a bad image. We know it. There are certain sectors of this market that have been neglected by actually both cab companies and the TNCs." Aruri noted service to those with disabilities. "When the TNC[s] came … they found a hungry market. That's because these companies were never interested in customer service, were never interested in technology."
One component of community outreach is the co-op's commitment to surpassing the quota for wheelchair-accessible vans: Six percent of the fleet is required to be wheelchair accessible, but Aruri said the co-op has the potential to offer more service. Back at the Transportation Department, Davila complimented the cab industry as a whole, saying that the franchises are often "at the forefront" of disability access. "A regular, average TNC driver, sometimes they're not informed about what certain accessibility requirements someone may need. … [Cab drivers] are constantly making improvements to help out the handicapped community and those people needing accessibility requirements."
With the new app and dispatch system fully operational and a new general manager installed, the co-op's board will refocus its attention toward marketing. That involves partnering with community groups in need of rides. The board has opened communication with People's Community Clinic. "We do want to partner and offer special services to the nonprofit organizations that do outreach to the community," he said. The co-op structure is conducive to that kind of arrangement, he said. Drivers work out themselves what sort of discounts they are willing – and financially able – to provide to riders.
"We want to reach every sector of this market, especially the underserved and underprivileged," he said. "We want to reach out to them. We want to make ourselves available to them. The way [we're] supposed to be."