November 25, 2014
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Aim of PUC: Preserve reasonably-priced taxicab, PMV services statewide
Thomas Kogut

Opponents of the creation of a price floor for public motor vehicle service have charged that the Division of Public Utilities and Carriers (Division) is limiting transportation options for consumers.  The reality is just the opposite.

Taxicabs and public motor vehicles (PMVs) are legally defined as distinct industries in Rhode Island. Taxicabs are restricted by territory, which allows for service to be extended beyond the lucrative urban areas to suburban and rural areas of the state. Taxicabs are also rate regulated and must meet strict vehicle age and mileage standards to ensure quality transportation experience for passengers. Until the advent of the new rules, PMVs have faced no rate regulation, no territory restrictions, and no vehicle requirements. This is true, because, when PMVs were first defined in state law, they were envisioned as a “premium” service that one would commonly associate with limousines and “black car” sedan services.

The problem is that some PMV operators have been capitalizing on the lack of rules and regulations to function exactly like unmarked taxicabs, in many cases with retired taxicabs that have surpassed the industry’s age and mileage limits. This “race to the bottom” has already had a noticeable impact on the taxicab industry, where the statewide taxi fleet has been reduced by about 20 percent in the last several years.

If we are witnessing the demise of the taxicab industry in Rhode Island, why should anyone care? The answer comes back to the preservation of consumer choice. Taxicab operators have invested capital to meet a requirement to provide transportation services within a particular geographic area.  PMV operators have no such obligation.  Make no mistake about this issue, if PMVs are allowed to operate as, essentially, unmarked taxicabs, legitimate taxicab companies which don’t want to be forced out of business will have one choice: rip off their roof lights, yank out their taximeters, strip away their vehicle markings, slap on “Public” license plates, and join the PMV feeding frenzy in high-traffic areas. In the end, the inevitable result will be fewer for-hire vehicles (of either type) operating outside of the downtown areas of Providence and Newport.  The Division’s establishment of a price floor is designed to ward off this outcome and preserve reasonably-priced taxicab and PMV services statewide.

As background on the matter, after years of working with the taxicab and PMV industries to find a regulatory approach to eliminating the growing destructive competition between the two groups, the Division in 2012 sought General Assembly approval of statutory language that directed the agency to establish a price floor and set minimum vehicle standards for PMVs. The establishment of a $40 price floor is far from the “shortsighted-protectionist—only-in-Rhode-Island” measure, as it has been characterized in recent commentaries. In fact, many other jurisdictions have turned to a minimum charge to mitigate such industry inequities. For example, the price floor for PMV-like livery service in New Orleans is $90; in Miami and Portland, Oregon it is $70, the same amount currently being considered in Dallas.

The legislation in question had overwhelming support from the taxicab industry, and, more-telling, from significant portions of the PMV industry. Not surprisingly, only those “unmarked taxicabs” operators opposed the idea. Once the law was passed, the Division started a lengthy rulemaking proceeding that incorporated a number of suggestions raised through public comment and testimony at two public hearings.  In fact, the Division changed many of its originally proposed rules following the initial public hearing, after determining that many of the suggestions offered by the PMV industry represented better solutions to some of the Division’s regulatory concerns.  To continue to work with the PMV and taxi industries, the Division granted a petition to re-open a discussion of whether the $40 figure is the appropriate threshold for Rhode Island.  

Finally, there is the misconception that the State developed these rules to somehow protect taxicabs from competition and, moreover, to block the market entry of an internet-based transportation broker. That is simply not the case. The Division has been working for years to create a more harmonious relationship between the taxicab and PMV industries in Rhode Island, with an eye toward ensuring the best, most abundantly-available transportation services possible, for all Rhode Islanders.  With both transportation services functioning well, and within their statutorily established transportation arenas, consumers will be able to exercise a greater range of choice for their transportation needs, whether that ride is arranged at a street curb, a taxi stand, over the phone, or via a smart phone app. 

It is the Division’s belief that the establishment of a reasonable price floor for PMVs is essential to achieving this goal.  Efforts to eliminate this price floor will, if successful, result in the demise of taxicab services to much of the State, and, ironically, a dramatic increase in rates for those former taxicab passengers now compelled to utilize PMVs.  

Thomas Kogut is Associate Administrator / Legislative Liaison with the Rhode Island Division of Public Utilities and Carriers


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