Fargo Should Absolutely Deregulate The Taxi Industry

Earlier this year the North Dakota Legislature passed legislation to clear the way for ride sharing service Uber to enter the state’s communities. Existing taxi companies weren’t thrilled, which has been a theme of Uber’s growth across the globe.

Many were quick to dismiss the anger of the existing companies as nothing more than rank protectionism. A desire not to have to compete with a new and technologically advanced way of doing business. While much of the opposition to Uber is exactly that, some of it is perfectly valid concern over Uber getting different treatment than its competitors.

You see, the cab companies in Fargo are upset because they’re being regulated in ways that Uber – essentially the same sort of service – is not. For instance cab fare rates in North Dakota’s largest community have to be approved by the city government, but Uber has a special dispensation from the state to charge whatever they like.

So the solution, it seems to me, isn’t to block Uber from entering markets like Fargo but rather to deregulate the existing cab companies. An idea which seems to be on the agenda:

A request to raise taxi rates in the city has led city commissioners to rethink the way they regulate the industry in light of ride-hailing companies such as Uber.

City Auditor Steve Sprague told commissioner tonight that they must deny Lucky 7 Taxi Service’s request because city laws require all taxi companies to agree to a rate hike, which led him to wonder why the city didn’t let them set their own rates.

The law seems outdated, he said, because Uber drivers also provide rides for hire but the city is not allowed to regulate Uber; the state does that.

Gosh, private business owners being able to set their own prices? What do you think this is, a free country?

All joking aside, this is a refreshing development from government which typically tries to solve problems related to too much regulation with more regulation. But the news isn’t entirely good. While there does seem to be some appetite in Fargo’s municipal government for ending cab fare price controls, they seem to be stopping short of eliminating them.

“Sprague said he would prefer letting taxis set their own rates but cautioned that the city probably wouldn’t want them to be able to dramatically raise rates during peak-demand periods as Uber does,” the report continues.

Uber’s congestion pricing – raising prices when demand for rides is high – is a sound business practice, and sound economics. Essentially Uber is getting its customers to pay drivers more for working during peak demand hours or during bad weather. There are no doubt more Uber drivers willing to work the hours around when the bars close, or during bad weather, because they get paid more.

That Uber’s customers have to pay more for greater availability of rides is just how the market works. Uber isn’t a public utility. Nobody is forced to use Uber.

And if Fargo deregulates traditional cab companies, letting them set their own rates, there will be a more robust sort of competition for rides which will benefit all.