U.S. Transportation Chief Elaine Chao indicates self-regulatory route for autonomous vehicles likely to continue.
LCT Newsmaker Q & A
BOSTON – As the new President of the Taxicab Limousine & Paratransit Association (TLPA), veteran limousine executive Michael Fogarty must handle a tough agenda for 2015.
The competitive onslaught from Transportation Network Companies has disrupted ground transportation industries like nothing before. While taxis, limousines, shuttles and para-transits are all legal and licensed vehicle-for-hire businesses, there are many obvious differences. But they all have one thing in common in trying to compete with a common opponent that operates without equal and consistent regulations, and as of this writing has an estimated valuation of $40 billion.
In the last two years, TNCs have partially eroded the market share of traditional ground transportation by avoiding or modifying regulations that should fully apply to them as well. This enables TNCs to charge lower rates, or fares, and undercut their competitors.
Industry leaders such as Fogarty are tasked with a vast educational effort about TNC safety and service problems while working to achieve regulatory parity on multiple federal, state and local government fronts. His challenge is to lead the various sectors to put aside any differences and unite to stop the TNC juggernaut whose business model depends on destroying legal, regulated transportation businesses.
Fogarty, the CEO of the Americas division of Tristar Worldwide Chauffeur Services, based in Boston, formally started his term on Oct. 18, 2014 and will serve through October of this year. He recently spoke with LCT Magazine about the challenges ahead, and how the TLPA can benefit taxi and limo operators alike.
FASTFACTS: Michael Fogarty
Question: As an executive for one of the largest chauffeured companies in the world, why did you join and volunteer to work in the TLPA?
Answer: I attended a TLPA conference in the early 1990s and was very impressed with the regulatory update given by Al LaGasse (TLPA CEO) and Ken Butler (TLPA legislative counsel). They provided a lot of valuable information at the time that I hadn’t seen from other organizations. I met with many operators with diverse businesses, and the educational sessions were all well attended. I also was impressed by how the members were willing to share best practices and exchange ideas to help others grow their businesses.
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Q: As a TLPA President from the limousine industry, how do you balance and reconcile the demands of the limousine and taxi industries in your leadership role?
A: The TLPA has three division steering committees representing the three market segments of the for-hire transportation industry: taxicab, limousine and paratransit. These break down to about 50% taxicab, 25% limousine and 25% paratransit in TLPA’s membership. Each steering committee oversees the educational and legislative agendas for that division, and each submits reports on the divisions at board meetings. If there are any conflicts among divisions, it’s discussed and resolved at the board level. I’ve been involved on the limousine steering committee and on the board for well over 10 years, and have been a member for over 20 years. There have been only been a handful of issues where there’s been any conflict. I was a director for six years, became vice president for three years, then president-elect, and now President. I’ve participated as co-chair for different committees for limousines, taxicabs and paratransit. During the years you are vice president or president-elect, you become familiar with the issues and members of the divisions. It’s a great process that sets the organization up for success.
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Q: Why is it a good idea to group limousine operators and taxicab operators into the same trade association? Specifically, how does the TLPA serve the limousine operators?
A: On the vast majority of issues, the taxicab, limousine and paratransit divisions are all aligned. We have the same goals. Nothing highlights that more than the TNC issue we face today. The TLPA serves limo operators by giving them a larger voice in the government corridors of Washington, D.C. It’s such a broad constituency that can create more influence in D.C. In terms of other benefits, I’ve seen operators diversify their businesses based on knowledge gained at TLPA seminars and events. I know a great number of taxicab, limousine and paratransit operators who have all started businesses in one or both of the other sectors. The TLPA has a longstanding presence on Capitol Hill. Paul Miller and Ken Butler are our lobbyists from the Miller-Wenhold lobbying firm, and we’ve had ongoing representation for more than three decades.
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FASTFACTS: Taxicab Limousine & Paratransit Association
Q: Media reports indicate taxi business is down by 65% in San Francisco. By TLPA estimates, to what extent have TNCs grabbed taxi business overall? How can this business be recouped?
A: Those numbers came from an incorrect interpretation of data. Basically, taxi authority staff looked at the wrong data sets for that comparison, and the media has since corrected the story. But it is true that the industry in San Francisco, at least my impression from talking with operators, is that business is down between 25-35% depending on the fleet. The taxi industry has been particularly hard hit in California, as Uber is charging 40% below the taxi fare on most trips. This is Uber’s way of stealing market share by undercutting the competition, which makes you wonder what they’ll do if they are the only ones left standing. How high will they go, and what’s to stop them from gouging customers on every trip, and not just during bad weather or an emergency? Uber is basically running trips at a loss to take market share. One of my concerns, and one many limo operators share, is they can use the same strategy in the corporate market to gain share. So if you want to see an issue where all of the organizations representing the limousine industry need to band together, that’s a major one.
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Q: How do you think the TNCs are affecting the limo industry and in what ways can the taxi and limo companies work together?
A: In terms of how they are affecting the limo industry, Uber has changed customer expectations. Clients expect on-demand service, lower rates and immediate billing. There’s been a movement among corporations to reimburse travelers for Uber rides. To me, it demonstrates that Uber is making inroads into the corporate market. From conversations I’ve had with travel managers, they are aware of the risks in using an unlicensed, not properly insured service, but pressure from travelers and senior executives have forced them to make a place for Uber in some company travel policies. Morgan Stanley, for example, just announced the inclusion of Uber in its travel program. They will regret it when someone gets hurt at the hands of one of Uber’s uninsured uberX drivers, but that’s where we are right now.
The for-hire vehicle industry is at risk from Uber’s model, which doesn’t meet public safety and licensing requirements. We need to educate the public and our clients about the regulations we follow strictly, and about the risks associated with unlicensed TNCs. We need to make sure we provide facts — not sensationalize it, but just give real facts. Where don’t they meet standards and why is it a risk? At the same time, we need to adopt more technology in our own businesses and continue to evolve. App technology isn’t going away. The customers love it. We need to make sure they love our app technology as much as Uber’s, and that they love our service and safety more than anyone.
We’ve been sharing information on what’s effective in educating regulators and the public for several years, and we’ve been communicating with the media. Sharing such messages that resonate can assist limo operators as well. As more and more operators become aware of the issues and work on issues locally, they can then work on it nationally. TLPA has done an enormous amount of groundwork over the past two years, and is now consistently mentioned in the media as the major foe to Uber. We all benefit from the TLPA’s knowledge and experience in the fight.
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Q: How would you define the “fairness” issue among unregulated TNCs and traditional “for hire” businesses such as limousine and taxi?
A: Fairness is all providers complying with their city or state’s public safety requirements, licensing, fees, and tax payments. Uber innovated with a better app, and it’s fine for them to use it to their advantage. But they need to comply with state and local laws for all aspects of the for-hire services they are delivering. They state they are not a transportation company, but that’s nonsense. If you ask a customer, they are “taking an Uber,” not “booking a limo company through Uber.” The customer believes they are a transportation company, and they are correct: Uber is a transportation company. I think operators are making adjustments and adopting more technology. We can and will compete effectively with Uber and Lyft as long as Uber and Lyft follow the same rules in providing for-hire transportation service. If they don’t pay fees and taxes, purchase primary commercial automobile liability insurance coverage, if they don’t do proper criminal background checks and licenses, and if they don’t make sure their vehicles are properly inspected for commercial service, then Uber and Lyft are given a significant competitive advantage and are able to deliver service at different price points than licensed operators. Unfortunately, the low price points are built on the backs of their drivers and on an unwitting general public, with unpaid fees and taxes and a major lack of insurance coverage.
So, do you regulate Uber as limos or taxis? It depends on the market and rules where the TNCs are operating. In many instances, a TNC is a limousine acting like a taxicab, and that generates some confusion. In creating a TNC category, it depends on how stringent the rules are. You must have 24/7 primary auto liability insurance coverage and driver licensing that includes fingerprinting and law enforcement background checks to assure public safety. There is a significant cost to meeting these public safety requirements. All operators should bear those costs equally.
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Q: Recognizing that the insurance industry may come up with a product for the TNCs, what is the problem with the present insurance situation?
A: Private auto insurance does not cover commercial for-hire transportation. An umbrella insurance policy for excess liability is not meant to be primary coverage offered to victims in an accident in a commercial vehicle. If Uber is able to convince the insurance industry to create part-time commercial and part-time personal liability policies, then all kinds of new coverage issues will develop. How will the insurance industry know if a driver had an app on or off? A driver could say one thing, Uber say another. There is no independent proof. Also, it’s been documented that Uber drivers are routinely providing trips not accessed via the app. They just pick up on the street. The driver doesn’t understand the risk, and neither does the passenger. It’s like walking a tightrope without a net — it’s all fine if you get to the other side ok, but disastrous if you don’t. So even if some new policy is created, those cash trips will not be covered at all by either the private or commercial insurance, which will create a whole new insurance issue for the public and our industry. That’s why all commercial transportation services in all for-hire industries are required to carry primary commercial auto liability insurance 24/7 so that the public is insured 100% of the time, without question.
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Q: In what ways can the TLPA and the National Limousine Association work together on the TNC issue?
A: I’ve had discussions with a number of NLA board directors and its leadership about sharing information, both from a public relations and a legislative standpoint. At a minimum, it really makes sense to share messaging to make sure we have consistent communications out there. We have a common opponent, so we have to be together on this issue. I’m confident we can provide a united front in Washington, D.C. and that the TLPA and NLA will unite to combat illegal transportation operations that don’t comply with public safety and licensing requirements. For example, the TLPA has an ongoing program that includes a number of days where members go to Capitol Hill, meet with lawmakers, and work the issues. It’s a targeted approach for specific issues with specific members to further our causes. I’d like to see coordination with the NLA to make our voices even louder.
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Q: What do you see as the long-term technology solutions to the TNC challenges for the limousine and taxi industries?
A: The on-demand apps are clearly here to stay. The public has embraced them. It will be part of the fabric of the ground transportation industry. I do see them becoming distilled into fewer and better apps that most operators tie into. I see some consolidation within the industry as a result of market changes. Both app products and transportation companies will consolidate. I’ve seen a number of products out there with great potential that provide the same functionality as the Uber app. I don’t think any one app has emerged as the undisputed leader among licensed transportation companies yet.
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Q: If you could be regulation czar, what would be your vision of an ideal regulatory universe for taxis, limos and TNCs to all co-exist and compete?
A: The current system works well and holds commercial operators accountable for the services they provide. Ideally, TNCs would fit into the taxi or the limousine requirements depending on the geography they are servicing. To create separate regulation for TNCs with less stringent requirements for driver background checks, insurance, and vehicle inspections is a terrible policy. I believe strongly that elected officials who opt for this “regulation-lite” approach are only putting constituents at major risk. So TNCs really must be required to meet the existing public safety and licensing requirements. If everyone can operate under the same rules, then that creates fairness and a level playing field. If that happens, I’m all for healthy competition. Uber wants to knock us down with one hand tied behind our back, and too many elected officials are cheering them on without educating themselves about the risks.
TLPA HISTORICAL TIMELINE
1917: A small group of taxicab operators met in Washington, D.C. and formed the National Association of Taxicab Owners (NATO). NATO was born of the need to protect operators from the encroachment of the federal government, which proposed to levy a 5% tax on the gross receipts of all companies operating three or more taxicabs. The new association presented its views before Congress and the legislation was not adopted.
1919: First national meeting of NATO was held.
1938: Taxicab industry survives the severe financial difficulties during the Great Depression and forms the Cab Research Bureau. Based in Cleveland, the CRB was developed to compile and provide statistical information on the industry, rate information, and interpretation and analysis of operations data.
1942: CRB affiliates with the National Association of Taxicab Owners; a second national organization called the American Taxicab Association (ATA) was formed to represent the newer, smaller taxicab companies in the U.S. The postwar years saw the widespread adoption of the two-way radio, considered the greatest innovation in the taxicab industry since the taximeter.
1947: NATO and ATA formed a joint committee to deal with the problems created by the proliferation of requests for radio frequencies within the industry.
1966: Representatives of NATO and ATA met in Bal Harbour, Fla., and merged their organizations into one, forming the International Taxicab Association (ITA). The officers and board of directors were elected from the U.S. and Canada and represented large, medium, and small companies.
1975: First convention of the International Taxicab Association was held in Toronto.
1976: ITA moved its base of operations from Chicago to the suburban Washington D.C. community of Kensington, Md., to be closer to the federal government.
1978: Alfred Lagasse joins the organization and becomes chief staff officer and then CEO, a position he holds to this day.
1990: ITA made the historic decision to add livery to its name, marking the diversification of the association’s representation to include all for-hire providers of local ground transportation.
1991: The association created three membership divisions for its members in 1991 that still form the basis of the organization today. The Taxicab Division focuses on meeting the needs of taxicab companies, the Limousine & Sedan Division represents companies that provide upscale transportation service, and the Paratransit & Contracting Division concentrates on meeting the needs of paratransit and non-emergency medical transportation services.
2000: By overwhelming membership vote at its 83rd Annual Convention & Trade Show, the International Taxicab & Livery Association became the Taxicab, Limousine & Paratransit Association. This new name more clearly identifies the different types of transportation companies the association has grown to encompass.
2014: Michael J. Fogarty, Americas CEO of Tristar Worldwide Chauffeur Services and a veteran limousine company executive, is elected as 2014-2015 President on Oct. 18 at the TLPA’s annual convention in San Antonio, Texas.
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