Regulatory Reforms

Policy Changes To Encourage Transportation Service Competition, Innovation, Diversity and Efficiency


TDM Encyclopedia

Victoria Transport Policy Institute


Updated 29 May 2015

This chapter describes changes to motor carrier and taxi regulations that can encourage competition, innovation, diversity and efficiency.




Regulatory Reform involves changing motor carrier and taxi regulations to encourage competition, innovation, diversity and efficiency in the provision of transportation services. Many jurisdictions have rigid restrictions on transportation services. Firms attempting to introduce a new transportation service, such as commuter express buses, Shuttles and Jitneys or shared taxies, often prohibited altogether or face excessive regulation. Taxi service is often highly regulated in ways that limit consumer choice and affordability (Taxi-L).


Many of these regulations are outdated or unnecessarily restrictive. Although there are reasons to regulate transportation services to maintain quality, predictability and safety, unnecessary regulations can be reduced, and regulation objectives can be changed to address specific problems while encouraging competition, innovation and diversity (Klein, Moore and Reja, 1996).


Transit service Regulatory Reform and privatization are sometimes implemented in conjunction with large reductions in transit funding or without adequate enforcement of service and safety standards, resulting in overall reductions in the quantity and quality of transit service. This can result in shifts from transit to automobile travel, contradicting TDM objectives.


Land use regulations may also require reforms to allow more efficient Parking Management and other Smart Growth policies (Hirschhorn, 2001).



How It Is Implemented

Transportation regulation reforms usually require state or provincial legislative changes, and administrative changes by regulatory agencies, such as motor carrier commissions. Taxi Service regulation reforms usually require changes by regional or local governments. Regulation Reform may face various types of opposition, and so may require Change Management strategies.



Travel Impacts

Increased transit service choice and competition can improve services, resulting in more use of alternative modes and reductions in automobile travel. Actual travel impacts depend on the nature of these reforms, the response by transportation service providers, and the level of demand for new transportation services.


Table 1          Travel Impact Summary

Travel Impact



Reduces total traffic.


Varies depending on conditions.

Reduces peak period traffic.


Some, but not all service innovations are directed at peak-period travelers.

Shifts peak to off-peak periods.



Shifts automobile travel to alternative modes.


Some, but not all service innovations would substitute for automobile travel.

Improves access, reduces the need for travel.



Increased ridesharing.


Some service innovations can be considered a form of ridesharing (e.g., commercial vanpooling).

Increased public transit.


Most service innovations can be considered a form of public transit.

Increased cycling.



Increased walking.



Increased Telework.



Reduced freight traffic.



Rating from 3 (very beneficial) to –3 (very harmful). A 0 indicates no impact or mixed impacts.



Benefits and Costs

Benefits include improved transportation choice and quality of service for non-drivers, and reduced automobile travel. Competition and innovation can increase efficiency, although cost savings may be economic transfers, not true efficiency gains, if competition simply drives down transit operator wages, increasing trips per operator-wage-dollar, without actually increasing productivity. More competitive transit service supports higher-density, urban infill, although some services (such as commuter bus service) may encourage longer-distance commutes.


Costs include transition costs (the costs to agencies of changing their practices), and loss of monopoly profits by some transportation service producers. In some circumstances, inefficient competition can reduce service (although this can be avoided by appropriate regulation). If Regulatory Reform and privatization are used as an excuse to reduce transit subsidies or lack enforcement of service quality and safety standards, there can be a reduction in transportation service quantity and quality.


Table 2          Benefit Summary




Congestion Reduction


Improves transit and taxi service.

Road & Parking Savings


Improves transit and taxi service.

Consumer Savings


Improves transit and taxi service.

Transport Choice


Improves transit and taxi service.

Road Safety


Safety impacts tend to be mixed.

Environmental Protection


Improves transit and taxi service.

Efficient Land Use


Improves transit and taxi service, which encourages higher-density land use, but may also encourage some longer-distance commuting.

Community Livability


Improves transit and taxi service.

Rating from 3 (very beneficial) to –3 (very harmful). A 0 indicates no impact or mixed impacts.



Equity Impacts

Regulatory reform can reduce existing policies that favor particular groups, thus increasing horizontal equity. It can improve affordable transportation options, such as jitney services and lower-priced taxis, which benefits lower income people and non-drivers, and increases basic mobility options. Competition can reduce transit and taxi operator wages, which may be considered regressive.


Table 3          Equity Summary




Treats everybody equally.


Reduces regulations that currently favor certain groups.

Individuals bear the costs they impose.


Can reduce automobile externalities.

Progressive with respect to income.


Improves affordable transportation, but may reduce wages for some middle-income employees.

Benefits transportation disadvantaged.


Improves transportation choice.

Improves basic mobility.


Improves transportation choice.

Rating from 3 (very beneficial) to –3 (very harmful). A 0 indicates no impact or mixed impacts.




Regulatory reforms can be implemented in most geographic conditions. They are implemented primarily by state/provincial and local governments.


Table 4          Application Summary





Large urban region.


Federal government.


High-density, urban.


State/provincial government.


Medium-density, urban/suburban.


Regional government.




Municipal/local government.


Low-density, rural.


Business Associations/TMA.


Commercial center.


Individual business.


Residential neighborhood.




Resort/recreation area.


Neighborhood association.






Ratings range from 0 (not appropriate) to 3 (very appropriate).




Institutional Reform



Relationships With Other TDM Strategies

Regulatory Reforms support and are supported by Institutional Reforms, TDM Programs, Market Reforms, Smart Growth and Least Cost Planning, all of which involve changing current transportation planning and funding practices. Regulatory Reforms can support Taxi Improvements, Transit Improvements and Shuttle Bus service. They may be needed to implement some Rideshare, Commute Trip Reduction, Tourist Transport Management and Campus Transport Management programs that are constrained by existing regulations (for example, rules governing the qualifications of a vanpool or jitney driver).




Existing transportation service providers, including transit agencies, private bus companies with regulated routes, and owners of taxi licenses, tend to oppose regulatory reform. Stakeholders that support reform may include transportation agencies, private bus companies that want to compete on regulated routes, transit user groups (e.g., Bus Riders Union in Los Angeles), government reform advocates, and consumer groups.



Barriers To Implementation

Barriers include the difficulty of creating sufficient political support for change, and the technical difficulties of changing existing regulations and practices. Transportation and taxi service providers that benefit from existing regulations often mobilize significant opposition.



Best Practices

·         Regulatory reform should encourage competition and innovation while protection transportation service quality.

·         Reforms should be implemented predictably, and if necessary, gradually.

·         Businesses and consumer interests should be involved in developing regulatory changes.



Wit and Humor

One evening a police officer pulls a car over and walks up to it. The driver rolls down his window and asks politely, “What’s the problem officer?”

The policeman says, “Your left brake light isn’t working.”

Just then, a women in the passenger seat says, “I told him to take the car in for maintenance last week, but he didn’t bother.”

The driver looks annoyed and says, “Please don’t interrupt.”

The policeman continues, “And I saw you running a red light a few blocks earlier.”

The passenger says, “I told him to stop, but does he listen? No! He keeps right on going.”

The driver turns to her frustrated and says, “Quite down.”

The policeman adds, “And just before the light I clocked you driving 50 in a 30 mile-per-hour zone.”

The passenger leans over again and says in a shrill voice, “I told him to slow down. But did he listen? No! He always ignores me.”

The driver turns and yells exasperated, “Hey, didn’t I just tell you to shut up? Now, don’t say another word or you’ll be sorry.”

The police officer then looks at the women and asks, “Does he always talk to you this way?”

“Only when he’s been drinking,” she says.



Examples and Case Studies

Taxi Deregulation Trends (Kang, 1998)

Taxi service has been deregulated in many countries, including the U.S, U.K., New Zealand, Japan, South Korea, Australia, The Netherlands and Sweden. As an example, The Swedish Transport Policy Act of 1989 provided the framework for the deregulation of the industry in 1990, suggesting that the best service for the lowest economic cost would be supplied by a deregulated taxicab industry subject to free market forces. Deregulation of the Swedish taxi market was carried out in five steps:


1.       Barriers controlling entry were removed, so that an operator can have as many taxicabs as desired. This relieved the county councils of their former task of estimating the demand for taxi services in each operating area.

2.       Fare controls were removed, so that taxi companies became to be able to set their own fares. However, they were required to inform customers about the fare prior to trips, and taxicabs must be equipped with receipt writing meters.

3.       The requirement for all taxicabs to belong to a radio booking centre was abandoned. At the same time, in order to stimulate competition between centres, publicly owned centres were established in the market as an alternative to the existing privately owned centres.

4.       Geographically restricted operating areas were eliminated.

5.       Strictly regulated operating hours were removed.


Many U.S. cities have partially or wholly eliminated local taxi regulations during the late 1970’s and early 1980’s. These included San Diego, Seattle, Phoenix, Portland, Sacramento, Kansas City and Milwaukee, as well as some smaller cities of significant size such as Tucson in Arizona, Oakland and Fresno in California, Raleigh in North Carolina, etc. Further discussions on taxi deregulation are still on going in America, and it has occurred or tried in several cities in 1990's, including Indianapolis (1994), Houston (1995), Denver, Hartford and Boston.



Indianapolis Taxi Regulation Reform (Moore and Rose, 1998)

In 1991, the city of Indianapolis created at Regulatory Study Commission (RSC) to implement regulatory reforms. One of its major achievements was to reduce unjustified regulation of the city’s taxi services.


Like other large U.S. cities, Indianapolis's taxi industry was heavily regulated, yet the quality of service was poor. Long waits were common after calling for a taxi, particularly in lower-income areas. Taxi fares for long trips were higher in Indianapolis than in many other major cities. A small number of companies dominated the Indianapolis taxi market. Only 392 cabs were permitted to operate in the city. One company controlled more than half of those licenses, and competition among cabs was limited. A substantial number of the licensed taxis were not in service at most times on an average day. Owners of a taxi license make most of their money from regular fares, so investing in wheelchair accessibility made no sense. The city did not allow specialized service, so the disabled had to use expensive private ambulances for door-to-door trips.


Minority organizations supported reforms. The restrictions on taxi licenses, fares, and service levels all but prevented low-income drivers from starting their own cab companies, and reduced the quality of service in lower-income neighborhoods.


The RSC rewrote Indianapolis taxi regulations with an eye to increasing competition. This included the following changes:

·         Removed the overall limitation on the number of taxis that can be licensed.

·         Allows taxi companies to set fares, with some constraints on maximum fares.

·         Eliminates arbitrary rules, such as requiring taxi drivers to wear a special badge and cap, and specifying the number of seats taxis could have.

·         Allows taxis to "cruise" for customers.

·         Provides greater flexibility in safety regulations.

·         Allows special taxis to carry passengers in wheelchairs.

·         Allows jitney businesses greater operational flexibility.

·         Allow jitney businesses to provide a "charter service."



References And Resources For More Information


John Boroski and Gerard Mildner (1998), An Economic Analysis of Taxicab Regulation in Portland, Oregon, Cascade Policy Institute (


GTZ (2003), Sustainable Transportation: A Sourcebook for Policy-Makers in Developing Countries, (, by the Sustainable Urban Transport Project – Asia ( and Deutsche Gesellschaft fur Technische Zusammenarbeit ( In particular, see Modules 1b (Urban Transportation Institutions), 3c (Bus Regulation and Planning) and 6 (Resources for Policy Makers).


Joel S. Hirschhorn (2001), New Community Design to the Rescue, National Governor’s Association (


Choong-Ho Kang (1998), Taxi Deregulation: International Comparison, PhD Dissertation, Institute for Transport Studies, The University of Leeds (


Daniel Klein, Adrian Moore and Binyam Reja (1996), “Free to Cruise: Creating Curb Space for Jitneys,” Access, No. 8 (, Spring 1996, pp. 2-6.


Daniel Klein, Adrian Moore and Binyam Reja (1997), Curb Rights: A Foundation for Free Enterprise Urban Transit, Brookings Institution Press (


LEDA - Legal and Regulatory Measures for Sustainable Transport in Cities (


Todd Litman (2005), Smart Growth Policy Reforms, Victoria Transport Policy Institute (; available at


Richard Meakin (2003), “Urban Transport Institutions,” Sustainable Transport: A Sourcebook for Policy-makers in Developing Cities, published by the Sustainable Urban Transport Project – Asia ( and Deutsche Gesellschaft fur Technische Zusammenarbeit (


Adrian T. Moore and Tom Rose (1998), Regulatory Reform at the Local Level: Regulating for Competition, Opportunity, and Prosperity, RPPI Policy Study No. 238


Robert W. Poole, Jr., and Michael Griffin (1994), Shuttle Vans: The Overlooked Transit Alternative, #176, Reason Public Policy Institute (


Jonathan Richmond (2001), The Private Provision of Public Transport, Kennedy School of Government, Harvard University.


Schaller Consulting ( provides information on taxi regulation and policy.


M. Sohail, D.A.C. Maunder and S. Cavill (2006), “Effective Regulation for Sustainable Public Transport in Developing Countries,” Transport Policy, Vol. 13, No. 3 (, May 2006, pp. 177-190.


Taxi Study Panel (1999), A Study of the Taxi Industry in British Columbia, BC Ministry of Transportation and Highways (; available at


Taxi-L Website, ( provides links to documents and links related to taxi transport.

This Encyclopedia is produced by the Victoria Transport Policy Institute to help improve understanding of Transportation Demand Management. It is an ongoing project. Please send us your comments and suggestions for improvement.




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