San Francisco cab drivers are Uber's latest pickup

January 15, 2014: 11:45 AM ET

Uber, Lyft, and other ride-sharing upstarts are transforming a slow-to-change industry from the outside in.

"We're working to improve taxi service to better compete with ride share companies," explains Paul Rose, a spokesperson for the SFMTA.

FORTUNE -- Being a cab driver isn't what it used to be.

The San Francisco Cab Drivers Association (SFCDA), an association for registered taxi drivers that promotes fair working conditions and business practice, reports that one-third of the 8,500 or so taxi drivers in San Francisco -- over 2,800 -- have ditched driving a registered cab in the last 12 months to drive for a private transportation startup like Uber, Lyft, or Sidecar instead.

How have these startups been able to take so many drivers so quickly? Passengers more and more appear to appreciate these startups' superior dispatch technology, ease of use, and competitive pricing. (To wit, leaked information this December proved just how well Uber is doing overall: $1 billion annually in gross bookings, roughly $213 million a year in revenues, and growing.) Indeed, the lack of a central taxi dispatch has long meant some taxis are never connected with some passengers, a frustrating scenario businesses like Uber sidestep with smartphone apps that track the car's location on a virtual map and an ETA. Meanwhile pricing is becoming cutthroat: Late last week, Uber slashed Uber X prices again in 16 cities, including San Francisco, by up to 34%, claiming fare prices cheaper than traditional cabs.

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That translates to a lot more empty cabs. After all, why bother standing on the street corner, hand flailing, when you can perform a few finger taps on your phone? "When 50% of your miles driven are empty, that's a pretty significant number pointing to poor supply management," explains Trevor Johnson, Director for the SFCDA and a San Francisco taxi driver for six years.

Jason Bow worked as a cab driver for two years before he turned to Uber X. Compelled by promises of lower cost overhead, he began picking up passengers last July in his black 2010 Toyota Prius. For a 50-hour workweek driving a taxi, he once pocketed up to $1,250 after expenses. But as an Uber X driver, he makes more for less: a 40-hour workweek nets him about $1,500. But the best perk is Bow's flexible work schedule: He can punch in and out whenever he wants, which jibes well with his filmmaking aspirations. "I get to create my own schedule, and that's what's most attractive to me," he says.

Many cab drivers who still drive registered taxis are seeing income drop. And that income drop is, in turn, causing them to turn to startup solutions. Farid Jaawani has worked as a San Francisco taxi driver for nearly 25 years. But over the last 12 months alone, as companies like Uber rapidly expanded, his annual income took a nosedive. "It went down so fast and too much," he says. Jaawani now supplements his income by cooperating with services including Uber Taxi, but struggles to make the same income he made just a year ago, and chafes against both the competition and the regulation. "This is bullshit, man. I could buy my own car, paint it a different color, put my name on it and pick up people too."

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Even SFCDA director Johnson noticed his income from taxi fares plummet roughly 50% over the last 12 months. Now, he uses Flywheel, an Uber-like smartphone app that shows users the location of available taxis. (Flywheel takes a 10% cut from each fare.) According to Flywheel CEO Steve Humphrey, roughly 1,500 out of all 1,900 cabs on the street in San Francisco use Flywheel to bolster their income. And the number of rides hailed through the app has leapfrogged sixfold over the last six months, although Flywheel declines to offer specific ridership numbers.

To further combat increasing pressure from competitors, the San Francisco Municipal Transportation Agency (SFMTA), which regulates registered taxis in San Francisco, is finally taking action. For four years, the number of San Francisco taxi medallions -- permits to operate a cab -- remained capped at around 1,500, creating an issue of cab scarcity, particularly as San Francisco's population increased with the tech boom. So the SFMTA upped the number of medallions from 1,500 to 1,900 last year. Come end of 2014, there will be over 2,100 medallions total, with new drivers coming from a preexisting wait list.

"We're working to improve taxi service to better compete with ride share companies," explains Paul Rose, a spokesperson for the SFMTA. "That includes putting more taxis on the street." Rose says the SFMTA is also working on providing its own real-time data to third-parties to allow for more Flywheel-like apps, which Rose says such will arrive "soon."

But if the cabbie exodus continues, "soon" may not come quickly enough. Then, the solution may not be catching up with those regulation-bucking, forward-thinking ride-sharing startups, but joining them.

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About This Author
JP Mangalindan
JP Mangalindan
Writer, Fortune

JP Mangalindan is a San Francisco-based writer at Fortune, covering Silicon Valley. Since joining in 2010, he has written on a wide array of topics, from the turnaround of eBay to the evolution of net neutrality. A graduate of Fordham University, Mangalindan has also written for GQ, Popular Science, and Entertainment Weekly.

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