VARs Caught In NYC Taxi Tech Showdown

For a city that's relatively cosmopolitan and awash with money to fund cutting-edge conveniences, New York has always had antiquated taxi cab technology. Visitors are routinely shocked to discover that NYC cabs don't accept credit cards: New arrivals at JFK airport had better be prepared to fork over $50 in cash for a trip to Manhattan.

That's set to change soon, with taxi owners facing a Jan. 31, 2008, deadline to implement new state-of-the-art technology systems that will automate trip tracking, process credit cards, and feature a passenger information screen displaying news, sports and weather updates. But in the face of such a technological sea change, drivers are pushing back. A 48-hour strike by the New York Taxi Workers Alliance began Wednesday, temporarily thinning the city's cab fleet and drawing attention to driver complaints about the new systems' costs and potential privacy infringements.

The Taxi Workers Alliance, which represents around 9,000 of the city's 44,000 taxi drivers, has two main gripes and a host of minor ones about the new systems. Its top complaint concerns the costs they'll inflict on drivers. Credit card companies charge merchants a percentage transaction fee for their processing services, a cost that will be directly passed on to cab owners. Many New York taxi drivers lease their vehicles from fleet operators, paying a per-shift rental fee and keeping whatever revenue they earn above that. Fleet operators are allowed to deduct up to 5 percent of credit-card transaction totals to cover their processing fees, a cost that their drivers will have to absorb.

Drivers are also speaking out about the tracking technology that will be implemented in the new systems. The New York City Taxi and Limousine Commission (TLC), which governs the city's 13,000 licensed yellow cabs (known as medallion taxis for the permits they require to operate), is requiring automated tracking of all metered trips, replacing the paper trip logs drivers currently maintain. The Taxi Workers Alliance argues that such tracking tools are the thin end of the Big Brother monitoring wedge.

"Basically, the Taxi and Limousine Commission wants to spy on drivers, and they want the drivers themselves to pay for it," Bhairavi Desai, executive director of the Taxi Workers Alliance, told local newspaper Newsday.

But technology integrators involved in the multi-year project say it's being misconstrued. Accepting credit cards will increase drivers' revenues enough to offset processing fees, and the new tracking technologies aren't being put to any nefarious uses, they argue.

NEXT: Solution Providers Feel The Heat

Creative Mobile Technologies (CMT), based in Long Island City, New York, is one of four solutions providers authorized by the city to provide the new taxi systems. Medallion holders had until Aug. 1 to sign up with one of the four vendors. Around 5,000 contracted with CMT, and more than 1,100 of those cabs are already equipped and operational, according to CMT President and COO Jesse Davis.

In the year it spent pilot testing and the three months it's had early-adopter cabs up and running, CMT has logged more than 2 million trips and amassed a trail of data on the new systems. Once drivers begin actually using the new systems, they're usually won over by the benefits, Davis said.

"It's brought corporate America back into the taxi cabs," Davis said. "They're getting fares they never got before, they're larger fares, and they tip better. We know the average credit-card fare is just under $20, where the average cash fare is just under $10. We don't know the average cash tip, but on the credit cards, it's just under 23 percent."

In its Request for Proposals back in 2005, the TLC laid out detailed specifications to which the new taxi technology systems would need to conform. Within those parameters, vendors were left to develop their own technology bundles and strategies for monetizing the systems. While each of the four is working with different hardware, software and telecom providers to assemble its solution, all have incorporated advertising into their revenue plans to offset the direct costs to medallion holders of equipping their cabs.

CMT is absorbing all of the upfront costs of refitting its contracted cabs, which Davis estimated at $3,000 to $5,000 per vehicle for the equipment alone, and relying on advertising to carry it into the black. The company has partnered with Clear Channel and NBC Universal, which will provide content for the cabs' passenger information screens and sell ads against it.

It's a risky plan, Davis acknowledged: "CMT's business model was, 'We make the investment in the hardware and technology and gamble that advertising is going to make this whole program work."

Taxi advertising has had a rocky past. Clear Channel sells ads on small billboards and LED screens that sit atop taxis, but slow demand has kept the toppers off most city taxis. Interior taxi advertising has met with even less success so far. A 2000 project by Yahoo and Palm to bring Internet-connected, ad-bearing devices to a handful of taxis fizzled after a six-moth pilot test.

But with all NYC taxis required to carry the new systems, market penetration soars and ad dollars will follow -- vendors hope. VeriFone Transportation Systems, which is mixing an advertising model with a monthly fee from the medallion owners it contracts with, has already signed advertising deals with MasterCard, ESPN, Panasonic and the ABC Network, according to a company representative.

Like CMT, VeriFone TS has enrolled 5,000 cabs in its program and equipped 1,000 so far. The company, headquartered in Long Island City, is a joint venture between electronic payment solutions provider VeriFone and taxi equipment manufacturer Taxitronic. Other partners contributing to VeriFone TS's taxi systems include GPS (global positioning system) developer Garmin, storage vendor MicroNet, and content providers WABC-TV, ESPN and Zagat Survey.

CMT's solution uses terminal hardware from vehicle specialist Mobile Knowledge, modems from Feeney Wireless and data services from Sprint, tied together with a lot of custom development. Davis worked with Clear Channel on the user interface design for CMT's passenger terminals and built a custom .Net application with a SQL Server backend to store the years of electronic trip records vendors are required to maintain.

It's the trip-tracking technology that Davis feels has been most misunderstood in the strike brouhaha. The new systems all feature GPS technology with the potential to be abused, but vendors insist that it's purely hypothetical threat.

"In theory you could sit there and trace a car everywhere it goes," Davis said. "The reality is that by contract and design, you can't do that."

Contract terms strictly restrict TLC access to records from metered trips: if the meter doesn't go on, no automated record of the trip is recorded. The city agency will have no real-time access to location information for individual vehicles. Fleet owners will potentially be able to track the whereabouts of their cabs with greater precision, but that kind of technology is inevitable, David feels: "It's no different than having a LoJack or OnStar. UPS and other drivers, and all the trucking companies, have had this for years, and you never hear complaints."

The efficacy of the Taxi Workers Alliance strike is unclear. Unlike the 2005 subway strike that completely shut down NYC's main transit system for three days, the taxi action has not completely cut off cab service: plenty of yellow cabs roamed the city picking up passengers Wednesday and Thursday. The strike has succeeded in drawing customer and media attention to drivers' concerns about the new taxi technology, but it's unlikely to hinder its adoption.

"We've provided taxi drivers with two significant fare increases in return for customer service improvements. Our administration has the utmost respect for drivers and we've treated them fairly. Now, we're asking for the same," Mayor Michael Bloomberg said in a press statement earlier this week. The TLC remains committed to its schedule for the system rollouts, which calls for cabs to have the system installed within their next inspection cycle, which runs from Oct. 1 to Jan. 31.

"In the long run the strike will have limited or no impact as the drivers realize the true benefits of the system," VeriFone TS Vice President of Sales and Marketing Jeff Karasyk said via e-mail.

After years of planning and testing, Davis is eager to see the technology upgrade project come to fruition. "This is a really good opportunity to do something for the industry," he said. Davis expects to take several years to recoup in advertising sales the per-car system installation costs, but once that debt is worked off, he intends to cut owners in on an advertising revenue share.

"In the [contract] renewal years, my commitment is, 'I pay them,'" he said.