LTFRB still trying to get a grip on Grab

BY BEN KRITZ, TMT, Manila Times, Jun 11, 2019

IF it seems to be a little more difficult to get around town starting this week, it is likely because ride-hailing service Grab was to have removed about 8,000 active drivers from its platform on Monday due to those operators not obtaining a transport network vehicle service (TVNS) franchise by a June 7 deadline. The Land Transportation Franchising and Regulatory Board (LTFRB) has called on Grab management to explain the large number of “colorum” drivers in a hearing today (June 11).

The larger problem underlying all this is that transportation demand overwhelmingly outweighs supply. After helping to speed up former rival Uber’s exit from the Philippine market, Grab has established a virtual monopoly and has become a vital part of the transit infrastructure, at least around Metro Manila. The platform is well-organized and on the whole managed efficiently, and offers a variety of additional services (such as food delivery) that have in combination with a good deal of bureaucratic fumbling allowed Grab to secure an almost unassailable grip on the market.

Unfortunately, there is simply not enough of it, and although Grab could make a few strategic improvements that would relieve the situation, the blame for the severe supply-demand imbalance not surprisingly lies with the LTFRB. The public transportation regulator has been behind the learning curve on how to deal with a model like Grab for far too long. For the sake of meeting public demand as well as easing its own workload, the agency should strongly consider simplifying its approach.

According to LTFRB data, there are currently slightly more than 45,500 legal TVNS drivers, those who either have a certificate of public convenience or provisional authority (meaning the final certificate is still in process and not yet awarded, but the eventual approval is presumed). As there is no competition to speak of, all of those are assumed to belong to Grab. Grab on the other hand has about 35,000 active drivers, of which 8,000 have been deemed “colorum” and removed from the service.

On top of that, the LTFRB has said it will open 10,000 more slots for TVNS drivers. Assuming that some sort of compromise can be made (it should be) to legalize the recently active but not registered drivers, who would fill most of the new TVNS slots, from the LTFRB perspective there is a shortfall of 12,500 Grab operators. The most expedient solution to soaking up some of the demand, LTFRB Chairman Martin Delgra 3rd reportedly suggested, is for existing Grab drivers to work full-time, and for those drivers who have a TVNS certificate but are not active to put it to its intended use.

Delgra has a point, but so does the commuter advocacy group The Passenger Forum, which took exception to Delgra’s suggestion in a statement over the weekend. Many Grab operators do it on a part-time basis, and that is in fact a key feature of the whole ride-sharing model: To extend the use of cars that are already on the road anyway, therefore increasing public transportation capacity without increasing the number of vehicles, and coincidentally provide a source of additional income for drivers. Taking away that flexibility essentially just creates a large, slightly altered form of taxi service and cancels out the advantages of the ride-sharing model.

It would be foolish to suggest that some level of regulation over ride-sharing services is not needed, but the regulatory outcomes so far have been unsatisfactory. The existing service is not even close to meeting actual demand, and the commuters who have come to rely on it are ultimately penalized by higher fares.

Rather than attempt to regulate ride-sharing at the granular level of individual operators, it might be more efficient for the LTFRB to delegate those responsibilities to Grab itself, and simply focus on regulating the service provider. Grab already imposes its own requirements and standards for its operators; extending that to cover the requirements and standards imposed by the LTFRB should not be technically difficult, and reduces the number of entities the government needs to regulate from 50-plus thousand to one.

Making this change would also quickly solve the supply shortage. Instead of determining a fixed number of TVNS slots, the LTFRB would allow Grab determine the appropriate number; after all, the service provider is in the best position to assess market needs and respond to them quickly.

Although it does not appear likely at this point, if a serious competitor to Grab does emerge, the arms-length regulatory structure would make that competitor’s survival and success much more likely. Only a service provider with sufficient organizational stability and competence could be given the regulatory duties, which would eliminate all but the best-developed platforms.

ben.kritz@manilatimes.net