Uber and the Taxi-Cab Business / by kevin murray

I seldom have a need to take a taxi, but when I have taken a taxi the overall experience has been okay.  Sure, I've been ripped off but there are devious people in any business and on the other hand I have had some pleasant conversations.  Taxi-cabs do appear overall to be fairly expensive, but that appears to be because they are heavily regulated, highly structured, and also a business that has a relatively high cost of entry.  There is money being made in this business, but most of the spoils are not going to the actual drivers of the vehicles themselves who are simply trying to make a living, in which their livelihood is most definitely under assault from a new service known as Uber.


Uber is a service that brings the "taxi" to the consumer, and empowers the consumer in the making of his choices of how he wants to get around town. Uber is as simple as using a Smartphone app in which you provide Uber with your location, the type of vehicle that you desire, and Uber will provide you with an estimated time of your pickup and the price of your ride, which varies depending on whether traffic is especially busy and whether you are thereby subject to "surge pricing".    Not too surprisingly, tech savvy people have become some of the biggest proponents of Uber.  Additionally, Uber was successful in receiving a $1.2 billion infusion of cash from an investment consortium, so within a very short time Uber has become a formidable alternative and competitor to the traditional taxi business and possibility the transportation business in general.


Although Uber has done a good job of vetting their drivers and being transparent about their service to their customers, in which by so doing, they have been able to launch successfully their service in major cities around the world, the taxi-cab business has essentially been handcuffed in being able to respond to this valid and formidable competition as their business is both heavily regulated and has significant fix costs.  Additionally, the Uber model essentially "cherry-picks" the best customers and clients from taxi-cab drivers, in which the very people that have the most money and the highest savvy have switched over to Uber.   This spells trouble for the traditional taxi-cab companies and for their drivers.


Even worse for taxi-cab companies is that their retention rate for drivers is sure to drop, to which some of those drivers will willingly work for Uber, and thereby deepening the downward spiral and quality of the traditional taxi-cab service.  While in principle, I agree with the Uber business model, that you as a consumer should be able to pay for private transportation of your own choice and volition, there is also the fact to consider that the playing field is not level, to wit that taxi-cabs are heavily regulated and burdened with those attendant costs, while Uber is not.  Therefore, since the cost of business with Uber is less than the cost of business for taxi-cab companies, Uber can charge their customers a cheaper fare.


There are two ways to deal with this dynamic change in the ride sharing business, one is to simply outlaw Uber or to mandate that they cannot operate in your particular city, as some cities have already done, and the other is to de-regulate the taxi-cab business and to allow the traditional taxi-cab businesses the ability to fight fire with fire, to have their own apps, and their own innovations.  To accomplish this will necessitate politicians and bureaucrats being foresighted and inventive, something that almost seems like an oxymoron.