Krupp on Uber

Jason Krupp writes:

Rapid technological change is more often than not a painful thing, littered with the bodies of those firms and industries that failed to adapt – just ask Kodak, Betamax and former mobile phone giant Nokia.

That painful change is brewing again, this time in the form of next generation of transport technologies, such as the Uber. For those unfamiliar with the firm, it effectively lets anyone become a taxi driver using their own car through a proprietary mobile payment and passenger matching system.

It is a disruptive change that threatens taxi industries across the globe, and has been greeted by protests and anger from the incumbents. French taxi unions and drivers, for example, recently brought Paris and much of France to a standstill to demonstrate against Uber by blocking roads, tipping cars and burning tires.

To some degree, the rage is understandable when you consider that the protestors have made significant investments in taxi medallions, vehicles and businesses in the belief that the revenue model is stable and they could earn a profit. Readers might also feel inclined to topple cars in the streets of Paris if they had paid NZ$385,000 for a taxi licence only to have their lunch stolen by some uppity tech firm from California.

But equally understandable is the rage of customers, who have had to bear the brunt of ever rising taxi fares. New Zealand is not exception, and has the unenviable distinction of being the most expensive place in the world to catch a taxi, despite being deregulated in 1989. Indeed, Christchurch, Queenstown, Wellington and Auckland all rank in the top 10 for least affordable fares. These fares compare poorly with ridesharing according to an admittedly limited comparative test by Consumer NZ, which showed Uber rides in Wellington were significantly cheaper than taxis.

I’d say 25% or more cheaper.

The price differential is explained to some degree by over-regulation, such as the one introduced by then-Transport Minister Steven Joyce that taxis must have a camera installed to prevent crime. Another is the requirement that metered taxi operators have 24-hours dispatches. The effect of both these rule and others has been to limit competition by tipping the market in favour of large well-capitalised taxi operators, and against smaller incumbents to the detriment of passengers.

This safety issue is an important one, because the industry is likely to argue it vociferously as the New Zealand Taxi Federation has done with the use of smart phones as a metering device. (Under New Zealand law, Uber has to offer a fixed price for a trip). Industry groups are likely to push the case that if taxis need to install cameras by law, then Uber drivers must do so too.

Remember these cameras were not put in to protect passengers, but to protect drivers. Now if taxi companies thought they needed to protect their drivers better, they could have just done so by choosing to install them. But they lobbied the Government to make it compulsory, and now are using it to argue Uber drivers should be forced to have cameras also.

Yet this line of attack fails to consider the nature of the Uber service. Passengers have to pre-register to make use of the service, as do drivers since Uber is the financial intermediary between the two.

Yet this line of attack fails to consider the nature of the Uber service. Passengers have to pre-register to make use of the service, as do drivers since Uber is the financial intermediary between the two.

Exactly. Uber does not do casual pick ups. You can not hail an Uber down in town. You have to pre-register and order one through the app. So it is ridiculous to claim Uber drivers should be forced to install cameras.

The Cato Institute recently published a paper that looked into whether ridesharing apps like Uber and competitor Lyft are safe in the US. The paper found that while there were legitimate safety concerns for passengers, they applied to the industry as a whole, and the vetting procedures used by Uber and Lyft were superior to those of the taxi firms. Likewise, Uber and Lyft drivers enjoyed significant advantages over their taxi compatriots as far as crime was concerned because they operated on a cashless-basis.

In NZ, all drivers get rated on a one to five star scale. A driver who averages below 4.5 stars will get dropped. And if you give a rating of just three stars (or less), they will personally contact you to investigate. That makes me feel incredibly safe – 10 times more than a camera in a car.