UBER – EMPOWERING TAXI DRIVERS AND CUSTOMERS

Stone the crows! Licenses to run up money on the meter aren’t what they were and taxi owners know it.

Last week cabbies turned out all over Europe to protest the arrival of Uber, the app based system that connects passengers with drivers who aren’t in licenced cabs and transport passengers for an agreed fee.[i]

Uber is already an alternative to taxis in Sydney.[ii] Gosh I wonder why? For as long as the Crows can remember, Sydney taxis have done a terrific job for the community they serve – the people who run the networks and own the licence plates. Between 2002 and 2012, an under-supply of taxi plates and regular fare rises increased payment system Cabcharge’s profits by 400 per cent.[iii]

But for passengers, service and availability is patchy at best. Nearly a third of a survey sample said a booked cab had not turned up.[iv] And the poor devils who drive, but don’t have the $400,000 licence it not so long ago took to buy taxi plates, work grinding hours for $27,000 a year.[v]

As the Independent Pricing and Regulatory Tribunal puts it:

Licence lease values need to be reduced so that barriers to entry will be reduced, entry into the taxi industry made more affordable. Fares will also become more efficient as the proportion of fare revenue allocated to licence lease costs fall, because the licence lease cost is an economic rent rather than an efficient cost of providing taxi services.[vi]

But not too much of a reduction mind. The people who run the networks and own the plates are keen on keeping their rent. In a submission to an IPART review, the NSW Taxi Council accused the agency of wanting fares frozen and the prices of plates reduced: “The blind pursuit of this type of ideology is having real impacts on the livelihoods of taxi business owners and families, and is forcing good operators out of the market. The result is ultimately that good people will leave this industry and standards will decline as a consequence.” The Taxi Council concluded with statements from taxi licence owners, explaining how change would unjustly reduce their modest incomes.[vii]

They should be glad they aren’t in Melbourne, where the Napthine Government will now rent taxi plates for $22,000 per annum; they used to trade for $500,000.[viii] While the Victorian government has fined drivers who do not have taxi/hire-car licences for providing rides via the Uber network, Taxi Services Commissioner Graeme Samuel (yes the same Samuel) says there could be a role for ride-share drivers who are licensed.[ix]

But regulators and the industry’s owners are arguing over the spoils of irrelevance. The days when the state can ration the right to drive people where they want to go and where only companies with dedicated comms infrastructure can put passengers in touch with drivers are ending, if not over, thanks to Uber and its equivalents.

Phone-based app operations allow prospective passengers to have a relationship with drivers they like and know where they are when they want them. The relationship deals out the corporate comms networks the existing industry depends on, empowering drivers and cutting their costs.[x]

Of course, the state government can legislate to licence these entrepreneurs in the same way as cabs. Taxi owners who have paid hundreds of thousands of dollars for plates understandably argue they should, if only because unregulated drivers pay nothing for the right to trade.

But technology has made the old regime irrelevant – it makes no sense to try to restrict what people will do when they can. What is the government going to do? Try to ban apps and have the police run random taxi checks, pulling drivers over to check they are not charging their passengers? Transport Minister Gladys Berejiklian certainly shows no enthusiasm for trying to protect the taxi industry:

We’ve got a really good working relationship with the taxi industry. That will be ongoing. But we also appreciate technology is driving real change out there in the market place.[xi]

As the New York Times predicts: “Car-sharing services, ordered from phones and charged automatically, will become more and more common around the world, overcoming resistance by local authorities and the taxi industry, and expanding the aggregate taxi market.”[xii]

For a while anyway, at least until robot cabs start picking up passengers – and Google is testing a driverless car in California.[xiii] When the price rent seekers extract gets too high the market transports people around them.

 

 

ENDNOTES

[i] Amy Thomson, Cornelius Rahn and Daniele Lepido, “Uber protests snarl Paris traffic as London cabs gather, Sydney Morning Herald, June 12

[ii] https://www.uber.com/cities/sydney recovered on June 14

[iii] John Addis, “Killing the Cabcharge dinosaur,” Sydney Morning Herald, May 12

[iv] Kirsty Needham, “Need a taxi? Hailing is faster than calling,” Sydney Morning Herald, December 29 2013

[v] Wendy Carlisle, “Poor fare: the tough life of the Australian taxi driver,” Radio National, Background Briefing, June 23 @ http://goo.gl/48dx8 recovered on June 14

[vi] IPART, “Review of maximum taxi fares and review of annual Sydney taxi licenses” July 2014 @ http://goo.gl/Htv9WP recovered on June 14

[vii] “Review of maximum fares draft report December 17 2013: submission by the NSW Taxi Council,” February 7 @ http://goo.gl/NFDwn8 recovered on June 14

[viii] Adam Carey, “Reforms road block takes toll on taxi industry,” The Age, June 13 2013 Victorian Taxi Services Commission, “New taxi licenses from June 30,” @ http://goo.gl/9Oc1BL recovered on June 14

[ix] Ben Grubb, “Victorian government issues $1700 fines to Uber ride-sharing drivers,” Sydney Morning Herald May 8

[x] Luke Hopwell, “Uber and GoCatch are about set to be deregulated in NSW, but what does that mean?” Business Insider, April 8 @ http://goo.gl/we0xHV recovered on June 14

[xi] Ben Grubb, “NSW transport minister sends mixed messages over legitimacy of Uber ‘ride-sharing’ service,” Sydney Morning Herald, April 25

[xii] Neil Irwin, “Uber’s real challenge: leveraging the network effect,” New York Times, June 13

[xiii] Charles Arthur, “Google claims driverless car could transform mobility and improve safety,” The Guardian May 29

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