Taxis, Drivers & Digital Disruptors

uber vs cabs

Image courtesy of Fotalia/ArtMundo

Taxis, Drivers & Digital Disruptors
| published June 23, 2014 |

By R. Alan Clanton
Thursday Review editor

There are hardly any venues in which the term “digital disruption” applies more than in the worlds of cab drivers and delivery folk. Digital disruption, in case you’ve been asleep during recent years, are words to describe how technology shatters conventional business models and up-ends time-honored processes.

For example, Amazon has disrupted the book store and music shop model; in fact, some have argued, those disruptions have become lethal—killing Waldenbooks, B. Dalton, Borders and infecting Barnes & Noble with an inevitable slow death. The newspaper business, to cite another easy-to-digest case, has been disrupted to the point of no return. Journalism has evolved so dramatically—or has been battered so relentlessly—in recent years, that it has faced a hurricane-like existential threat.

But who would have thought that the simple, straightforward business of calling a cab, hitching a ride or getting directions could turn contentious?

Drivers of cabs and shuttles say that they are under assault, and it’s not from low tips or complaints of speeding. They are under attack from digital tools available on your smart phone and in your car.

A tech start-up company called Uber, which is also the name of the app, offers mobile applications which allow drivers and riders to find the fastest possible way to get from point A to point B. Uber also enables average Joes and Janes to arrange to pick up extra cash by sharing their rides with other people going in the same direction. Uber, which is based in San Francisco, is backed by several venture capitalists and investors who liked the idea of crowd-sourced driving and ride-sharing. Uber acts as an intermediary—linking drivers who are tied into its system with anyone who needs a ride. And there is no cash transaction, making it painless and risk-free: riders pay based on a formula which uses mileage and speed (generally, time) to bill the customer by credit card. Tipping is not required, and is—in fact—largely discouraged (the credit or debit card transaction doesn’t even allow for a tip; and if a rider insists on tipping it must be in cash). Drivers who work with Uber touch no cash and never see your credit card.

Popular from the very start, Uber has moved its low-cost operations into hundreds of cities in the United States, Europe and the British Isles. Uber faces only one small drawback in its model—it is pricey: in some U.S. cities is compares modestly to traditional cab services, but in some cities it costs more. But Uber promotes its service as more flexible, more comfortable and infinitely more user-friendly. Uber streamlines its business model to reduce cost, and incorporates a dazzling battery of high-tech tools and web-based applications to make the pick-up and drop-off package fast and seamless.

For riders and ride-sharing advocates with a penchant for nimble mobile phone technology, Uber is a no-brainer. And it has become a cash cow for Uber’s quiet investors. Uber’s pricing is demand-based: during slack times, the cost drops; during peak days or hours, it rises slightly. Market purists see this as street-level capitalism at its best: a driver has something to offer, and you have a need; in between there is a price, negotiated by algorithms, Google, and supply and demand. What’s not to like?

But hold on a minute. Ask a cab driver in London, San Francisco, New York or Paris what he or she thinks of Uber—or any of its aggressive new competitors, like Lyft and SideCar—and you are likely to get an earful. Blood pressures will rise, and the expletives will fly. To those in the cabbie world, these web-based start-ups with all their mobile technologies and crowd-sourcing magic are little more than another assault on the working man. Uber destroys jobs, renders a noble profession useless and may be illegal to boot!

In several countries, Uber is under direct attack from the traditional cabbies and their supporters among traffic and highway regulatory agencies. Uber, in their view, lets hundreds of non-licensed, non-accredited individuals act in the place of highly trained, business-licensed cab companies. There are legal fights in Australia, France, Canada and Britain, and protests have taken place in several European cities. In London, Mayor Boris Johnson—under pressure to declare Uber and its kindred competitors illegal—said recently he doubted any such blanket declaration or outright ban would stand up in a courtroom. In Toronto, city officials and police charged Uber with a long list of crimes—from operating unlicensed taxis, to operating a business without appropriate safety standards in place.

In San Francisco, Uber was charged with similar crimes, including infringement against California laws meant to regulate and tax limo services. In several U.S. states, Uber and its competitors have been hit with class action lawsuits; the charges—unsanctioned, amateur drivers stealing tips, thereby undermining an industry pay-scale based on gratuity. Just weeks ago, Virginia issued a blanket cease-and-desist order against Uber for its violation of state laws regarding the appropriate background check of drivers. In Massachusetts, the state declared Uber to be operating illegally because Uber’s use of Google and GPS system technology did not meet the state criteria for measurement or highway guidance (even though State Police now routinely use the same technologies in almost all of their patrol cars).

But the bottom line for cabbies in hundreds of cities is...well...the bottom line. Cabbies say that Uber is an economic threat, not merely a tool for disruption. If Uber is allowed to operate with few—if any restrictions—cab and limo drivers say, then dozens of other start-ups will eventually so flood into the marketplace of street transport as to render an entire profession useless. In tourism-based cities—London, Paris, Berlin, Sydney—where fragile economies still stagger under heavy post-recession conditions, cabbies may lose their livelihoods entirely.

Uber, which is the more formally arranged of the ride-sharing start-ups, faces its own intense pressure on its flanks. Lyft, for example, offers what is usually described as democratic-driving, or peer-to-peer ridesharing. Already operating in nearly 100 U.S. cities, Lyft is designed to link up drivers with riders, with little more than that as its function. Riders can simply donate using cash or credit card, or kick in a few bucks at a routine gasoline stop. In some cities, Lyft has become a ridesharing program of great popularity and ease-of-use. And its small cost is most easily offset by more riders. A vehicle with a driver and three passengers, for example, would be the most efficient way for the driver to defray costs of a trip from Point A to Point B. Within the Lyft community, riders are encouraged to “donate” appropriately based on time and distance. Lyft began as a small-distance spin-off of Zimride, founded in 2007, which facilitated ride-shares over longer distances and encouraged its users to network and build trust through social media. Using references online—and factoring-in things like reliability, friendliness, cleanliness, and timeliness—other users could establish ratings for other drivers and riders.

And like Uber, Lyft incorporates dozens of rapidly-evolving tech tools into its arsenal. Green advocates see Lyft as the ultimate ride-share program. Cabbies see it as a way to undermine their very existence: lots of amateurs simply hauling extra passengers for the cost of gas or the price of a latte. Cities and states continue to debate the complex mosaic of questions and issues: safety, security, insurance and liability, taxes and fees, even the appropriateness of tools being used. And a combination of city, state, and law enforcement see Uber and Lyft as mechanisms for dodging regulation and accountability.

Technologists ask the question: how do these apps and start-ups differ from street level negotiation of a simple trade? For example, when I was a student a Florida State University (this was many years ago, before the popularity of the internet or the advent of mobile apps), students would routinely post little notecards on “travel boards” in places like the student center or the campus post office. On any given Friday, one could simply go to that board—either to offer to share your car with another student and their luggage, or as a way to hook up with a driver. With one phone call, a driver traveling from Tallahassee to Tampa could link up with a student who wanted a ride in that same direction, and voila, the cost of gas could be instantly cut in half. An editor and author like Tom Standage, author of Writing on the Wall: Social Media the First 2000 Years, would agree that those ride-share bulletin boards were simply a rudimentary form of social media, which, in this case, expedited a basic transaction.

Uber originally promoted itself as a luxury service (thus the high-end price point), but the intense competition from crowd-sourcing services has forced Uber into more flexible products. Largely gone are the Lincoln Town Cars and the Cadillac Escalades, and it their place have come mainstream and intermediate-grade cars of every make and style.

As informal and democratic as Lyft seems, there is some structure. The service requires two to three hours of training, and mandates that its participants meet certain minimum standards: background check, criminal background search, vehicle inspections, no drugs or alcohol. Lyft also advertises that it insures its drivers up to $1 million for any serious incident, and its participants must maintain a minimum rating among all users. Drivers whose rating falls below the threshold are terminated.

Meanwhile, cabbies and their allies have become enraged in the face of dozens of start-ups—tech-based, crowd-sourced entities which threaten the very existence of the driver of vans, shuttles, limos and cabs. Protests in London, Paris, Madrid and New York have gridlocked traffic and brought attention to the economic struggle between the Old School and the New School. But some of the protests, despite the fact that some in local politics support the cabbies, has directed invaluable attention to Uber, Lyft and SideCar—free publicity that millions of dollars in marketing and advertising money could not have bought.

The cab drivers may, in fact, be curmudgeonly and gruff in the adherence to their time-warp business model, but some market analysts argue that the problem is not so much the fault of slow-to-react cabbies, but rather antiquated regulations and statutes. Laws written and approved in 1965 or 1973 have little relevance to either the streets or the dynamic possibility of technologies now been deployed on a daily basis. Editorial writers across the U.S. and Europe are suggesting that the only way to break through the ugly impasse is to rethink what is now possible—without sacrificing customer safety, or the safety of others on the road.

Uber, which owns not a single car or SUV, says its business model represents merely a way to connect people with data and information. Lyft says much the same thing, and even tosses in the money-saving aspect and the green benefits.

In the end, it is Old School versus New. If the newspaper and the bookstore are to serve as examples of the outcome, we invite you to place your bets now how this struggle will end.