Taxi Industry Cartel Losing Ground to Uber

November 3, 2014 Updated: November 3, 2014

Uber Technologies, Inc. is a company that symbolizes change in the taxi industry, by using the latest technology to ease the pain of summoning a taxi. It is on its way to conquer U.S. cities, including Washington, DC, through amendments to existing regulations.

According to Uber’s website, it provides a more efficient transportation system with an on-demand service by using an application on mobile devices.

Uber brings great benefit to not only drivers, but also to traffic regulators, according to Siona Listokin, a professor at George Mason University.

“The company collects a plethora of data that has never before existed in the cab industry … For the first time, Uber’s data can allow policymakers to directly measure taxi fares, the availability of cars, and the safety records … In effect, Uber must introduce regulators to big data, an area in which the government has severely lagged behind,” said Listokin in a January article published by The Slate Group.

Besides those that see the benefit of allowing companies such as Uber and others with similar business models operate, there are those who want the company disappear from the face of the earth. Some see this company as a usurper, driving the cab industry out of business, while others, like “Moms against Uber” claim that the safety of children is endangered.

In response to those on the warpath against Uber, an article on the Daily Signal, a publication of the Heritage Foundation, said in September that competition to the taxi industry is long overdue. “The taxi industry already is a noncompetitive cartel,” mainly “Because local and state governments made possible the taxi cartels in the first place.”

Operating Legally in the U.S. Capital

The DC Council recognized in a recent 108-page report that technology has advanced faster than regulators could catch up and have found it difficult to bring regulation up to date. However, it is now tackling the reform of the for-hire transportation services.

Washington, DC has approved the Vehicle-for-hire Innovation Amendment Act of 2014 by a 12-1 vote on Oct. 28. The bill was introduced on April 4 by Council members Cheh and Grosso, according to a record released by the DC Council.

“Nearly two years ago, the DC Council secured a place for Uber in the District. Today … the Council has passed a comprehensive ridesharing framework, providing a permanent home for uberX in the District,” said an article on the Uber Blog.

The DC Council’s ridesharing framework requires that Uber, or any company with a similar business model, to perform an extensive background check on each of its drivers. Besides, it must insure the drivers for a minimum amount of $1 million and require an annual auto safety inspection by a certified mechanic. The Council also ascertained that passengers with disabilities are served by including this requirement in its bill.

Uber said on its blog that it had all the requirements stipulated by the DC Council already in place, which in its mind proves that it has never neglected its responsibility to its customers.

“We are proud that Uber’s safety standards have set the bar for ridesharing in DC, and throughout the country,” said Uber on its blog.

Regulation Benefitting Uber and Competitors

California became the first state to regulate ride-sharing services in Sept. 2013, being of great value to Uber and its competitors and providing a road map for the rest of the country. 

The Houston Council approved by a 10-5 vote changes in its taxi services rules on August 6, with the majority of council members focusing on leveling the playing field for everyone from limo companies to Uber.

Even a court has been called upon to stop Uber from operating in Nevada by that state’s attorney General in October, claiming that the company was a threat to public safety. On Oct. 29, Clark County District Court Judge Douglas Herndon denied the request. However, it is only temporary until a subsequent hearing on Nov. 14, which will dig deeper into the issue, according to the Las Vegas Sun.

Uber and its competitors will keep facing regulatory agencies that are beset by unhappy taxi drivers. Opposition not only comes from the cab industry, but also from regulatory agencies because of losing an income venue. For example, by dropping off and picking up passengers, airports lose fees that are charged to taxi drivers, as required by the regulators. 

“Airports are huge revenue engines for the cities, which treat the airports as quasi-governmental entities that operate under a board of commissioners. With so many taxis, shuttles and others using the airports to make money, the airports take a cut by requiring permits,” according to a Houston Chronicle Blog.

Amazing Funding

Despite all the rigmarole that exists because of the fear of a sassier newcomer, this newcomer knows how to play the market.

Uber raised $1.2 billion from mutual fund managers and venture investors that valued the company at $17 billion within 4 years of its founding, according to the Uber Blog.

Additionally, the company expects to raise a total of approximately $1.4 billion within the coming months.

Interesting Tidbits

Uber was founded in March 2009 under the name UberCab, Inc., which was changed to Uber Technologies, Inc. in Oct. 2010, according to a historical record on the company’s website. 

By Oct. 2014, the company provided services in 128 cities and 37 countries worldwide. The company operates in cities in Asia Pacific, Europe, Middle East, Africa, Central and South America, and North America.

However, success breeds competition. There are a number of competitors, with Lyft, Inc. being one that is most similar to Uber’s business model.

What would be competition without legal maneuver? Uber and Lyft are at each other’s throat, with Lyft saying that Uber employees cancelled 5,000 of its contracts, while Uber says that Lyft workers having cancelled 12,900 of its ride sharing contracts, according to the betanews website.

The war between competitors and the competition will go on for some time. Uber and companies with similar business applications are facing not just the local and national taxi industry, but also courts and regulators. Also, others that feel that they are hampered in one way or another by advancing technologies, as well as defenders of this industry using advanced technology will chime in.