Earlier in the week The Points Guy wrote about car service Uber giving away free taxi rides in New York City this week. It’s to promote Uber‘s new service that lets you hail a cab with their app — solving the problem of how to available cabs connect up with riders, besides just driving around the city looking for people stepped half in the street waiting an arm in the air?
Uber is a technology company. The have an app you download and they use GPS information from your phone to identify where you are. When you double tap, you order a car to show up. Cars for hire also have apps on iPhones given to them by Uber. When those cars have downtime, they can pick up rides. Basically Uber takes the very same cars that are already licensed and operating and lets them find customers when they’re otherwise sitting idle. And it helps customers find a ride with a tap on their phone. (They also take reservations via text.)
And since your credit card information is already on file with Uber, there’s not even a financial transaction with the driver. Gratuity is included, the card on file is charged. You’re billed based on time and distance and car service fares wind up being about 50% more expensive than cabs, sometimes less than that.
Now Uber has launched the same concept for New York taxis, you aren’t even paying more for the service — it helps you hail a cab and helps the cab driver make more money by having less idling time without a trip.
But with the launch in New York this week, almost immediately the government has stepped in to say the taxi offering is probably illegal.
Two months ago I explained how taxi systems were broken in many cities. Local governments frequently fix both the number of cabs allowed to operate and the prices those cabs can charge. In New York, both practices began in the 1930s. The number of cabs permitted then is about the number permitted now, and it costs between $700,000 and a million to buy the right to operate a cab. It’s often hard to get cabs to take you outside the city, since they may not legally be able to pick up passengers on the way back or charge you to recover the cost of the empty trip. And since all cabs charge the same price, there’s no incentive to provide a better service, offering a premium product, in order to earn more.
Taxi officials say that Uber’s service may not be legal since city rules do not allow for prearranged rides in yellow taxis. They also forbid cabbies from using electronic devices while driving and prohibit any unjustified refusal of fares. (Under Uber’s policy, once a driver accepts a ride through the app, no other passenger can be picked up.)
Since you’re calling the cab via the Uber app, taxi officials are arguing that’s a pre-arranged ride, which for some reason is illegal. And since the cab driver has a mobile app to accept rides when requested (and to close out a ticket when the ride is over), that may be illegal too. And once a driver accepts a trip through Uber, they have to turn up to pick up that passenger – which means they might bypass someone else looking for a taxi ride that they drive by on the way to their pickup, also illegal. There are counter arguments to all of these claims, but the bureaucracy is gearing up against the service that helps connect up consumers and drivers.
The Times piece identifies the opposition as coming from incumbent car service companies (who presumably don’t want competition), and also identifies even more potential regulatory arguments to use against Uber: that the tip is added automatically (so the customer can’t refuse to tip or select their own tip) and that they don’t accept cash.
Bizarrely — when it’s already tough to get a taxi ride in some neighborhoods but Uber doesn’t turn away anyone — one argument in opposition to Uber is,
that the spread of taxi apps had the potential to create a “two-tiered taxi system” in the city: one for people “with fancy smartphones” who are asked to pay a premium, and one for everybody else.
Meanwhile a Huffington Post piece reveals another entrenched interest behind opposition to Uber: the city gives out monopoly contracts to payment processing companies, and all taxis must use those. But Uber represents payment outside of the payment processing contracts.
in a statement released Thursday, David Yassky, chairman of the New York City Taxi and Limousine Commission, said drivers could not accept payments through Uber because it violates contracts the city has with two other companies — Creative Mobile Technologies and Verifone — which provide the technology that allows passengers to swipe credit cards in the backseat.
And this may explain why Uber is free for the week — a great move to introduce the city to the service since they aren’t allowed to process taxi payments.
The taxi commission is going to stand in the way of apps while those contracts are in place, and it will determine what technology is permitted in the future:
[Yassky] said the commission would work on rules to facilitate apps once the contracts expire and seek proposals for a smartphone payment system in the city’s 13,000-plus cabs.
These actions by taxi commissions provide no benefit to consumers, they protect the interests of incumbent companies. There’s no safety issue, Uber uses only existing licensed and certified drivers with their own vehicles that already operate every day. But technology is disruptive, and it’s not surprising to see the status quo react this way especially in such an ossified segment of the economy as taxis.
I’ve become a huge Uber fan as a consumer. And the ability to use Uber for Taxi rides which are cheaper than car service rides is a great innovation, though I’m no fan of taxis.
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