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Enough with the Uber bashing already

Our editorial: Uber is giving the taxi industry the shakeup it deserved. Arguments against it are grounded in turf protection.


 
Photographed at Dundas Square, Toronto, Uber taxi service is a new way to travel around the city. Request and payment are all made using an app. (Bernard Weil/Toronto Star/Getty)

Photographed at Dundas Square, Toronto, Uber taxi service is a new way to travel around the city. Request and payment are all made using an app. (Bernard Weil/Toronto Star/Getty)

Once upon a time, Naheed Nenshi would have been told he was on Candid Camera; now it’s Periscope. To his chagrin, the Calgary mayor was caught last week on a hidden live-stream camera letting fly his private thoughts on Uber, the ride-sharing app that’s shaking up the taxi business.

“Uber . . . has a brilliant business model, and are dicks,” Nenshi declared as he was being ferried around Boston by a driver for Lyft, a service similar to Uber. He also claimed Uber let registered sex offenders and violent criminals slip through its driver-background checks. Nenshi later offered up an earnest-sounding apology, and recanted his unfounded allegations about Uber’s background checks. For someone who’s used social media to great advantage and now finds himself hoisted upon his own digital petard, it’s a moment of considerable irony. More significant, Nenshi’s comments provide valuable insight into the positions and prejudices that define the heated battle over municipal regulation, consumer rights and the future of taxis in Canada.

The traditional taxi business is a creature of municipal command and control. City regulators set the number of taxis allowed to roam their streets, determine the vehicles drivers may use, the prices they charge and how they interact with customers. Taxes, fees and other requirements abound; competition is a foreign concept. By strictly limiting the availability of taxi licences, this system has also made some taxi licence owners (although not necessarily drivers themselves) very rich.

Uber upends this cozy relationship by flooding streets with eager drivers who connect to passengers through smartphones in a way that largely eliminates municipal oversight. This has caused taxi licence prices to plummet, and taxi drivers everywhere to protest. Despite all the sound and fury however, ride-sharing apps offer tremendous advantages for consumers. According to the federal Competition Bureau, Uber fares are generally lower than taxis. (Although rates can rise during peak demand.) Wait times are shorter. Convenience and quality of service are also notably better. The Competition Bureau recommends cities adopt a “light” regulatory approach with Uber to allow “market forces and competition to determine outcomes and drive innovation.”

Unfortunately not all cities respect the bureau’s advice to favour consumers over the taxi industry. Vancouver has banned Uber. Montreal is engaged in a fierce battle of car seizures and fines with Uber drivers. Nenshi chose a passive-aggressive approach, creating a set of regulations he knew would conflict with Uber’s “brilliant business model” in order to keep the service out of Calgary.

Civic hostility toward Uber is often justified in the name of passenger safety. Nenshi’s falsehood about sex offenders is a fine example of fact-free fear-mongering over background checks. In truth, the wealth of data exchanged when arranging an Uber ride, including a mutual rating system, as well as the absence of cash changing hands, offers ample protection for passengers and drivers alike. Another refuge for taxi patriots is the claim Uber threatens the livelihood of hard-working immigrants. Again, Nenshi’s own live-streamed experience puts paid to this allegation. His Boston driver told him he makes a satisfying US$40 an hour driving full time for Uber and Lyft. Presumably such returns are possible for any taxi driver with similar dedication. (It seems reasonable to ask why Nenshi, who deliberately engineered Uber’s departure from his own city, patronizes similar services when travelling abroad. Perhaps he finds them safe, convenient and well-priced?)

The arguments arrayed against Uber are grounded not in consumer protection, but turf protection. Regulators instinctively resist any erosion of their powers, even in cities that pride themselves on their progressive or high-tech bona fides. This likely explains why Uber has been such a “prickly” negotiator, to paraphrase Nenshi’s colourful descriptor. Given the deeply entrenched positions of its opponents in the taxi industry and municipal offices, Uber is pushy out of necessity. The obstacles are too great to be polite.

Thankfully, not every city has set out to stifle Uber. After initially cracking down on Uber, Ottawa recently unveiled a new set of policies entirely compatible with ride-sharing. Significantly, these rules also untangle the web of red tape choking taxi drivers, giving them a real chance to compete. Licence fees will be cut dramatically and regulations on such things as trunk size, window tinting and credit card fees will be dropped. That’s right: until Uber arrived, Ottawa imposed a $1.50 fee on every taxi passenger paying by credit card. Why? Because it could. Surely this is proof enough of the necessity for Uber’s disruptive presence.

In his unguarded, live-streamed moments, even Nenshi seems to acknowledge the inevitability of an Uber-led shakeup of the Canadian taxi business. “We’ll get there eventually,” he told his Boston driver. “It’s all going to sort itself out.” And so we wait for Nenshi and the rest of Canada’s regulation-obsessed civic leaders to decide when they’ll finally be ready to put the interests of consumers first.


 

Enough with the Uber bashing already

  1. Actually, I agree with some of Nenshi’s comments.

  2. Well, it’s not really a “get over it.” So if someone with an app can just show up and take over an industry, isn’t any industry vulnerable. I keep teasing my dentist that I am going to start UberDentist. And, why not UberPolice? And how about UberCouncil (for city council). Seems to me that we have created regulatory frameworks for a reason. If all it takes to upend it all is someone with programing skills, we are weak as a society, indeed.

    • A weak society is one that kills innovation with regulation and bureaucratic red tape.

    • An over-regulated society desperately needs exactly this sort of disruption. We should be relieved it is happening. Long overdue.

  3. “He also claimed Uber let registered sex offenders and violent criminals slip through its driver-background checks.”

    Ummm, no. What Nenshi actually said was that the city of Calgary SENT registered sex offenders to try and infiltrate Uber’s background checks, and then said that he “doesn’t know where they found these guys and he doesn’t want to know”. Watch the clip and see for yourself. It’s pretty damning. What I am having a hard time understanding is why left leaning rags like Maclean’s are busy downplaying what Nenshi actually said. Is it so much to ask for balanced and honest journalism in this country?

  4. Uber only succeeds in the black market through coercion, extortion and bribery… What kind of person would defend a company like that? the answer is a payed shill. Uber tries very hard to make it look like the cab companies are a monopoly and they are the heroes trying to destroy this evil empire but the obvious truth is that it’s the other way around. Uber is a 60billion dollar monolith trying to destroy the mom and pop small business. Competition is not a foreign concept just because you’re working under regulations, You freemarket people make me sick… Go live in the south of USA

    • Uber won’t destroy the Mom and Pop small business. It will, however, damage the traditional taxi business where the bulk of the money is made by the owners of the deliberately rarefied taxi licenses. In Calgary or Edmonton, a taxi company with a fleet of ten $2000 Crown Vic’s and ten licenses is worth close to $1.5 million. The bulk of the cash flow from the business goes towards paying for the licenses if bought from another taxi company, while the driver gets close to minimum wage. Those licenses become valuable free-market commodities once paid for, despite only costing something like $150 from the City of Calgary.
      Uber creates independent contractors who keep most of what is charged out. As the article points out, an Uber driver can expect to earn a solid middle-class income working 40-45 hours per week.
      It’s also worth noting that drivers of regular taxis have committed murders and assaults, and been arrested for impaired driving while on the job, just as has happened with Uber, so that issue is a non-starter.
      In the end, Uber is only actually successful in cities where there is over-regulation of the taxi industry, such as Calgary. That’s because most of the regulations are only in place to employ government workers, satisfy the innate totalitarian tendencies within government, and protect the owners of taxi companies. There is little or no thought given to how the customer is served in all this.

      • The problem is that uber is not the savior, if you think cab companies are bad, uber is 10x worst and the more they monopolize the market by using the fact that no one can compete legally against them, the more that people realize how bad uber is the more they will want to regulate them,,making things exactly as it was with the cabs. The truth is, with all the media spin about the pros of uber and the cons of cabs, the only reason anyone uses uber is that it costs less as they don’t even pay sales tax. If tge regulations are broken, you need to fix them and not bring in the cowboys who think they are above the law.

  5. Think about it this way for a second.

    You’re a legit cabby, who’s been working by all the rules.

    All of a sudden, the rules change because someone who thinks the rules don’t apply to them comes along and starts taking away your livelihood.

    Then, that someone somehow manages to convince the city, who issued that taxi licence you own and paid for through blood sweat and tears, to actually change the rules, and the value of your city issued licence plummets further, not to mention the fact that since the other guy showed up and started operating without actually being legally authorised to, the income you depend on to pay for your business expenses and feed your family has also melted away.

    Would you be pissed. Hell yeah! Would you want to sue someone to at least try to get some of that value back. Hell yeah! So who would you end up suing? Probably the city, Why? Because they’re the ones who issued the taxi licence you thought you needed to be able to operate your business and then switched the rules on you because…Well just because, because they have no way to really justify doing something like that.

    And where will the city get the money if cabbies do sue and end up winning? Probably not from Uber, because that would screw up their business model, as they keep telling everyone, and they would cry about that too and threaten to leave if someone tried get them on the hook for it, but from law abiding citizens who actually pay their property and other city, provincial, and federal taxes.

    Not to mention that once Uber gets what it wants, if it gets what it wants, it probably won’t be long before they hike their rates because their business isn’t sustainable right now and their investors are breathing down their neck to start getting some kind of return on the billions they’ve poured into this thing, which Uber has essentially been using to subsidized their rates and fight City Hall,

    Honestly, what I think Uber is doing pretty much amounts to economic terrorism and citizens and cities shouldn’t stand for it any more than we would if dealing with any other kind of terrorists and run them out of town or throw them in jail.

    But hey! People like Uber because they can save a couple of bucks on a taxi ride once in a while for now and some will actually write to their politicians to please, please, let them stay, which I find pathetic.

    The other part of the problem is the market isn’t open, but a regulated one and Uber is trying to convince cities to change that using brute force, backed by the billions they have to subsidize rates (not an open market concept), subdue elected officials (not an open market concept either) and con consumers into thinking they’ll get a better deal with Uber, which likely won’t be the case over the long run, simply because they have a pile of money to do it and law abiding cabbies don’t.

    They can claim they’re trying to level the playing field all they want, but what they’re really doing is tipping it in their favour just because they can afford to.

    No later than this week, Uber also claimed that if they have to get out of Toronto, 15000 people will lose their jobs, which is essentially more BS, since those jobs are most likely part-time and pay 4 bucks an hour if you believe most of the reports out there. Would you work for 4 bucks an hour in Toronto, Vancouver or Montreal? You can get a job at McDonalds that will pay you almost 3 times that much in Ontario, with minimum wage at $11.25 an hour. If those drivers mostly work part-time, say 10 hours a week and actually do make 4 bucks an hour, that amounts to the equivalent of 1250 full-time McJobs at 40 hours a week if you do the math, which doesn’t sound nearly as impressive. They also make the same ridiculous claim when challenged in other Canadian cities.

    And yes they have an app and it’s new technology. So what?

    If someone decided to develop a similar app so that meth dealers could hook up with junkies more easily, would that all of a sudden make selling meth legal? Uber is using exactly that concept. They’re enabling an illegal service, but because we’re talking about cab rides and not selling meth, that somehow makes it OK.

    I’m not saying the taxi business is perfect and that nothing should be done by cities and cabbies to improve things. I just don’t think giving into to Uber’s tactics is the right way to go.

    And you don’t have to take my word about the claims I’m making. Bloomberg reported about a lot of what I’ve said just last week, and also added that Uber makes about 19¢ a ride in the U.S. right now.

    Now, if their goal is to make 19¢ a ride, wouldn’t it be a lot easier and a lot cheaper just to sell their app to cab companies on a subscription basis and charge them for it, and not have to worry about all the legal hassles, high PR costs, and ride subsidies?

    So why aren’t they doing that?

    http://www.bloomberg.com/news/articles/2016-04-14/lyft-is-gaining-on-uber-as-it-spends-big-for-growth

    I also thought the last paragraph of that Bloomberg article was pretty funny and shows the irony of the whole situation:

    <>

    Apparently, Uber’s backers can dish it out but don’t like it much when someone else comes along and gives them a taste of their own medicine.

    • So where did Uber get their billions from? They got it from selling a service that obviously works better for the customer than the current model. Think about a few points raised in your post-
      How does a $150 taxi license end up having a market value of over $100K? Simple. If you can find enough drivers to keep a car running 24/7, and pay them minimum wage, you can siphon off enough cash to pay the black market value of a taxi license. The cities issue the licenses, but because they don’t issue enough of them, the licenses become the critical asset and the drivers typically don’t own them.
      How can Uber subsidize their own rates? That’s called selling at a loss. Again, the drivers are not paid by Uber. They’re paid by the customer, and Uber takes a $.19 per ride surcharge. That means a driver who takes two $20 rides in an hour earns $40, less $.38, less gas and depreciation. That means a driver with a $600/mo car payment, $600-700 in fuel costs, and $400 insurance costs, is earning $5000 per month at 40 hours per week. Most regular cab drivers are lucky to make $2000 per month.
      It’s possible to find very decent mid-sized used cars suitable as Uber-mobiles, for $10-15,000, making that monthly expense even lower.
      The current system is grossly over-regulated. None of those regulations in place are there to help ensure that customer needs are met. They are strictly in place to serve the desires of government and the interests of the existing taxi companies. Believe it or not, the customer is the one that will determine the viability of Uber and other businesses like it, and the success of Uber and Lyft is simply evidence that the taxi industry and the governments that regulate it are not interested in the customer. They’re only interested in protecting what they have. That’s what most regulations actually are- barriers to competition.

      • @Bill Greenwood

        Please get your facts right. Uber keeps 20% of the fare on a ride, not 19¢. 19¢ is what they end up with after expenses in the U.S. these days, but that’s only the U.S. market.

        Bottom line is this company is running at a huge deficit, $1.7B on $1.2B in annual revenue according to the Bloomberg article I posted, which is obviously not sustainable no matter which way you cut it.

        Why is that you might ask?

        Because they aren’t charging what it costs them to provide their service, which is called dumping in most markets and is a practice frowned upon by most governments who usually set tariffs and fine companies who are found guilty this practice to prevent it from happening and re-establish market equilibrium.

        I’ll turn your own question back at you. How does a company go from developing an app, which isn’t all that expensive to do, to being valued at $62.5B by private investors. It probably has something to do with not following establised rules and paying your drivers peanuts.

        And if the company is worth so much, why won’t its CEO consider an IPO? Is he afraid that valuation might turn out to be pie in the sky?

        http://www.cnbc.com/2016/04/27/ariana-huffington-to-join-ride-hailing-service-ubers-board-of-directors.html

      • Bill, you CLEARLY don’t understand how digital companies make money. Uber got their billions from stock market investors NOT from selling rides. They will use those billions to disrupt the taxi industry, change regulation, and establish a monopoly. Then they will use their infrastructure to take on the delivery business, transport business, logistics business, etc… Before long we will all be carrying each others packages and people around in our vehicles and giving a piece of the action to Uber for the privilege.

  6. I find it somewhat amusing that Uber seems to be welcome in government capitals, such as Ottawa and Edmonton, but is to be kept away from the general public who live outside those capitals.

  7. Hey editor , I worked for uber in toronto last one year , I never make $40. Sometimes I make $7 per hour. I do not know how boston driver make $40 per hour. I know you are advocating for Uber. Did you really go insight of the fact before writing this . I am the example . Look at the reviews that uber driver wrote how much they make and the treatment they got. Hope you will look at those before .Uber is giving cheap price that why you guys r happy .I do not know what you got from uber (donation,bribe). All i can Uber is cheaper price now but near future it will not stay like this . Now they want to drive out taxi industry so they r providing cheap price.Wait for five years , you will see . What calgary mayor said i am agree with it, he told the truth that is why you do not like this. It is very heard to get honest journalist now a days. Time will say what is happening now is correct or wrong. Overall, we want both taxi and uber should stay in toronto not giving favor one over another.

  8. This editorial reveals an irresponsible lack of understanding about the issues at stake in the Uber situation – corporate growth vs local prosperity.

    Since their invention by the aristocracy in the middle ages the designed function of a corporation is to grow by extracting value from a market and convert it to cash and shareholder value. Anyone who has a Walmart in their community has seen this in action. Walmart undercuts the pricing of every local competitive business in the area until they are all gone. The businesses and skilled workers that served these casualties of war as suppliers and employees find themselves poorer as a result. Meanwhile the money transacted in the area that would have normally stayed flowing within the local economy, creating trade opportunity for its people, gets siphoned up by Walmart and transformed into cash that sits unused in corporate vaults, profits for overseas vendors, and a higher stock price for shareholders. The value in savings customers get at the store are massively outweighed by the costs to the local economic ecosystem.

    Digital businesses are exponentially more efficient and effective at this extractive process. On average they employ 10% the number of employees as a traditional business and make many times the revenue. We’ve already witnessed the music industry, the publishing industry, the hotel industry, the movie/television industry, and now the taxi industry become decimated by digital behemoths like Amazon, Netfilx, AirBnB, and Uber. Investors – people with money – love these corporations. They thrive off gaming the system – making money off stock price growth from non-sensical corporate valuations. Meanwhile, the sustainability of resources and prosperity at the community level is eroded.

    Consider how efficient and effective Uber is at this extractive process:

    ** It puts professional taxi drivers out of work for even lower paid lesser skilled workers: like the local butcher who Walmart put out of business by flooding the market with cheap steaks or the professional journalist that is replaced by an automated reporter algorithm or a blogger. You may not like to call taxi drivers professional. But they do drive taxi 12 hours a day, seven days a week, and know the city better than a part timer using a GPS.

    ** It extracts money from both the rider, the driver, and the region in exchange for an app that provides little economic value to the local economy.

    ** The entire taxi transportation ecosystem is disrupted. Like digital disruption did in other industries, this scorched earth approach will kill thousands of businesses that support the drivers and fleets. From the deli that sells the driver his lunch to the mechanic that works on his car – they will loose money and potentially their livelihood. This blast radius is massive and not given due consideration.

    ** Uber exploits the resources of those with the fewest to spare. Its bad enough that people working pay-cheque-to-pay-cheque have to work multiple jobs to support a family. Now, the sharing economy, another extractive concept, asks them to share what little they have. You’re not getting Uber rides from the CEO of a bank. What do these less well-off people do when their car breaks down from the extra use put on it by Uber work and they don’t have enough money to fix it? How do they then get to their full time job?

    ** Uber snubs regulation. We all know that there are deep problems with the taxi industry. Exploitation of drivers, price fixing, black market license trading, etc… But, regulations that have put in place over years have been done so for the benefit of riders and the industry itself. These regulations shouldn’t be confused with the corruptions mentioned above. And so to hail Uber as a solution to these ailments is misguided. Uber is less a solution to this corruption than it is an exploiter of it. Not only should Uber not be allowed to operate, government should overhaul the taxi industry, making it possible for drivers to own their own cars, licenses, and make a decent living without having to work 84 hours a week.

    Left unchecked by government and society, Uber, and the next wave of digital corporations (simply doing what they were designed to do) ARE dicks. Massive dicks that will screw us out of local prosperity and grow the disparity between the haves and have nots. This publication, having been through the disruption of the publishing industry shows it has learned nothing from the event. Its also has a responsibility to be less flippant about how it evaluates the changing tides so as to be a trustworthy source for its readership. Macleans, you completely missed the story. And it’s a big one. I assume this poorly conceived offering is an ironic result of your publication having less skilled, lower paid workers than may have existed prior to the great publishing digital extraction.

    Still not convinced? Read the recent book “Throwing Rocks at the Google Bus” by professor and best selling author Douglas Rushkoff.

  9. To whomever wrote this editorial. (because you didn’t put your name anywhere)
    Put yourself in the taxi driver’s position. To do this, I have come up with this analogy. Lets say Macleans magazine employs 500 people, and the company has a fixed budget for salaries. Suddenly, Macleans decides to employ 5 times the amount of employees (2500), but still maintain the budget for 500. Your $75,000/yr salary just became $15,000.
    That’s where uber hurts the cab industry the most. Nobody can make a living anymore, its all part time beer money now.

  10. And yet here it is again, the fake meme peddled by Uber – “Ride Sharing.” This is only if you can imagine that someone happens to be going where you’re going when you’re going. The reality is that it is a hired ride. Who is going to pick me up from the airport at 3am in the morning? Assuredly not someone who happens to be going to my place. As for driver skills, 80% of people on the road are barely capable of staying between the lines most of the time, so some sort of advanced review of skills is needed for drivers. Am I covered in case a Uber driver has an accident? Probably not in most cases. I’ll still be traveling with Taxi companies for a long time yet.

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