Hailing the Uber revolution

Canadian cities and the taxi industry are fighting to keep Uber out, even as passengers clamour for the ride-on-demand service. It’s a losing battle.
BERLIN, GERMANY - SEPTEMBER 02: In this photo illustration, a woman uses the Uber app on an Samsung smartphone on September 2, 2014 in Berlin, Germany. Uber, an app that allows passenger to buy rides from drivers who do not have taxi permits, has had its UberPop freelance driver service banned in Germany after a complaint by Taxi Deutschland, a trade association of taxi drivers in the country. The company, which operates in 42 countries over 200 cities worldwide, plans to both appeal the decision made by a court in Frankfurt as well as, at the risk of heavy fines, continue its services in Germany until a final decision has been made on the matter. CREDIT: Adam Berry/Getty Images
Adam Berry/Getty Images
Adam Berry/Getty Images

By some accounts, it was the ancient Romans who invented the first taxi meter—a series of linked metal discs that counted off the revolutions of a cart wheel and marked the distance travelled by dropping pebbles into a box. And if that was the case, you can be sure that the first rules governing cabs and their drivers weren’t far behind.

Authorities in Paris and London were certainly regulating horse-drawn hackneys as far back as the early 1600s. In North America, however, it wasn’t until the Great Depression of the 1930s—when desperate would-be chauffeurs began duking it out on urban streets—that most cities started licensing and limiting the motorized versions.

It’s always been a difficult balance to strike. When municipalities have a lot of taxis on the road, wages decline and so does the quality of the drivers and their vehicles. But if you license too few, consumers suffer long waits, especially at peak hours and in poor weather. Eventually, some sort of “gypsy” service sprouts up to try to fill the void.

Uber, headquartered in San Francisco, bills itself as a “peer to peer” ride-sharing company. Its innovative smartphone app uses GPS technology to match customers with nearby taxis, limos, or private cars, then allows them to track the journey in real time from beginning to end, and pay the fare without ever having to reach into their wallets. After only five years in business, it already operates in more than 200 cities—including Montreal, Toronto and Ottawa—has spread over six continents, and is valued at US$18 billion. And it hasn’t demonstrated much interest in playing by the old, established rules.

In late November, the city of Toronto filed for a court injunction against Uber, claiming the firm has been illegally operating as a taxi and limo brokerage since 2012. (The company maintains it is simply a technology provider and, therefore, not required to obtain a permit or conform to licensing standards.) The larger issue, though, is clearly the introduction this past summer of UberX, an option that allows customers to arrange for rides in private, unregulated vehicles. Prices vary—the service can be cheaper, or far more expensive than a cab, depending on demand. But consumers seem to love it as fiercely as the taxi industry loathes it.

“UberX is an absolute cancer,” says Sajid Mughal, a Toronto cabbie and president of iTaxiworkers, an association of more than 900 drivers. “They are killing us.” Current city regulations require cab owners to pay $5,000 a year for a permit, while it costs their drivers more than $600. The going rate for commercial insurance is about $5,000 annually. Yet the drivers UberX signs up—at a clip of 40 per day—bear none of those municipal costs, and pay only their personal insurance, about a fifth of the price. “If this continues, there will be 20,000 private cabs on the road,” predicts Mughal. “Professional drivers won’t be available. It will be worse than a Third World country.”

Kristine Hubbard, operations manager of Beck Taxi, Toronto’s largest brokerage, with 1,850 taxis, accuses Uber of “predatory” practices. After enticing hundreds of cabbies to sign on to the app by providing free-use smartphones, Uber is now “stabbing them in the back,” says Hubbard. “Their master plan is to use the licensed system to build a customer base, and then move them to an unlicensed, unregulated system.” Beck, which became the first Toronto company to introduce its own cab-hailing app back in 2012, hasn’t seen its business tail off. In fact, Hubbard says the firm will book a record 8.2 million trips this year. But she fears for the future. “You can see all these cars running around out there on Friday and Saturday nights.”

Other Canadian municipalities have also come out strongly against the company, especially its ride-sharing service. When UberX debuted in Montreal at the end of October, Mayor Denis Coderre flatly termed it “illegal.” In Ottawa, municipal employees have been staging undercover stings, booking rides, then fining unlicensed drivers $650 apiece. In Vancouver, where the company has run ads seeking drivers, the city’s four cab companies have banded together to seek a pre-emptive court injunction.

Geoff Meggs, the Vancouver city councillor who has been taking the lead on the file, admires Uber’s technology and says the company is welcome to set up shop, but only if it follows the usual rules and regulations. Vancouver is a highly regulated market, he notes, with stringent requirements governing safety, accessibility and environmentally friendly vehicles. “We also think there’s a fairness issue,” says Meggs. “I don’t think elected officials should be enabling change that destroys small business.”

The sticky bit is that consumers—and voters—seem to want Uber to succeed. An online “Vancouver needs Uber” petition, launched by the company in mid-November, has already garnered 20,000 signatures. A recent poll in Toronto, conducted by Forum Research, found that 68 per cent of respondents disagree with the city’s efforts to shut down the service. (Only 12 per cent of those surveyed had actually used Uber, but, of those, almost 80 per cent rated it as superior to standard taxi firms.)

Small wonder, because the reality in North America is that almost all cities are underserved by cabs. Dan Hara, an Ottawa economist who specializes in the industry, says Uber’s technology is impressive, but, ultimately, has little to do with its success. “Their business case is exposing all these cities where there aren’t enough taxi licences,” he says. “Uber just exploits the existing problems.”

Toronto has about 5,000 licensed taxis on the road, which works out to approximately 18 cabs per 10,000 population. Ottawa’s 1,300 taxis translates to just under 15 per 10,000. In Vancouver, where there are fewer than 600 taxis, the ratio falls to 10 cabs per 10,000 people. In comparison, Washington, the best-served American market, boasts a taxi rate per 10,000 people of 116. In New York, it’s 63; New Orleans, 48; Boston, 30. Even those numbers aren’t always sufficient to meet demand.

Of course, that generalized scarcity makes it a much better business for those who do own cabs. In Vancouver, municipal licences can be resold for close to $1 million, while in Toronto, there is an estimated $1.4 billion in total “plate equity” at stake. Brokers and owners in six cities have thus banded together to combat Uber and have launched a website,, to promote the benefits of regulation. Carolyn Bauer, the group’s spokeswoman and head of the Vancouver Taxi Association, acknowledges that consumers in her city are frustrated, especially on weekends. “They’ll line up for an hour to get into the bars, but when it’s time to go home, they want a cab right away,” she says. Taxi providers would like to make better use of technology, says Bauer, but face their own hurdles, as the stringent rules Canadian banks have enacted for credit card transactions. (Uber, though, seems to have overcome those challenges.)

For its part, Uber says it’s “working collaboratively with officials in cities across the world” to ensure that consumers can access a full array of transportation options. In a statement to Maclean’s, the company lauded the 14 U.S. jurisdictions, including Washington, Chicago and California, that have adjusted their taxi and limo rules to make space for ride-sharing, easing licensing and insurance requirements. It’s the sort of approach that Canada’s Competition Bureau and John Tory, Toronto’s new mayor, have both recently suggested would be more productive than battling it out in the courts. “There have been a lot of instances in recent history where technology has made a lot of changes necessary for people who are in business of one kind or another,” said Tory.

But it’s also one that promises a radically different transportation future. In San Francisco, a chronically underserved market with 19.5 cabs per 10,000 population, the new ride-sharing rules have added a lot more hired cars—for now. Between March 2012 and this past July, the average monthly number of trips by old, licensed taxis plummeted 65 per cent. The taxi war may already have been lost.