Uber and regulation

Salon had an article this week entitled "Why Uber must be stopped". It is an interesting read following on from a non-clickbait article at The Verge about Uber's questionable practices in recruiting Lyft drivers. 

It has been interesting watching the rise of Uber and other similar services. These companies are clashing with regulators around the world as they try to grow their slice of the market. 

The usual reason given for strictly regulating taxis is to ensure public safety and provide a high standard of service. The rise of Uber has highlighted the other side of taxi regulation: the monopoly that taxi license holders possess and the lengths they go to to retain that monopoly. 

In many cities, taxis are regulated by restricting the number of licenses available. These licenses are periodically sold off by the regulator or on-sold by their owner. Currently a taxi license plate in Sydney, Australia, can be bought for about A$380,000 and a New York taxi medallion costs about US$1 million.

These are monopoly prices that benefit the regulator who auctions off the plates and owners who can rent them out to drivers. This high cost does not help the consumer and makes it less likely for any de-regulation to occur. The loss of revenue for the regulator and loss in value of the medallion would be difficult to stomach for some. There is a vested interest in maintaining the status quo.

This is some of the background for the birth of Uber. They are trying to circumvent the regulations and the costs of entering the taxi industry. This is benefitting users and Uber.

Technology has allowed a lot of changes in commerce and improvements to public safety. It is possible to create a taxi meter using a GPS-enabled smartphone but that type of meter doesn't usually fit within existing regulations. It is possible to rate drivers and report complaints through to increase public safety but that also skirts around regulation.

Uber is often trying to fit in as a private-hire service. This means that the cars cannot be hailed from the street but are available for service on demand. This is similar to how mini-cabs work in London. The Black Cabs can be hailed on the street and are highly regulated. Mini-cabs can only be used by booking from the office or over the phone, with a price agreed in advance.

As it currently stands, I would like to see Uber more tightly regulated. Some of the taxi regulations exist for good reason and it is wrong that Uber is trying to work around them.

However, I would also like to see taxi regulations around the world loosened. There is no reason at all that a New York taxi medallion should cost $1 million. This is pure monopoly pricing that adds significantly to the cost of using a taxi in many cities, siphoning profits from drivers and passengers to medallion owners. It should be possible to issue as many taxi licenses as necessary to service demand.

The way things are going, Uber will undercut the regulated industry in many cities. This in itself may force loosening of regulations and benefit passengers. It might be a slow and painful journey though.