What to do about Uber (BC)21 Nov 2014
Update: New York and Chicago are exploring exactly this approach, as reported in the New York Times: “Regulators in Chicago have approved a plan to create one or more applications that would allow users to hail taxis from any operators in the city, using a smartphone. In New York, a City Council member proposed a similar app on Monday that would let residents “e-hail” any of the 20,000 cabs that circulate in the city on a daily basis.”
Nick Denton has a nice little article on Kinja about Uber and how they are slowly taking over the local transportation market in cities they have been allowed to operate.
it’s increasingly clear that the fast-growing ride-hailing service is what economists would call a natural monopoly, with commensurate profitability… It’s inevitable that one ride-sharing service will dominate in each major metropolitan area. Neither passengers nor drivers want to maintain accounts with multiple services. The latest numbers on [Uber], show a business likely to bring in nearly $1bn a month by this time next year, far ahead of any competitor
BC has thus far resisted the encroachment of Uber, but that cannot last forever, and it shouldn’t: users of taxis in Vancouver aren’t getting great service, and that’s why there’s room in the market for Uber to muscle in.
Like Denton, I see Uber as a mixed bag: on the one hand, they’ve offered a streamlined experience which is qualitatively better than the old taxi service; on the other, in setting up an unregulated and exploitative market for drivers, they’ve sowed the seeds of chaos. The thing is, many of the positive aspects of Uber are easily duplicable by existing transportation providers: app-based dispatching and payment aren’t rocket science by any stretch.
As an American, Denton naturally reaches for the American solution to the natural monopoly: regulated private enterprise. In the USA, monopolists (electric utilities, for example) are allowed to extract profits, but only at a regulated rate. As Canadians, we have an additional option: the Crown corporation. Many of our natural monopolies, like electricity, are run by government-owned corporations.
Since most taxis are independently owned and operated anyways, all that a Crown taxi corporation would need to do is provide a central dispatching service, with enough ease-of-use to compete with Uber and its like. The experience of users would improve: one number to call, one app to use, no payment hassles, optimized routing, maybe even ride sharing. And the Crown corporation could use supply management to prevent a race to the bottom that would impoverish drivers and reduce safety on the roads.
There’s nothing magical about what Uber is doing, they are arbitraging a currently inefficient system, but the system can save itself, and all its positive aspects, by recognizing and reforming now. Bring on our next Crown corporation, “BC Dispatching”.