The Uber Effect

Photo Credit: REUTERS/Eduardo Munoz

Although customers may be attracted to the taxi services Uber provides, due to its cheaper costs, alternative taxi companies are forced to compete with Uber’s low rates and use of the apps. Uber is a ride sharing app that has grown rapidly in the last seven years since its debut in 2010. A major reason for this boom is because Uber is not regulated in the same way that traditional taxi services are. While traditional taxi services are bound to using meters to determine the cost of a trip, Uber is free to charge any price.

“There is a very bad competition between Uber and us. Uber has affected all of us to be honest,” said Mohammad Asard, who has been a taxi driver for 25 years.

However, competing taxi services are not the only ones who are negatively impacted by Uber’s low prices. As stated by Luis Santana, a former Uber driver, “My first experience with Uber was great. Uber prices were good for the drivers as well as the company. Now the prices are more for the consumers, which is great for them but not for us.”

Uber drivers get 80% of a fare, and the company only takes a 20% cut. According to Bloomberg’s Eric Newcomer, a record breaking 62 million trips were made this past summer which is why Uber can afford to charge their clients lower rates. Currently, Uber is valued at nearly $70 billion, employs more than 10,000 staffers and has more than a million drivers operating in 528 cities around the world. But where does that leave local cab companies?

“Over the last five years we have seen decreasing volumes of calls. Uber at least have taken 40% of our calls,” says Andy Fernandez, who co-manages MetroLine Car service with his father Sandro Fernandez. MetroLine Car service, which has been around for over 20 years, was the first cab service company in Williamsburg, Brooklyn. Overall, Uber has left other companies in the taxi industry with financial troubles. According to a report by Bloomberg Technology, Uber’s gross bookings rose to $6.9 billion this year alone leaving other New York City taxi cabs to decline last year. In a 2016 TLC Factbook, hundreds of active taxi drivers declined from the year 2014 to 2015.

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Uber is such a strong competitor not only because of its low prices but also because of its use of apps. Passengers download an app that allows them to request the nearest available Uber car on their smartphone. Although, the use of apps enabled Uber to become the huge company that it is today, according to taxi expert, author of Taxi! A Cultural History of the New York City Cabdriver, and a former cabbie himself, Graham Hodges, phone applications have negatively impacted traditional taxi companies.

However, not all local cab companies are struggling to compete with Uber. Fenix Car Service located in East Williamsburg, Brooklyn had started using different programming software’s including applications around the time Uber started.

“Our app has been working amazing! We had to get to the same point and do the same thing as them. Back then we never used to send texts to our customers and now we do. We don’t see a big difference with Uber affecting us because we keep upgrading. If you don’t upgrade from radio you will see a decrease in work,” said program developer Diego Hernandez.

Fenix Cab Service is not the only business that has changed their system in Williamsburg, Brooklyn. Manager of Brooklyn Radio Dispatcher Company, Jose Nunez, said at first Uber had affected his company significantly but they learned that the new innovation was using apps.

Although, adopting apps have been a solution for some traditional taxi services, TLC is still struggling to satisfy their employees. According to Fernandez, the people in charge of TLC have invested in Uber and thus profit from its expansion. Moreover, he states: “People from TLC protect Uber, more than us [the drivers] because they have [financial] interest in it.” TLC Commissioner, Allan Fromberg, adamantly denies that Uber is to blame for the decrease in job stability for taxi drivers. Instead, he stated that he sympathizes with his drivers. “It’s an emotional issue for them, we are trying everything we can to accommodate our drivers.”

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