Uber: taxis and disruption

The unstoppable growth of Uber, driven by ever-lower technological entry barriers and significant injections of private capital, is converting the taxi industry in many countries into the next sector of the economy to experience major disruption. The latest example is to be found in the Spanish city of Barcelona, where the first protests and threats of action by taxi drivers’ associations have not been long in coming.

Uber is the first major project with global aspirations that has managed to disrupt a sector largely made up of the self-employed or small companies, which are subject to all kinds of rules and regulations, and within which exist all kinds of abuses and rule-breaking. I’ve written about these problems before (in Spanish), and the Vice President of the European Commission, Neelie Kroes, has criticized the disproportioned fines that the Belgian government has imposed on Uber.

The most important thing to bear in mind when discussing a disruption process such as this one is to what extent legislation is being passed to protect consumers or to protect the sector in question’s privileges.

The taxi industry is heavily regulated, many of them utterly absurd: a taxi license in Spain costs between €80,000 and €200,000, as well as requiring a special driving license, having no previous convictions, a municipal license, passing an exam, having an approved vehicle, equipping it with a series of approved devices, and complying with a series of requirements and codes of conduct that in some cities apply to personal hygiene and clothing.

Needless to say, the cost of having the approved equipment is costly, if not downright abusive: in Spain, a taxi-meter can cost €3,000, while a receipt printer comes in at around €600. One can imagine how those taxi drivers who have had to submit to these ridiculous procedures are going to react when they see competitors who seemingly only need a smartphone and an app, as well as a car, entering the sector.

Uber just keeps pushing away, extending its range of services: it started out with black cars, up-market limos, and is now offering taxi services in some cities by cutting deals with individual taxi drivers or even private car owners.

At present, there are five services available, from uberX (low cost) and uberLux, taking in uberTaxi, uberBlack, and uberSUV, all with their own feedback structures that allows for constant monitoring of drivers via an application that provides information on a vehicle’s location and the amount paid for a journey, taking in promotions and details never before seen in the sector.

While some of these aspects have already been matched by traditional taxi companies via smartphone apps, many are still a long way from doing so due to the absence of any digital structures.

From the user end, Uber offers many advantages over traditional taxi services, free of restrictions. It is reliable and provides levels of choice that traditional services have never tried to offer, and provides added value that many people are happy to pay for.

As with any industry undergoing disruption, banning Uber is not a long-term solution, and is also abusive; it would also lead to legal problems. The taxi sector’s only response is to try to match Uber’s offer, and to make life easier for its workforce by removing many absurd regulations.

Disruption is usually not a pleasant process, and can even lead to violence; but in the end, customers end up opting for the service that is most comfortable, that gives them greater choice, and up to a point, that is new. However unfair it may seem at the time, opposing such processes of change is shortsighted. In the medium term, the only way to learn from previous processes and join the revolution. Like it or not, not very long from now, the restrictions currently in place on becoming a taxi driver will seem ridiculous to us, there will be more consumer choice, and the sector will have undergone a radical change.

(En español, aquí)