Uber, down the road apiece

The recent controversy around Uber and the absurd and ineffective ban on its activities in Spain has prompted me to wonder about the future of our cities once we have all understood the futility of trying to stop the company’s disruption via the courts. Uber isn’t the problem, it’s a symptom of the end of an age of restrictive regulations that allow for certain economic activities to be carried out by cartels or monopolies. Countries can try banning Uber, but other companies will simply take its place.

Uber is a formidable competitor. It is now present in more than 250 cities in 50 countries, and has been valued at more than 40 billion dollars despite the numerous problems and image crisis it’s bee facing. At the same time, it should be remembered that it is backed by Google. Indeed, it’s hard to imagine how to take on a company for which taxi services are but a tiny part of its overall transport strategy. No taxi company, however big, could possibly justify such a valuation: obviously, the estimation of its worth is based on what Uber is going to become (which is why the disputes with taxi drivers seem so petty).

The mayors of cities like Atlanta or New Orleans understand: Uber will beat the taxis, although it may take longer in some places; no matter, because it has the resources to keep the fight going until it wins. Furthermore, as the Canadian Competition Office has pointed out, the net result of the appearance of Uber will be beneficial to consumers in terms of convenience and improved service. In cities like Los Angeles, Uber is already seen as a blessing.

Uber’s value proposition is clear: no hidden extras, an app that makes the whole process transparent; driver choice; being able to see your car coming and to pay conveniently, a quality service based on peer-reviewing, and in countries where licenses are not artificially restricted, a range of options from basic to luxury, including special needs such as bigger vehicles or being able to share the cost of a fare. In reality, many of these features are already available in Spain to conventional taxi drivers through apps such as MyTaxi, or Hailo, although they have still not resolved the issue of an agreed price or following the shortest route.

So let’s start up the DeLorean in our illustration and go back to the future: as said above, this isn’t about how long it takes Uber to conquer the world, but what will happen down the road. The first question is clear enough: what will happen to taxis as we now know them? To answer that we need only head over to San Francisco, a city where Uber has been operating for some time now. Taxis in that city have seen trade fall by 65 percent since Uber arrived on the scene: in other words, the average taxi was picking up around 1,424 fares per month in January 2012, and by last July, that figure had fallen to around 504.

But what about competition from similar players to Uber? From what we know about developed markets, Uber will need to look out, as companies like Lyft make themselves pretty much indistinguishable from it, a trend that is already leading to competitive dynamics that border on the illegal. Beyond Lyft, which operates in 68 US cities compared to Uber’s 90, and that has no international presence, or Sidecar, which operates in San Francisco, San Diego, Chicago, Washington DC, and Boston, or local apps such as London’s Kabbee, competition can come from the most unexpected places.

An article yesterday discussed the possibility that car hire companies like Avis or Hertz, which have fleets of millions of vehicles that are often sitting unused in car parks for long periods of time, are going to start competing with Uber, a move that would seem to make economic sense. Competition could also come from the authorities: Los Angeles and other cities are thinking of setting up their own Uber clone, with its own app. In cities like Washington, all taxis must use a municipal app; New York is considering following suit. It remains to be seen if city halls, which to a large extent are currently part of the problem with the rigidities they impose on the cabs, can become part of the solution.

What is clear is that the disruption Uber has unleashed has a long way to go, and making short-term predictions or seeing the issue in terms of what’s happening today is no help. The journey has only just started.

(En español, aquí)