Is the Uber model the future of taxi use?
Unlike most millennials, I’ve never booked an Uber. This might make me seem like a luddite but I’ve had little use for it and little incentive to download the app. However, there’s another reason for my resistance to Uber. It’s their business model that’s caused a few raised eyebrows amongst many onlookers and their competition who feel Uber aren’t operating on a level playing field.
Like other sectors that have experienced a drastic shift in the digital age, the internet and smartphones have transformed the consumer experience of hailing a taxi. There’s no need to rely on the chance of seeing a taxi to hail or even ordering a taxi in advance. No middle man via a controller, just low prices and convenience. Yet that’s left traditional taxi services, historically used to an unchallenged monopoly, with an aggressive breed of competition in Uber and similar services such as Lyft and Grab.
Uber is great for consumers as it offers convenient and efficient transport with incredibly competitive prices. Who could argue against that? Indeed, despite my reluctance, and with some trepidation for the double standards it presents with my own ethics, I will probably eventually succumb to using the service for those very reasons. In exchange for the service provided, consumers give Uber’s owners frequent custom and consequent profits.
Like most capitalist ‘success stories’, Uber seemingly leaves the owners and the consumers winning while the drivers get a raw deal (which a demand for drivers provides a distraction to). Uber’s competitors in traditional taxi services are also losing out and some would argue unfairly so. Therefore with what appears to be a controversial business model, and working within a sector where it’s viewed negatively, does the Uber model represent the future of taxi hire? And if so, where does that leave the previously unchallenged players and the drivers who provide the service?
Uber allows a taxi to be ‘hailed’ via its app from a growing network of drivers who drive their personal cars having signed up to the service. Albeit subject to some background checks (which critics have argued don’t go far enough and aren’t as extensive as those traditional taxi drivers are subject to), becoming a driver for Uber is relatively easy. That makes it not only an attractive service for consumers but also potential drivers looking for work. That’s without the rigmarole and effort of say doing ‘the knowledge’ for black cab drivers, the demanding training that requires drivers to learn and recall any route in London without the aid of a sat nav or a map. As a result, drivers have initially flocked to Uber but with varying perceptions of the service.
Uber undoubtedly offers flexible working arrangements insofar as it allows drivers to drive as little or as much as they want. Although with Uber taking a 20% cut of an already low fare, drivers need a lot of rides to make it worth their while as a main and sustainable source of income. Drivers either drive with Uber on a part time or ad hoc basis to supplement their income elsewhere or are forced to make an obscene amount of journeys just to break even.
For the former, it’s probably quite a welcome revenue stream. Nonetheless, if it’s your main source of income, it’s not a great situation to say the least. Furthermore, once factors and overheads such as car depreciation, tax, insurance, fuel and amenities are deducted, Uber’s been criticised for paying less than minimum wage. Not to mention, if drivers need to drive excessively to make a reasonable wage, that raises safety issues for passengers. Amongst other criticisms, Uber is yet to provide any clarity or response to refute either suggestion.
Whenever I’m in a taxi, I often like to ask the driver how they feel about Uber and to date responses go from lukewarm to vitriolic regardless of where in the world it might be. The allure of Uber has seemingly faded since its advent and it’s not gone unnoticed. A new taxi hailing app service, Juno, recently launched in New York with its hopes pinned on the premise of happier drivers leading to happier passengers which in turn increases their customer base and revenue. Juno takes 10% commission from drivers, half of Uber’s commission, and promises to give drivers a stake in the company. Even if Juno is unsuccessful in its attempt to dethrone Uber, it’s surely onto something in ensuring drivers aren’t losing out while only consumers and its owners win.
Competition is healthy for any sector. Particularly in contrast to the prices Uber is able to charge, it could be said that traditional taxi fares have long been too high because of higher overheads and a lack of competition to drive them down. With such low prices, Uber has been able to sway consumers to opt for their service. But that’s brought their service under the spotlight even more and largely for negative reasons.
In 2014, having transferred profits to its sister company in the Netherlands where it’s subject to a lower rate of tax, Uber paid £22,134 in corporation tax in the UK. That was despite making an £866,000 profit. Uber isn’t the only company adopting similarly unethical, but legal, practices. Though its intention to aggressively limit the tax it pays in the UK, and the social responsibility that comes with that, definitely doesn’t help the company ingratiate itself with me and many others in tempting us to give them our custom.
In the UK, Uber has also been accused of using its app as a meter akin to traditional metered taxis, something exclusive to black cab drivers. Black cab drivers saw this as an attempt to emulate the latter’s service without being subject to the same regulation and constraints that they are. Uber was successful in the legal action taken against them by Transport for London on behalf of black cab drivers to address this. Relations between the new school and the old school within the taxi sector continue to be acrimonious as the newcomers aren’t deemed to be playing fairly.
While traditional taxi services remain at odds with Uber and similar apps, it does need to be questioned how viable of a business model the former actually presents, especially against a backdrop of many taxi hailing apps now being available. Also, regardless of views on the ethics of Uber, it can’t be denied that their service reflects modern society and technology having pervaded all aspects of transportation, primarily in the use of GPS.
With black cab drivers in London continuing to do ‘the knowledge’, it does beg the question “why?” Years spent familiarising yourself with routes that a sat nav could tell you in an instant seems archaic and to some, probably pointless. Drivers should definitely have some knowledge of an area and shouldn’t need to rely wholly on a sat nav. But the cost of time and money against the use of technology bolsters the argument that ‘the knowledge’ is becoming increasingly redundant.
There is a sense of nostalgia and romanticism to the iconic black cabs in London and ‘the knowledge’ probably contributes to that. But like most people, I would rather take a lower fare and a quicker service in place of a nod to London’s history when my priority is completing my journey safety, quickly and at a competitive price. The reluctance of black cabs to modernise has, and will continue to, hinder rather than help in the fight against Uber and similar services. Unless black cabs can reduce their fares and improve their ability to be hailed without relying on chance, I can only see them reducing in their popularity and largely being the choice of tourists and others that cling onto the history of the service.
Other taxi services are heading towards a similar fate in being unable to compete with taxi hailing apps. If I can hail an Uber online for it to potentially arrive in minutes versus calling a taxi that may not be available for even within remotely close to the waiting time a taxi hailing app can provide a car, one can’t be blamed for supporting services like Uber on that basis alone. Uber is unashamedly in-keeping with our expectations and our need for efficiency and lower costs for services that a digital age has afforded. Alas, taxi drivers driving for traditional taxi services know that to make the move to Uber from what might appear a sinking ship, will mean a sharp pay cut and a steep increase in hours just to earn remotely close to what they would have once earned.
The business model of apps like Uber needn’t be unethical and they have modernised a sector that has rejected the use of technology at their peril. These apps surely represent the future of taxi services and it’s not too late for the old guard to adapt and join the party while it can still be partly on their terms. Conversely, Uber et al need to realise that while they might be reaping the benefits of unadulterated capitalism now, history is littered with examples of where workers’ dissatisfaction and negative public opinion has been forced to be addressed for a business to remain viable. Uber needs to be mindful that if they don’t fine-tune the business model to ensure this, someone else surely will.