This is the fourth post in a four-part series of articles on Uber.
The argument in posts 1, 2, and 3 can be summarized as follows: Uber’s flagship UberX service is unambiguously illegal in most cities in Canada because municipal and provincial taxi licensing law (British Columbia and Quebec license taxis at the provincial level) considers UberX a taxi service and Uber refuses to apply for a taxi licence for UberX under these laws. And it doesn’t apply for a taxi license for UberX because it does not want UberX to operate under the same rules as the rest of the taxi industry and incur the same licencing fee, insurance, and consumer safety costs that the rest of the industry pays.
Nor does it want its UberX service to charge the same regulated fares as its taxi competitors – it wants to be able to charge “surge pricing” which sometimes increases the fare for an Uber passenger as much as 10-fold over the regular fare.
In other words, while Uber is competing for the exact same passenger dollars as the rest of the taxi industry, Uber wants to play by its own rules when it comes to industry regulatory costs and fares.
Why? Simple – without its own set of rules that reduce its costs, the UberX service can’t afford to undercut the fares of existing taxi brokers – by far its most important competitive advantage. Put differently, Uber’s business strategy is simply a political strategy designed to pressure Canadian licensing authorities into creating a separate, cheaper set of taxi rules for UberX to operate under.
How does Uber justify having new licensing rules written just for itself – rules that significantly reduce its costs relative to the costs it would incur operating under the same rules that other taxi companies operate under? Why does Uber think it deserves special treatment?
In Uber’s public statements, it is its unique technology that sets it apart from other taxi services. Uber likes to advertise itself as a technology company that provides a “digital application service” to connect passengers to drivers. In other words, according to Uber its defining feature is that it provides a software platform that connects a customer with a service. And because it is essentially a technology company, unlike other cab companies, it needs its own rules.
The problem with this rationale is obvious – by now, many taxi companies employ Uber-like digital technology that puts drivers in touch with passengers (in addition to traditional phone dispatch). And it goes without saying that the established taxi industry doesn’t think a whole new set of rules are needed just so they can deploy their nifty new apps. Continue reading