Uber, a Silicon Valley Start-up, offers cheap and reliable transportation services through advanced technologies in smartphone GPS systems and computing capabilities. Uber and other technologically savvy companies have altered traditional consumer markets with a new self-regulating shared economy, which has carried an impact on markets everywhere. Having introduced and utilized this new shared economy, these big data companies, such as Uber and AirBnB, have gained praise from supporters for lowering costs and creating convenient transportation opportunities for consumers. They have clashed with the traditional economies of the past, threatening the businesses of many companies that rely on traditional market interaction such as booking hotels and cabs over the phone or in person. This has been at the center of a debate that has placed tremendous pressures on companies like Uber from various governments and municipalities.
The flexibility made possible by Uber’s innovative structure gives it a tremendous edge over its traditional competitors. With Uber, you can order a taxi through the Uber app on your smartphone device and know exactly when it will arrive in real time. Traditional taxi companies cannot offer such measures of predictability, which are particularly useful at times when such predictability is needed, such as periods of extreme weather conditions. Further, Uber customers do not have to worry about making payments with cash or cards, as the payment is made with a credit card through the application at the time of order. This provides the customer with a convenient and seamless experience that guarantees piece of mind during transportation. In Toronto, Beck Taxi Company has begun toying with the idea of introducing a system that mirrors Uber. This system is, however, still in the testing phase and has not been fully rolled out yet.
Uber’s reputation is one of its most valuable assets, as the success of service relies on attracting repeat customers. Therefore, Uber requires its drivers to be competent, fully insured and be driving reliable cars to prevent incidents that can jeopardize customer safety and damage the service’s reputation. Furthermore, the most valuable commodity that sets Uber apart from traditional taxis is the ability to have flexible pricing in place of standard cab fares. On Uber, when demand is at a peak, fares rise to restrict that demand. As a result, Uber drivers are not idle for long periods of time and customers have constant access to reliable transportation alternatives.
Ultimately, the innovation utilized by Uber to achieve its level of growth generates competition in a stagnant market, creating more job opportunities in the economy. Brian Kantor, Chief Economist and Strategist at Investec Wealth and Investment, writes that “growth happens when individuals are left largely free to pursue their own interests by competing with established suppliers through hard work, taking risks and constantly innovating to improve their own rewards. The hidden hand that converts private benefits into public gains is a work in constant progress.”
Uber’s success hasn’t been met solely with enthusiastic support, as a number of complaints and lawsuits have been filed against Uber over the last few years. Uber’s opponents, mainly municipalities and competing cab companies cite its unregulated business model as a cause for concern. This is due to Uber’s circumvention of some municipal by-laws that ensure customer safety and regulate traditional cab revenues.
Currently operating in more than 200 cities in over six continents, Uber hasn’t the slightest interest in reducing its expansion into other areas of the world or playing by the established government regulations for cab companies. New York, Toronto, Paris and other major metropolitans around the world are suing Uber for operating illegally as a taxi and/or limo service without paying proper licensing fees and abiding by established requirements. Traditional cab drivers in various parts of the world have felt the pinch. They have all echoed similar concerns, arguing that this new service inherits unfair advantages because Uber drivers are able to operate without abiding by the rules, regulations and licensing requirements that apply to traditional taxis. The D.C. Cab Commission is urging city taxi regulator bodies to suspend Uber’s operations until they buy insurance, perform background checks on drivers and have their vehicles inspected for safety purposes.
This isn’t the first time Uber has faced issues pertaining to background checks and passenger safety. In early November 2014, a 26-year-old woman from New Delhi, who was raped by a driver from the web-based Uber taxi service, filed a lawsuit against Uber. The lawsuit accuses Uber of failing to inspect the backgrounds of drivers to ensure passenger safety and security and is seeking unspecified damages. This was a big blow to Uber, as it resulted in banning the service in New Delhi; a measure that many other municipalities are also considering. The company has, since then, apologized for the incident and acknowledged the importance of securing passenger safety. Even with Uber’s promise to perform over 2 million background checks, however, this incident has not sat well with many passengers and municipalities worldwide. Regulation issues and legal challenges to Uber’s business model have led to national bans in Thailand and Spain as well as many forms of local bans in India, Germany and the United States.
Uber’s rise to success has brought a real change to the traditional economy and shifted the taxi marketplace into a self-regulating business model, offering a reliable service at a fraction of the traditional cost. Proponents of Uber argue that its dependable, efficient GPS smartphone technology and cheap rates are going to be the driving force of the new digital world of alternative transportation solutions under this shared economy. On the other hand, opponents argue that Uber’s business operations and its sheer lack of compliance with regulatory legislation ultimately jeopardizes revenue streams from traditional cab services to municipalities. More importantly, this lack of regulation impacts the potential safety of customers, as witnessed last year in New Delhi.
Nevertheless, city councils and regulators could be open to the idea of continuing such services if Uber agrees to pay its fair share of regulatory licensing fees and institutes a robust background checking system. For cities looking at cashing in on extra revenue, Uber’s business model is definitely worthy of consideration, as long as it operates within the confines of existing municipal by-laws and regulations. However, it will be up to Uber to decide if it will play by the traditional rules that govern the taxi industry. Abiding by these regulations can help grow the economy as well as avoid lawsuits and bans that have hindered the full potential of this innovative service.