Part of The Uber: Capitalism on wheels Super Story

Uber wars

by Kevin J. Mooney | Posted on

An agile, convenient, tech-savvy transportation service that benefits commuters in big cities all over the world is in jeopardy if unelected regulators have their way. A major showdown is set for this fall. The battleground: Washington, D.C.

Since taking root in the nation’s capital beginning in December 2011, the venture start-up company known as Uber has experienced “unbelievably fast, strong growth” for its taxi and high-end sedan and SUV services, Rachel Holt, the company’s East Coast region general manager, told Rare in an interview. That’s because there is a growing appetite for “fast, convenient, reliable” car services in Washington and other urban settings that now outpace conventional taxi-cab operations, she explained.

As an alternative to hailing cabs at awkward spots late in the evening, or in the midst of inclement weather, customers can instead download Uber’s app on their smartphone, which can then be used to locate the nearest affiliated drivers. The ride is automatically charged to the credit card on file with the company’s billing department. There’s no fumbling for cash or credit cards.

“The technology is a big part of the Uber experience,” Ms. Holt said. “With one push of the button you can get a car and you never need to take out a credit card. It is a seamless transaction that customers really appreciate.”

Since the San-Francisco-based company was founded in 2010, it has expanded to the point where it offers services throughout the U.S. and overseas. In addition to Washington D.C. and San Francisco, Uber is now active in New York City, Los Angeles, Seattle, Chicago, Boston, Philadelphia, Dallas, San Diego, Baltimore, Minneapolis, Detroit and Sacramento. Foreign cities with Uber services include Paris, Berlin, London, Rome and Milan.

But right from the beginning, Uber has encountered regulatory hurdles aimed at obstructing its use of technology in different areas of the country. The Washington D.C. Taxicab Commission has been and remains a source of consternation for Uber and its customers. Just a few weeks after introducing new services to the city, Ron Linton, the Taxi Commissioner, personally led and organized his own sting operation against an Uber driver back in January 2012. Mr. Linton used Uber’s smartphone app to order a sedan that took him to the Mayflower Hotel. At that point, his officers converged on the car and impounded the vehicle after issuing multiple fines to the driver.

“That was quite the introduction for us in Washington D.C.,” Ms. Holt recalls. The sting coincided with a three-day weekend that included the Martin Luther King Jr. holiday. “The driver could not get his car back for the entire weekend.”

Mr. Linton has told members of the press that Uber broke the law by intermixing limousine services with taxi rules. The critical difference being that taxis charge based on time and distance while limousine charges are prearranged. However, D.C. taxi regulations distinguish between the sedans used by Uber and standard limousines. So it would seem then that Uber is permitted to charge according to taxi rules.

Nairu Hourdajian, a public information officer with Uber, insists his company has not violated any laws.

“Anytime there is change, those that benefit from the anti-competitive status quo will resist that change,” he said. “The fact is that despite the misinformation often spread by incumbent taxi operators, Uber technologies operate legally in all its markets, including 18 cities in the U.S.”

Despite entrenched opposition from “incumbent taxi operators” and local regulators, there are some encouraging signs that bode well for Uber.

For starters, not everyone in government is working to restrict the company’s activities. In fact, it was just this past December that the Washington D.C. City Council passed new legislation that Ms. Holt, and other company officials, describe as “groundbreaking, pro-consumer, pro-driver, pro-innovation.” The bill provides for “transparency in consumer pricing” and also boosts the supply of for-hire vehicles.

The city council’s actions could potentially “solidify the market for technology companies like ours,” Ms. Holt said. Put simply, the bill takes 21st-century realities into account that existing laws and regulations did not accommodate. But the nine-member Taxi Commission is not letting go. In fact, it is now poised to reintroduce proposed rule changes that could stifle the very innovations customers find so appealing, Ms. Holt warned.

One of the most controversial proposals would restrict the ability of technology companies like Uber to work directly with taxi drivers in D.C. and would instead require payments to be made through payment processors in taxi cabs that would then be integrated into the cab’s meter system. “This would shut down our taxi services because that’s not how we process payments,” Ms. Holt explained. “Being able to push a button, get a car and then never have to take out a credit card in this seamless way is what we are about.”

Other proposals would put restrictions on the use of fuel-efficient vehicles and block Uber from partnering with certain drivers. Another pending regulatory proposal calls for Uber to provide regulators with data on the rides processed through its system.

Neville Waters, a spokesman for the D.C. Taxicab Commission, told Rare that criticisms directed against the proposed changes are unwarranted and overblown. The payment-processing method favored by the commission is needed as a safeguard for consumers, he said. “Frankly, the concern here is the potential for credit-card fraud or the mistyping of information,” Mr. Waters claims. “It only takes a few drivers — whether maliciously or by mistake — to have a massive amount [of] credit-card fraud or identify theft. Rather than risking that, it is much easier and efficient to have a digital dispatch company integrate with a payment service provider so this is done automatically without any manual entry. This is what Uber finds so distasteful.”

Mr. Waters also said that some of Uber’s marketing efforts are misleading since the company does not actually own any vehicles or employ any drivers. “You hear talk of Uber drivers and Uber cars, but this is patently false.”

Is it?

While it’s certainly true that Uber does not actually employ drivers or own cars, Ms. Holt points out the company has “hundreds of cars and drivers” at its disposal in D.C. and in other parts of the country. One is Peter Faris. Thanks to Uber technology, he can maximize his time, earn additional money and provide a better service in D.C. He’s a fan.

“Uber combines the instantaneousness of a taxi with rates that are close to taxi rates, and it combines this with black-car services and professional drivers,” Mr. Faris told Rare. “One reason it is so successful is because you are getting so much value from the client standpoint for your money. It’s also good for the black-car drivers because it opens up all kinds of choices for them. They typically have a lot of downtime but now they can choose their downtime and it makes a world of difference because they can spend more time with their family. Uber has blown open all kinds of opportunities for black-car drivers, black-car companies and customers.”

Going forward, Mr. Faris is concerned the commissioner’s regulatory drive could subtract away from seamless, instantaneous services that benefit a wide range of clientele. “We have young people, we have older people and all kinds of customers and they all benefit from what Uber offers,” he said. “I hope this doesn’t change.” Mr. Waters, the commission spokesman, remains cynical. “They [Uber] just want to do what they want with no regulations,” he said.

Instead of playing favorites with existing cab services that are resistant to change, city officials should encourage competition, Matt Patterson, a labor-policy analyst with the Competitive Enterprise Institute (CEI), told Rare. “When businesses collude with government bureaucrats to protect their legal monopoly, as appears to be the case here, it shuts out the types of innovation and entrepreneurship that create jobs and bring new ideas to market,” he said.

Meanwhile, Uber continues to grow. Most recently, it has expanded internationally into Seoul, Taipei, Mexico City and has big plans to tackle the massive market in China. Domestically, it just launched in Indianapolis and Honolulu. Next up are Houston, Miami and Portland, where Uber is working to “break down regulatory barriers,” according to company officials. There are pockets of resistance around every corner, but competitive forces are winning the war in the ride-sharing marketplace.

Kevin J. Mooney is an investigative reporter in Washington, D.C. who writes for the American Spectator and Watchdog.org. Follow him on Twitter @KevinMooneyDC

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