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June 27, 2014

Taxi owners, government patrons try forcing Uber to go 'off-duty'

Editor's Note: If you're not a weekly subscriber to Taylor Armerding's column, you can publish this one if you notify him at t.armerding@verizon.net

That cliché, “Build a better mousetrap, and the world will beat a path to your door,” apparently needs an update.

In our modern world, if your better mousetrap threatens the market share of other mousetrap makers, the employees of those other makers plus government regulators will be among those beating a path to your door – to put you out of business.

They never put it quite that bluntly, of course. Instead we hear about “fairness" and “leveling the playing field,” as we are now about Uber, the company that offers an alternative to taxis by “connect(ing) you with a driver at the tap of a button,” on your smartphone. You can also pay the fare on your smartphone.

From the perspective of customers - presumably the key interest group here - it is a far better mousetrap. It's quicker, cheaper, cleaner. Blog sites are full of comments about how the ride shows up more quickly; the fare is cheaper (you can choose your vehicle from subcompacts to SUVs or luxury sedans); and the interiors are neat and clean.

Indeed, both the driver and the passenger(s) get rated after every ride, so there is actual direct motivation to put some substance to the claim that the company wants to “serve you better.” A prospective passenger can see a picture of the driver and his or her customer-service rating before getting into the car. A driver with too many low ratings loses the job.

Not surprisingly, given the choice, customers have flocked to Uber by the millions. From its launch in 2009, Uber now says it operates in 131 cities (66 of them in the United States) in 38 countries. It lists Google Ventures and Goldman Sachs among its investors. It recently earned an $18 billion market valuation.

So the goal of cab companies and their government enablers is to deny consumers that choice - or, at a minimum, make it less attractive and more expensive. In Paris, hundreds of cab drivers, demanding that Uber be shut down, drove very slowly on major highways and secondary roads. There were similar protests in other European cities, including London.

The predictable result was gridlock. It’s hard to see how that builds public sympathy from either their passengers or other drivers.

Virginia has outright banned the company, threatening to fine any drivers who accept Uber riders. So have the cities of Miami and Austin, Texas. There are various other efforts to regulate the company out of existence in some locations, some of them staggering in their absurdity.

In Cambridge, Mass., allegedly one of the East Coast's hot spots of the innovation economy, the taxi lobby convinced the city’s licensing commission to propose a minimum $50 price for Uber rides plus restrictions on the company’s use of technology to calculate fares. In Paris, one of the demands was to mandate a 15-minute delay between calling for a ride through Uber and the pickup. Fortunately, a court threw it out.

In short, the goal is to force Uber to provide worse service at a higher price. There are shades of “Harrison Bergeron,” Kurt Vonnegut’s iconic short story about government efforts to make everybody “equal,” including requirements that athletic people drag around heavy weights so they can't jump higher than anyone else.

The cab drivers are not the villains in this drama. As has been documented by a number of investigative reports on the industry, most are pawns in a game rigged by large investors, banks, middlemen and government. Most cabbies who pick up customers don’t own the vehicle, and they're likely getting paid a relatively low wage. They are victims of what has accurately been described as “urban sharecropping.”

And when it comes to the taxicab owners, yes, they are heavily regulated. But, in exchange, they get minimum pricing, and there are a limited number of medallions, meaning demand is always greater than the supply. That yields a classic non-competitive, closed system with high prices and spotty service. (Some cab drivers are outstanding, but that is the blind luck of the draw, with no customer feedback welcomed to get rid of the bad ones).

And, of course, the taxi industry, now exposed as woefully obsolete, doesn’t want to improve itself and compete with Uber. It wants government to eliminate the competition.

Their arguments are as absurd as the regulations they demand. They complain that Uber cars aren’t safe. As if taxicabs are 100 percent safe?

The major mystery to me about cab drivers is that most seem to want to remain serfs, working for next-to-nothing. The first thing I’d do in their place would be to quit and join Uber, where I could compete on my merits.

The long-term reality, however, is that government attempts to squash the very innovation it professes to support will not work. As others have pointed out, no government intervention was going to keep the car from replacing the horse and buggy. No intervention was going to protect typewriter manufacturers from the personal computer. Yes, some jobs were destroyed along the way, but many, many more were created.

If government really wants to create a level playing field for taxi companies, it should lift the stifling regulation and absurd limit on medallions, letting all parties compete in the marketplace. The world will beat a path to the car doors of those who are the best.

Taylor Armerding is an independent columnist. Contact him at t.armerding@verizon.net

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