Rethinking the Uber Vs. Taxi Battle

Uber’s CEO Travis Kalanick and what he calls “Big Taxi” have been at loggerheads for quite a while now, with battle lines drawn and the public and politicians taking sides.

And yet, this entire battle formation – as enticing as it seems – is likely to be futile in the end.

The reason for this forecast? There is a strong likelihood that over time taxis and ridesharing are going to merge until they are substantially the same.

Already, taxi companies are incorporating their own apps into their service. We can also learn some valuable lessons from the past.

The history of commercial passenger transport gives us a clue about how this contemporary version of the battle is likely to play out.

A long history of regulation

The commercial transport of passengers, and its regulation , go back centuries. Horse-drawn coaches-for-hire first appeared on the streets of Paris and London in the early 17th century.

These independent operators were unregulated and freewheeling, and proliferation and chaos soon ensued.

King Charles I of England finally ordered in 1635 that all the vehicles on the city’s streets had to be licensed by the state “to restrain the multitude and promiscuous use of coaches.”

Centuries later in the United States, the Great Depression threw millions out of work, some of whom owned a car.

Suddenly, the number of cars-for-hire exploded, clogging the streets. Uninsured drivers regularly got into accidents that injured passengers, and unsavory drivers engaged in criminal activities.

Things got so bad that in 1933 a U.S. Department of Transportation official wrote:

The excess supply of taxis led to fare wars, extortion and a lack of insurance and financial responsibility among operators and drivers. Public officials and the press in cities across the country cried out for public control over the taxi industry.

The policy response was that most major cities instituted regulations over licenses, fares, insurance, safety, background checks and other parts of the rapidly evolving taxi service.

Crucially, these cities also imposed limits on the number of taxis permitted within a city. Indeed, this is where today’s much-reviled medallion system stems from.

Medallions and other regulations capping the number of vehicles are often derided as Big Taxi protectionism, and there is a degree of truth to that.

Surge management vs. free-for-all

However, this history also shows that many of these regulations were enacted for good reasons. Certainly careful study should be conducted to figure out the causes of the recent surge in traffic congestion in San Francisco, New York City and elsewhere.

This would lead to more definitive insights on how much ride-sharing really contributes to congestion — or how much of that is the expected result purely of a growing economy.

Looking back at history, what has often driven regulatory interventions is the proliferation and resulting chaos of having too many vehicles on the road.

With ridesharing’s popularity, it’s not hard to imagine how this still relatively new service could eventually result in city after city returning to the “good ol’ days” of too many drivers, not enough safety and inadequate consumer protection.

How happy will customers be if they can hail a ride right away, but then are stuck in traffic for 30 minutes longer because the streets are jam-packed with congestion?

Anyone who has visited Shanghai or Beijing and witnessed the clogged roads and highways and toxic smog that prevent you from seeing buildings a couple of blocks away knows that there can be too much of a good thing.

Might we reach a saturation point, when limiting the number of liveries on the public roads fulfills other important policy goals, such as cutting down on traffic, air pollution and carbon emissions, as well as safety?

In many ways, this discussion is another version of the age-old argument about the public commons vs. individual freedom.

The history of livery services shows that it is important to regard our streets as a public utility, with the subways, buses, taxis and now ridesharing vehicles together comprising a transportation system that the public depends on.

Particularly in dense urban spaces, the different components of the transportation system must be coordinated.

A balance of “competing conveniences” has to be weighed, with the public good kept at the forefront of these discussions — instead of a much narrower focus in which companies win in the battle between Uber, Lyft and Big Taxi. Focusing on that question literally misses the all-important big picture.

Uber-style innovation into public transportation

Unquestionably, there is room for ridesharing in that big picture. Uber’s technology shows real promise. For example, Finland has launched an Uber-like app for public transportation.

Instead of dispatching individual cars, it pools riders on a public mini-bus, with each customized route being calculated in real-time.

Such efforts to incorporate ride-sharing technology into public transit are in their infancy, and it remains to be seen if they will be scalable.

Given government’s control of the purse strings, it could be smart to subsidize such efforts — if they make sense in terms of traffic management.

Uber’s Travis Kalanick has also launched UberPool, which is experimenting in San Francisco with a new ride option called Smart Routes.

Drivers are picking up and dropping off multiple passengers at the same time along a specific route, similar to traditional buses that follow a predetermined path between two points.

This service shows potential, but there again we have to think through the impact on the overall transportation grid. Otherwise, UberPool could undermine the public bus system.

If ridesharing companies begin offering vans that sprint up and down the busiest and most profitable routes, such cherry picking would destroy revenue for public transit.

The subways, buses, personal autos, trucks, taxis and now on-demand ridesharing vehicles together form a transportation system for moving people and goods from place to place.

Particularly in crowded urban areas, getting the right mix of these various options can make the difference between whether transportation is efficient and enviro-friendly or clogged up by congestion.

Editor’s Note: Steven Hill’s book, Raw Deal: How the “Uber Economy” and Runaway Capitalism Are Screwing American Workers (St. Martin’s Press, October 20, 2015) will release on October 20, 2015.