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Taxis Uber Alles?

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Articles - July/August 2014
Friday, July 11, 2014



Unless you’ve been living under a rock for the past two months, you know that the ride-sharing app Uber is one of the hottest, most controversial tech startups in the country right now. In June the San Francisco-based company announced that investors had poured another $1.2 billion into a funding round, giving it a jaw-dropping $17 billion valuation. That same month, anti-Uber protests erupted in London, Paris and other European cities, fueled by taxi drivers furious about losing business to the fast- growing company.

Closer to home, Portland taxi drivers have so far prevented the company from operating in the Rose City, after the city’s Private For-Hire Transportation Board of Review rejected Uber’s requests to change its permitting requirements. “While we are constantly exploring new markets, we don’t have any immediate plans to expand into Portland,” Uber spokesperson Sarah Maxwell says.  

But if local operators have kept the vandals from the gates, their days of playing defense are over. Later this year, three cab companies — Broadway, Green and Radio — will roll out their own smartphone booking service: an enhanced version of Taxi Magic, a mobile app that is integrated with the existing taxi-dispatch system. “We got outdone tech-wise,” admits Steve Entler, Portland Radio Cab general manager and a member of the Transportation Board. “Now we’re fighting fire with fire.”

The battle between Uber and the taxi industry is the latest in a series of skirmishes between traditional industries and government regulators on the one hand and upstart tech companies on the other — the former claiming to be the protector of the public good and local business, the latter a force for innovation and smart urban living. In the app-based ride-sharing wars, both sides are scoring wins. 

Despite its meteoric growth, Uber has been thwarted by city and state regulators concerned about safety and liability of the company’s drivers.

For example, California legalized ride sharing last year, yet the state is at loggerheads with Uber over some basic regulatory issues — such as drivers not being licensed and a lack of commercial insurance. Uber has also suffered setbacks in New Mexico, New Orleans, Denver and, of course, Portland. 

“Cities and government agencies say, ‘OK, we recognize Uber is providing an important service,’” says Kathleen Butler, Portland’s regulatory division manager. “But also there are rules you have to follow; you have to have insurance, you have to have a permit, the basic safety things. The CEO of Uber [Travis Kalanick] basically has said,  ‘No, we don’t agree. We’re disruptive; we don’t like the government telling us what to do.’” 

Uber executives declined to comment. But in negotiations around the country, the company has claimed it is not a taxi service but a technology company that connects people with cars to people who want rides. 

 For their part, cab companies are seeking tools that will help them keep up with rapidly changing times. Designed by Virginia-based Taxi Magic, the upgraded app will help modernize the struggling industry while protecting taxi operators from encroaching ride-sharing companies, says Radio Cab’s Entler. Like Uber, the new service will allow people to hail a ride from their smartphone, track it via GPS and pay automatically from a saved credit card. It will also enable customer reviews of individual drivers. 

Unlike Uber, which contracts with its own drivers, Taxi Magic works exclusively with existing cab fleets. “Uber aims to disrupt markets,” said Jay McClary, Taxi Magic executive vice president of marketing and operations. “We provide the taxi industry a way to improve.” 

Other companies, such as Connecticut-based startup Dashride, are helping taxis transition to mobile technology.  And yet, as cities densify, the real threat to cabs may be the business model, not the app, urban transportation experts say. Like many cities, Portland operates taxis as a “regulated monopoly”; the city limits the number of taxi permits, which are distributed to cab companies for a fee. Portland has 460 taxis on the road  — but that may be insufficient as more city dwellers seek fast and convenient alternatives to car ownership, 

“If Uber weren’t filling an unfilled niche, it wouldn’t be growing like mad,” observes Steve Gutmann, former business manager for Portland Getaround, a peer-to-peer car-sharing service. “There’s a hunger out there for more taxi-like services, and probably because of the industry’s monopolistic nature, there’s more latent demand than supply.”

In 2013 Portland put 78 new taxis into circulation — the first fleet additions since 1998. Butler says the city is planning to supplement with more cabs in the next few years but did not provide specifics. Unlike tech conglomerates such as Uber, taxis are locally owned and benefit the local economy, she adds. That kind of argument didn’t sway the Seattle city council, which in June voted to let UberX, the company’s citizen-driver platform, operate without limits on the number of drivers that can be on the street at any given time.

What’s next in the ride-sharing wars? Ironically, the latest Uber uprisings were led by the company’s own drivers, who have protested low pay and mismanagement — as well as comments Kalanick made during a June conference about driverless cars eventually replacing the company’s human operators.

But even a tone-deaf CEO may not be enough to stop the inexorable march of change. If Uber’s valuation turns out to be a bust, other “transportation network” services such as Lyft and Sidecar are waiting in the wings. Like UberX, these companies allow drivers to use their own vehicles to pick up fares. Just as the online vacation rental company Airbnb turns every homeowner into a potential hotel operator, ride-sharing services turn every driver into a potential taxi operator — allowing anyone with a vehicle to earn extra cash by picking up riders as they drive around town. 

 “Everyone wants to be a cab without going through the hoops to be a cab,” sighs Entler. “The endgame is contracting with anybody who owns a car. That will destabilize the taxi industry for sure.” 


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