The phenomenon of start-ups using innovative methods to respond to consumer demand is not new. What started in 2008 as an app by two men who had trouble hailing a cab in Paris, is today a multinational corporation valued at $62.5 billion. Uber is an online transportation network company, which currently has operations in 528 cities around the world. Its growing presence worldwide has been met with both successes and difficulties in its introduction. Uber has recently been lobbying to expand its operation to Vancouver, in British Columbia. This initiative has been welcomed by those who feel that it will fill an existing gap. But it has also been criticized by those who feel it will bring a wave of uncertainty and distortion into Vancouver’s market.
Uber is based on a peer-to-peer business model that pairs riders with customers through an app. Riders can use it to book a cab with drivers affiliated with transportation network companies such as Uber or Lyft. Payments are made through the app, where riders and drivers can rate each other. Since Uber is a private company, it has its own security and screening procedures for its drivers. This is, very different from the manner in which licenses are obtained for established taxi services in cities that are governed by the legal authorities of the government.
The present taxi industry in BC is heavily unionized and contributes to employment in the economy. In addition to the conventional taxi fleet services, there are also some other ‘made in BC solutions’ that have attempted to satisfy consumer demand in the past. Spare Rides is a community based ride-sharing model, which currently has 3000 members using its service. Ripe Rides has a fleet of luxury sedans that is yet to procure taxi licenses. Flok operates in a niche market of concertgoers and students. However, a private company as large as Uber has yet to make its way into the BC industry. It has already penetrated the market in other large Canadian cities such as Toronto, Calgary, Ottawa, and Quebec.
Residents of British Columbia want the convenience of ride-sharing services by Uber. A petition on its website had 74,000 supporters in favor of the provincial government allowing Uber to enter the BC industry. Several tech frontrunners have also written to the government to allow this expansion in the taxi industry. Uber uses technology to bring convenience, predictability, and cost effectiveness to its customers. This is particularly attractive to people who have to commute using public transport on a regular basis.
The provincial government of BC would heavily regulate Uber’s services as it does with other taxi services in the province. The Passenger Transportation Board is hugely involved in how the service is operated including setting a limit of number of taxis that can operate, boundaries, and fare structures. Local governments can even write bylaws around commercial and business licensing. The legalities around bringing Uber to BC morph their way into a debate on political agenda.
John Horgan, BC NDP leader said, “There’s an existing industry that has been asking for more access to vehicles, so there can be more supply for the travelling public and they’ve been denied that.” However, there has been a heavy pushback from the Vancouver Taxi Association on this reform. Carolyn Bauer, the association’s spokesperson said, “This is the government introducing large, corporate interests at the expense of small, local businesses… The government has completely ignored our interests and we will be using (the) legal and political means available to us to fight this unfair government initiative.” The Liberals have been accused of reversing their previous opposition to Uber two years ago. Transportation Minister Todd Stone has assured BC residents that a company that “chooses to operate in BC [will]do so in a lawful manner.” The variety of political viewpoints highlights the inability to satisfy all parties in question.
The political debate on Uber’s entry into BC, though interesting, is independent from issues that have been raised about the company’s services in the past. There has been critique on its procedures to ensure driver and passenger safety, lenience in insurance coverage, and its sexist business practices. It has also been criticized for its use of software ‘Greyball’ to block regulators from availing its service, deviance from municipal bylaws and the use of surge pricing.
Uber has had a mix of successes and failures in its operations around the world. In some countries such as the U.S, it has done exceedingly well by operating in the ‘shared-economy’ space. Economies governed by free markets are open to trust new business practices such as Uber to respond to consumer demand. However, it has not been as successful in European markets. This has been due to a mix of stringent laws, heavily unionized taxi services, and an adherence to conventional structures in the economy.
Some European countries such as Germany have been closed to distortions in the market due to the entry of private companies such as Uber, and are viewed as external forces. A licensed German taxi driver in Frankfurt stated, “We don’t like it, the government doesn’t like it, and our customers don’t like it.” Similarly, a professor at Germany’s Otto Beisheim School of Management said “If you want to be successful in Germany, you have to understand the regulation… Uber didn’t, and it paid the price.” Culture can be a contributing factor on whether a business model such as Uber is regarded as propagating a shared-economy, or creating distortions in the market.
Uber has had mixed responses in developing economies, such as India. The idea is new and provides a convenient, comfortable option to a large insatiate demand. It has received opposition from the public taxi service but has been a huge hit particularly with people in the working class. But it has caused a shift from these people using traditional taxis for air-conditioned cars that can be booked and tracked. It even encouraged competitors such as Ola Cabs to use the same business model. Ola Cabs is an Indian transportation network company valued at $5 billion. Though it is significantly smaller in comparison with Uber, it marks a changing trend in the transportation industry. An insight from the varied responses to Uber’s introduction around the world is that its success is dependant on the unique social and economic construction of the region it chooses to operate in.
Uber Canada spokesperson Susie Heath echoed the sentiments of Uber proponents in Vancouver saying, “We believe that Vancouverites are clearly underserved and that people deserve access to more reliable transportation options in the city, including more taxis. The City of Vancouver and the provincial government should take action to expand the number of options available." But Vancouver City Council has decided to put it on hold for another year due to some of the reasons discussed earlier. Vision Vancouver councillor Geoff Meggs said, “We all agree more service is warranted. But no one is I think keen to put out new taxi licences if they're not going to be economically viable in the face of ride-sharing or any other changes the provinces could impose.”
Bureaucratic red tape has been a significant roadblock for Uber’s presence in Vancouver. The government’s decision also highlights its discomfort in its inability to ensure a “level playing field” with the introduction of Uber. There is an opportunity cost and risk associated with this new initiative in Vancouver. But it is difficult to dissect and predict its ripple effects beyond a point. As Dan Ariely, a professor of Behavioral Economics at Duke University says, “The problem with opportunity cost is that opportunity cost is divided among many, many things.”