Uber's Dominance - and the Coming Squeeze

No matter how cool the service, monopoly practices invariably lead to monopoly prices. JL

Susan Crawford comments in Medium:

When private companies provide transport and communications services — in America, that’s how we do it — they do this subject to public obligations.The risk to all, to every city, is that taxi services vanish. They become creaky, vestigial refuges for the poor saps who rely on them. Unconstrained by competition, and with enormous scale and lower costs making competition impossible, Uber will be able to squeeze drivers and riders more tightly for profits.

My tribe — the technophiles, the Internet enthusiasts, the conference-speakers — is thrilled about Uber. I’m not. I know I’m swimming against the tide here, but I’m going to say it: I don’t think Uber is a good idea for American cities.

Before I drown under a flood of angry responses from around the Internets, hear me out: This fight is about public values. When it comes to city-wide transport and communications networks, serving everyone at a high basic level fairly — including drivers — is more important than permitting a single company to make enormous profits from a substitute basic private service.

I did not start off being anti-Uber. Like everyone else, I picked up on the big flat wide font in which it proclaims its name — the logo of a superhero, really — and I heard from my uniformly well-off friends that they loved the service for its push-button ease of use. My friends were big fans: being able to choose a car, see where it was on a map, time their pickups, and pay automatically made them happy. At a U.S. Conference of Mayors meeting I noticed that Uber’s logo was everywhere. Seriously, that font and its charcoal-grey smooth surroundings seemed to be covering every available surface, and mayors were swirling around its booths shaking hands and looking pleased to be new-fangled.

I read articles about Uber, I watched the tide of controversy surrounding its arrival sweep around the world, and I did notice that cab drivers were trying to protect their own turf from incursions by a service that felt to consumers like a better deal. “Huh,” I thought. “That seems protectionist,” I said to myself.

And then I started grilling cab drivers. I’m sure they were speaking in support of their own interests, but they had a lot to say. Here’s what they told me: Uber drivers have a tough time making a living; they’re responsible for their own cars, fuel, benefits, maintenance, tolls, and certain insurance as well as the kickback to Uber that takes a substantial slice out of every fare they pick up. They may or may not know where they’re going, and they may or may not be driving cars that are safe. Uber consistently squeezes its drivers as tightly as it possibly can; new drivers are paying an even higher cut to Uber than the first generation did.

Yes, this is just one instance of the gig economy — there are freelancers everywhere, as companies plow their profits into shareholder buybacks and dividends rather than investing in expanding their businesses and hiring new permanent employees — but this is transport we’re talking about.

And this is where a second public value kicks in. There is something special about basic physical transport and communications networks in cities. They are necessary to the fabric of the city; they are an essential input into every aspect of the city’s economic, civic, artistic, and social life. They knit the city together. Making that input available to everyone at a reasonable price and a high level of quality makes a city work — because other businesses and residents can rely on these services at a predictable price whenever and wherever they need them.

So even when private companies provide basic transport and communications services — in America, that’s often how we do it — they do this subject to extensive public obligations. That’s where the whole idea of “common carriage” came from — transport and communications networks operated by private companies that provided a high level of uniform service at uniform rates under uniform promises of safety and reliability.

Here is my self-interest: I am a fan of taxis wherever I find them. Taxis are not the same as Uber. Their rates are regulated and set; their pricing is transparent and can be double-checked (just look at the meter, which is itself regularly tested); they look like a uniform fleet; they are subject to very strict licensing and safety requirements. With rare exceptions, they don’t employ surge/congestion pricing schemes. I want them to work well.

From my perspective, cities should be focusing on making their taxi services better. Taxis should be more accessible to everyone. Taxi fares should be low, predictable, and uniform. Taxi geographies should be wide. Taxis should be clean, fuel-efficient, driven by trustworthy, well-trained drivers, and available for frictionless electronic hailing. Because when you have a working taxi service that serves everyone at a basic level, urban society as a whole does better. Right now, taxis may not be doing enough to meet these basic requirements.

Uber, with its superhero font, seemingly unlimited appeal to investors, 4500 employees, and $50 billion valuation, seems unstoppable. But that’s because taxi services haven’t been good enough for citizens to support the drivers who object to Uber, and the cab drivers seem to the rest of us to be fanatically yelling at Uber in their own interest. Taxis aren’t viewed as expressions of the public value of clean, safe, city-validated, superior, inexpensive transport for everyone involved — and as a vehicle for good jobs.

And so the risk to all of us, to every city, is that the taxi services we have gradually vanish from view. They become creaky, vestigial refuges for the poor saps who still rely on them. That has to be bad; unconstrained by public competition, and with its increasingly enormous scale and lower costs making private competition impossible, Uber will be able to squeeze drivers and riders even more tightly for profits.

This issue is in flux around the world as Uber marches on enormous new markets in India and China. Berlin, New Delhi, Seoul, Madrid, and Rio de Janeiro have already decided against Uber. It would be a good idea for more American cities to join them.