31 Comments

Summary:

It’s easy to assume that traditional players protesting against their nimble new competitors are just sore losers — easy, but not always fair nor accurate.

Photo by Oli Scarff/Getty Images
photo: Oli Scarff/Getty Images

There are many things that can enable disruption, but let’s talk about two in particular: technological advantage and playing by different rules. It’s easy to get the two confused – as many people are doing in the case of Uber and the traditional taxi strikes it is inspiring across Europe.

The drivers that will gridlock London on Wednesday (others are also striking in Berlin, Paris, Madrid, Milan and Lisbon) are Luddites and idiots, according to some commentators. They’re just trying to hold back the tide of technologically-enabled competition. But is that a fair assessment?

Unfair fight

The very well-funded Uber and rivals such as Lyft and Hailo certainly do pose a threat to traditional cabs: their apps provide a more convenient way for people to find a car and their real-time marketplace model (they don’t actually maintain fleets as such) is more efficient than just driving around looking for a raised hand. However, their biggest advantage is regulatory, certainly in places like London, where traditional “black cab” drivers have to stick to well-defined rules.

Here’s the problem: if you’re a London taxi driver, you need a license from Transport for London (TfL) to operate. There are two kinds of licensed cab driver there, black cab and private hire/minicab. Minicab drivers can only take pre-arranged bookings with a pre-arranged fee, and black cabs are the ones that drive around looking for business, are easily identifiable, and carry a meter.

The minicab conditions exist largely because of passenger safety – it’s relatively tricky to tell which drivers are genuine and which are potential threats, and there has historically been a problem with drivers aggressively touting for business. What Uber is doing is to take on licensed minicab drivers (at least in theory; the company’s London recruitment page has a dead link for getting TfL licensing) and send them out to compete with the black cabs in the metered-travel business.

The black cab drivers say, correctly, that this is illegal. TfL, however, has decided that the smartphone app-based meter used to calculate Uber fares is not a taximeter, and has asked the High Court to back it up.

This was a very silly decision on TfL’s part. The law clearly states that a taximeter “means a device for calculating the fare to be charged in respect of any journey by reference to the distance travelled or time elapsed since the start of the journey (or a combination of both)” — you could get tangled up in whether Uber’s app is a “device” or whether the GPS-equipped smartphone would have to be the device, but it’s pretty clear that it does what a taximeter does.

Regulatory failure

The black cab drivers are in a terrible position. Their regulator is effectively saying that they have to play by certain rules (such as going through rigorous testing for having memorized London’s streets) while others who are doing much the same job don’t have to be equally compliant. Under this set of rules, black cab drivers don’t merely have to fend off their crowdsourced, app-enabled rivals – they have to do so with one arm tied behind their back.

It’s worth noting that many traditional black cab drivers happily signed up for Hailo, a service that was originally designed to bring them into the app-enabled age, before turning against the company when it moved into the competing minicab space as well. It’s not like they’re entirely resistant to change — though how many will now sign up to participate in Uber’s Hailo-esque UberTaxi service, not coincidentally announced on Wednesday, remains to be seen.

The fault, therefore, lies with the regulator, not the cabbies. And those who are so keen to deride the cabbies for their supposed neo-Luddism and idiocy should really be asking whether they want to see the regulations changed in London, Paris, San Francisco, San Antonio and beyond. Should all taxis be deregulated? Should Uber be more heavily regulated? I don’t know – that’s a public policy decision. But it’s a far more complex argument than the one painting traditional taxi drivers as fools and protectionist villains and Uber as the swift, smart underdog.

Regulation is really tough these days, with the pace of technological innovation being as speedy as it is. Rules that suited one age suddenly don’t fit the next, and it takes a while for them to catch up. In the interim, some traditional players sometimes find themselves at a severe and unfair disadvantage that’s not of their own making. Don’t blame them for that – and don’t assume that their disadvantage is wholly caused by their rivals’ inherent technological superiority.

PS – I’m going to an event this evening where the organizers warned attendees that there’s a taxi strike in Berlin, but Uber has helpfully stepped in with the offer of free and discounted rides. Uber is currently banned from operating in Berlin, so that’s illegal, but who cares, right? Disruption!

  1. Martin Eriksson Wednesday, June 11, 2014

    You’re absolutely right that regulation isn’t keeping up with technological advances, narrowly defining taximeters, regulating licensing to the point where a medallion in NYC can cost up to $1 million and limiting competition and innovation. The problem squarely lies with regulators and their elected masters in city halls around the world.

    But anyone who uses that kind of antiquated regulation to keep competitors out of their market are absolutely “fools and protectionist villains”. They massage the regulations to their benefit in a purely protectionist manner, to shape an unfair market advantage for themselves. It has nothing to do with public safety or customer experience.

    Should all taxis be unregulated? No, public transport should have some minimum rules around safety, fair fees etc – but they don’t need to cover the exact technology used to calculate that fee or anything else that will change between the time they dream up the regulation and actually implement it.

    I use London taxis all the time and love them. They are without a doubt the best in the world. But if they won’t let me hail one from my phone so I don’t have to wander around in the rain for 30 mins looking for one then I’ll take my business elsewhere. The flipside is if they are the best in the world – and worlds better than a minicab – why are they afraid of a little competition?

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    1. Wasnt it Sean Fanning that said, “Again its adapt or die?”

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    2. Have you not heard of Gettaxi, or Cab;app or Radio Taxi app? there a number of ways to hail a traditional black Taxi in London using your smartphone. Uber brings little new to the London Taxi or Private Hire market accept illegality. Surely thats not right!

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    3. You seem to have fallen fowl to the worlds press and Uber glossy magazine articles. London cabbies have been using App technology for around four years, well before the new kids on the block. Hailo over 14,000 drivers, Get Taxi 5,000 drivers.

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  2. Can you even still get around in downtown London by car? B^P

    Seriously, I just had my first experience with Uber on a recent trip to NYC and it was absolutely brilliant. Regulations be damned, the user experience was not just better, it was exponentially better for basically the same cost as a cab. Better car, better driver, easier to use, tell me why I care about a bunch of self-entitled insular hacks driving around in cesspools on 4 wheels in a manner guaranteed to overcome even the maximum dosage of Dramamine? Didn’t think so.

    Now, London tends to be the best of the worst when it comes to cabs, but compared to what I just experienced with Uber, they have a lot of work to do.

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    1. Seriously Sir you do need to understand the market your referring to when making such statements. The London Taxi Trade has for years been voted as the best Taxi Service in the world, this is in the main because of the requirement of the driver having to complete the knowledge of London. You do not need to do any such test in other capitol cities to become a Taxi Driver there so you cannot reasonably compare your experience of the NY Taxi service with that of the London Taxi service. Would I be right in saying you can land of the plane one day and the next be driving a NYC Taxi, well you cannot do that In London.

      Uber may well be a welcome alternative in a city who’s Taxi service has for many years gone backwards in terms of quality but London is very different. When you are a purveyor of fine dining why would you desire a trip to McDonalds!

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    2. So you tried for the first time a new app, clean car, smart driver, I suppose you spoke to the driver for the first time in years about the app and had a conversation and left satisfied. What do you think that driver did before Uber came to town, he was probably the same driver you complained about above. Londoners are not fooled into believing a polyester suite and a free newspaper with a bottle of water and subsidised prices will have longevity with companies like Uber. In time the bubble will burst, already companies are using their own apps to cut out the middle men, so investors will have to think of other forms of disruptive technology to make money. The poor exploited taxi drivers are going to be the real losers.

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  3. SpurredoninDublin Wednesday, June 11, 2014

    The London Black Cab system is an anachronism. For years, minicabs were licensed throughout most of the UK, but the LTDA opposed the same in London, meaning that for the best part of a quarter of a century, the citizens that were frequently unfit for the job, while being driven by people who were frequently even more unfit including convicted murderers and sex attackers, Why were the people of London denied this protection? Because the LTDA did want to have to deal with people who could do the job at a fraction of the inflated prices that they have been allowed to charge!

    Can anyone explain to me why in this day and age of GPS, drivers have to spend years doing “The Knowledge”, and why even after passing these tests, so many of these cabs have “Satnav” fitted? This is tantamount to banning calculators in school maths lessons.

    On the subject of meters, London is the only part of the UK where Minicabs are banned from having meters. And what is the reason for that? It is to avoid the Black cab prices being compared with the competition.

    In the UK, there is a Conservative “Free market” gov. The supposed aims of these people is that competition is good for the consumer, but as soon as someone comes up with a scheme to benefit the public financially, the London Cabbie displays that Luddites still exist.

    If you want to put it into context, imagine that you run a business but you are denied access to the Internet while your competitors can avail of this. Imagine that you are an accountancy firm and you are only allowed to use quill pens and ledger books, while your competitors are allowed to use computers.

    Yes it’s true that the London Cabbies are the best trained in the world, but to spend but how many businesses would spend three years training their van drivers to memorise their routes before they let them loose on the streets of NY, when they could spend an hour or so, teaching them to use a Satnav?

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    1. SpurredoninDublin Wednesday, June 11, 2014

      In my haste, I should have written. “the citizens of London were frequently being driven around in unfit vehicles, by drivers who were even less appropriate than their vehicles”.

      Apologies to anyone that I confused.

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      1. Ironically you gave the argument that the man driving the black cab in the current London protest has given. He said that the radio that day had been full of stories of inappropriate U**r journeys.

        Like the Scottish vote for independence I am currently undecided in the face of false and/or hypothetical futures. I imagine though that if I had invested in training and a vehicle for my family’s future I would be very concerned by a new entrant to the market place who last week said that they will start throwing mud (see interview on alternate channel with Kara Swisher).

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        1. SpurredoninDublin Wednesday, June 11, 2014

          Not sure which of my arguments you were referring to, and I do understand about “self interest” and have some sympathy with the argument. I lament the passing of the High St Butcher shops (and indeed many other businesses that are no longer on the High St), but the public have voted with their feet to use the (IMHO) inferior supermarkets. I never heard anyone saying that we cannot allow supermarkets to open because they will destroy all these businesses.

          And that is the real issue. The London Cab Drivers have a history of 50 years of doing their best to stop people having a choice, even going so far as to willfully and knowingly putting the public at risk.

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          1. “I never heard anyone saying that we cannot allow supermarkets to open because they will destroy all these businesses.”

            Cities all over the world are wrestling with whether or not to allow Walmart because it effectively shuts down the local store ecosystem.

            No where does anyone seem to point out that to some extent cabs could be considered a utility for which regulation would try to ensure safety, fairness and availability without being in a competitive market that would price out parts of the population, like say a night shift hospital worker who takes a $15 cab home instead of a $50 market-priced Uber. I’m thinking that there are times when it is a net-good for society to have regulations. Not everyone can afford an Uber ride and taxi’s probably can’t survive on only the lower value fairs?

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    2. “Can anyone explain to me why in this day and age of GPS, drivers have to spend years doing “The Knowledge”, and why even after passing these tests, so many of these cabs have “Satnav” fitted? This is tantamount to banning calculators in school maths lessons.”

      As a transplant from Silicon Valley/SF to London, I can tell you the reason you spend years learning anything is to be proficient and excel at it. I don’t want a surgeon I go to to simply use an app to tell him where and how to cut me open.

      London taxis are the best I’ve ever experienced. I can hail any taxi (it isn’t really hard dot find a black cab in London) and tell the drive where I want to go…doesn’t matter how obscure the road is…they know it and also know the best way to get there. They know every nook and cranny in this city and are also an excellent source of local knowledge…thanks to the “Knowledge.” Also…London taxis are designed to be taxis…they aren’t cars converted to taxis services. They can take a wheelchair, a stroller (without folding it), roomy, and seat 5 people comfortably.

      Conversely I’ve hired cars through apps. They don’t know where they are going, generally are new to the country or haven’t been driving long, have to rely entirely on GPS…so if there is a bottleneck, they have idea how to go around it.

      I guess our society would prefer that everything these days is done by amateurs with no reward or interest in having something of quality outside of a flashy looking app, a free water bottle, and a leather interior. No need to excel at anything anymore…it can all be done with apps.

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    3. A frustrated misguided mini cab drivers view of London transportation. In an ideal world a free for all society would be great. Regulation is their to protect the customer not to create monopolies. You are aware that 25 rapes and assaults are committed by Mini cab drivers and especially touts every week in London and 90% don’t get reported to the police. You mentioned inflated prices, then pray tell me, why is the largest mini cab company in London, at times 50% more than a London taxi. Yes your right, London taxis are the best in the world because of the highest standards they set. I’m very proud to be a London cabbie and when the worlds tourists come to London they too can experience being driven around London in an iconic taxi and when asking for a place of interest have the confidence of a driver who not only knows were he going but can relay a conversation about places and history without a post code.

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    4. A frustrated misguided mini cab drivers view of London transportation. In an ideal world a free for all society would be great. Regulation is their to protect the customer not to create monopolies. You are aware that 25 rapes and assaults are committed by Mini cab drivers and especially touts every week in London and 90% don’t get reported to the police. You mentioned inflated prices, then pray tell me, why is the largest mini cab company in London, at times 50% more than a London taxi. Yes your right, London taxis are the best in the world because of the highest standards they set. I’m very proud to be a London cabbie and when the worlds tourists come to London they too can experience being driven around London in an iconic taxi and when asking for a place of interest have the confidence of a driver who not only knows were he going but can relay a conversation about places and history without a post code.

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  4. Nemo Incognito Wednesday, June 11, 2014

    Agree with the central point here: similar services need to be regulated in similar ways and the failure of TfL to do any root and branch reform utterly screws black cab drivers. If they want to blow the market right open, fine, but Uber’s regulatory arbitrage is about as admirable as Wall St regulatory arbitrage pre-crisis.

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  5. Finally, an intelligent article on a complex issue — unlike most of the other “party line narrative” on other tech news outlets.

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  6. I didn’t really know about Uber until this. Might give it a try.

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  7. The way taxi drivers have lobbied against public transportation (i.e. airports, etc.), their “industry” deserves no respect at all from the public. I am happy their own chickens are coming home to roost.

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    1. We lobbied and demonstrated TFL, regarding the rapes and assaults on women each week committed by Mini cab drivers and touts in London, that forced government to toughen up regulations for private hire drivers, all drivers know must have criminal record checks.

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  8. Cabbies and fleets are idiots to think that regulators receive kickbacks only from them. What makes them think that a company worth $18b won’t outspend and keep the regulators from taking any action against Uber?

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    1. SpurredoninDublin Wednesday, June 11, 2014

      @ Desi

      You make a good point. Under EU law, there is the “freedom to provide services”. Should this matter go to the European Court of Justice, it is likely to take several years, but under EU law, if the court rules in favour of Uber, they and the drivers who would have used the system will be entitled to seek damages against the regulators. The likely cost would be in the region of £2-300,000 which is nothing when compared to the rewards of having access to the taxi market in a world class city which also happens to be the largest city in Europe.

      At some stage, they will need to explain why Uber is legal in every other part of the UK but not in London. Then answer of course is that metering mincabs (uniquely) in London is illegal. It will then be necessary for the UK authorities to explain why this situation is unique to London. The fact that it was campaigned for by the London Taxi Drivers in ordeer to disguise comparison of fares is unlikely to be acceptable to the ECJ. They generally only accept exceptions if they can be shown to be in the public interest, as opposed to the self-interest of one group.

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      1. Theres absolutely nothing wrong with Uber wanting to provide services, but they must do it in a way that fits within the law of the land. There are many minicab apps in London and the UK and all work within the legal framework. Surely you would support such an approach! Uber is not legal in every other part of the country. It is finding problems elsewhere because it breaches certain aspects of PH law. PH law was put in place for passenger safety and consumer protection. Nothing to do with protecting Taxi drivers jobs. You might want to have a look at the Law Commissions most recent recommendations into proposed changes to Taxi and PH law. You might then understand the background to such laws!

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      2. Uber’s aggressive march on cities like London is not only about the meter, there are many other issues to be answered, insurance, surge charging, operators licence procedures, tax.
        London’s regulations are quite clear and are mostly adhered to by both parties except Uber. Uber has a large war chest of around 1.2 billion, it managed to obtain an operators license, which should never have been given in the first place. Transport for Londons lack of enforcement was there for all to see, they had to pass it on to the high courts because of their failure.

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  9. Regulation exists for some reason. Imagine you take that cab and (unfortunatelly) you die. If you’re working for a company, the firm’s insurance will claim vs. the cab’s insurance. If you’re not, it’s your life insurance who claim the same. If it’s a regulated cab your family will receive a good insurance payment which will let them have a decent life. If it’s not an official cab, guess what? The insurance company will tell it wasn’t intended as a protection for passenger since it’s a particular and not a commercial insurance. It will claim against the driver. Imagine how much a taxi driver has? You guessed right, very much less than the insurance premium if anything at all. Your family will end empty handed. Nice story? Actually happened!

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  10. Living in San Francisco, I am a supporter of Uber. Most cities have deficient and defective taxi cab systems and regulatory schemes. I am more conflicted in the case of London. IMHO London is perhaps the one major city on the planet (Tokyo being a possible candidate) that does taxis right. The quality, competence, and professionalism of London cabs and cabbies should have been a model for other major cities. That it’s obvious merits were ignored in favor of purely market blocking medallion mechanisms is a shame. The world would lose something worth keeping if the London cab system went the way of the dodo.

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    1. The London minicab market would be well served by a legal Uber operation so its quite surprising they refrain from complying totally with the law. Lets be very honest here. An Uber driver will never be able to provide the level of service a London Taxi driver can offer, but they could improve the level of service offered by the minicab industry. Too often minicab proprietors have creamed a huge percentage of each fare completed by each minicab driver and Ubers take is much more reasonable. There are safety and consumer protection aspects of Ubers operation that must and will be made to change and when it does change to satisfy the legislative requirements Uber can become a major player in the minicab industry. It will never however be a player in the Taxi industry in London as the London Taxi Trade is about to launch their own corporative Taxi app will over time be the preference of drivers and it is that preference of the drivers that will be the driving factor in who succeeds in the long run!

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    2. Don’t worry about us London cabbies we will survive. Contrary to public and worlds press, we in-fact have had App technology for many years and is doing us proud.

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