It all happens like clockwork: a new product or service uses advances in technology to make life more convenient for customers, threatening the traditional business model of the longstanding giants in the industry. The entrenched interests don’t take kindly to these new competitors, and flex their longstanding relationships with regulators and local governments to inhibit this competition.
This has been happening recently in the cab and car service industries, as new companies are using mobile apps to allow smartphone users to digitally “hail” cars to their location, instead of using the traditional stand-on-the-street-and-wave method. And leave it up to the government to get involved and make things more complicated and expensive for the consumer.
The most popular of these services is the San Francisco based Uber, which allows users to summon a black car, SUV, or hybrid cab to their location. Taxi cab companies and commissions don’t take kindly to Uber chipping away at their business, and have sought to make it difficult for Uber and similar services to compete on a level playing field.
Washington, DC, has been particularly harsh on Uber. Back in January, the city arbitrarily declared the service to be operating illegally, and had a car impounded as part of a sting. The city claimed that it was doing so because fares were determined by a meter rather than preset, which made the cars in Uber’s system taxis rather than limos. The city council pondered passing a price floor, which would have essentially banned Uber’s lower rates, but eventually backed down under public pressure. The city council hasn’t given up its hostility to the upstart firm, whose ultimate fate is still unknown.
The rationale for strict regulations on these alternative forms of urban transportation is invariably consumer protection. In a recent Wall Street Journal article, numerous regulators spoke out in favor of regulations protecting passengers. New York’s Taxi Commissioner called transportation “a business where you do need regulation to make sure that the passenger isn’t treated unfairly.” A San Francisco Taxi Company owner called the upstart firms one of the biggest threats to the public, clearly speaking in hyperbole in an attempt to protect his market share.
People turn to Uber for two reasons: one is the convenience it offers users, many of whom are millennials who are constantly plugged into their smartphones. Using smartphones to hail rides seems like the natural progression of things, and it should be no surprise that it took an outsider to bring this new idea to the market.
The second reason Uber is popular is the fact that taxi licenses restrict the number of cabs on the road, meaning there is frequently a shortage of cabs to meet demand at peak times. The very policy that taxi cab companies have used for years to protect themselves from competition helped open the door for Uber to sneak in.
What’s at stake with companies like Uber is the right of a customer to choose who to do business with, and the ability of the market to regulate itself. The companies that succeed in the transportation marketplace should be decided by consumers, who will give their repeat business to the firms that offer quality service at a competitive price.
Americans have seen what happens when the government tries to pick winners and losers in the auto and energy industries, and there’s no reason to believe the government will be any more effective in the transportation industry. If customers are willing pay, there’s no reason for the government to step in.
