Uber's growth strategy hits a ceiling with city regulators
Regulators around the country are looking to shut down an innovative startup that provides on-demand taxi and limousine services at the push of a button. The fight may seem novel, given the technologies at hand, but there are some bedrock economic principles at play.
One one side of the fight is Uber, a company that partners with limo companies and allows riders to request cars using its iPhone app. On the other are bureaucrats looking to crush the disruptive technology.
The battle between Uber and city governments underscores the tension between lawmakers and technology companies at a time when Web sites and mobile apps can outmaneuver old rules. Services like Uber, Airbnb and Craigslist can cut out the middleman and lead to more efficient markets. But regulators say they could also put consumers at risk.
Uber has rattled regulators in many cities with its unusual approach to expansion. It says that it first consults a transportation lawyer in a city on whether it is legal to operate there. When it comes to town, its employees contact local car service companies to discuss working with them; in cities where Uber works with cabs, employees put up fliers or approach drivers at airports and gas stations. Participating drivers get free iPhones that run Uber’s navigation software, which helps them find people nearby who are requesting rides with their smartphones.
The start-up, which has raised $50 million since 2010, generally does not consult transportation regulators before it starts rolling in each city. Because it is not an actual provider of rides, it says that it is not subject to such regulation. To date, this approach has generally worked for it in 18 cities, including San Francisco, Washington, New York, Chicago, Paris and Amsterdam.
Regardless of the motivations of taxi companies and city governments, their actions are standing in the way of innovation, said Daniel Sperling, a professor of civil engineering and environmental science and policy at the University of California, Davis, and director of its Institute of Transportation Studies. Some of the app companies have come up with advanced ways to promote customer safety, he said, like the ability to see a rating of a driver before getting into the car.
“Transportation has been one of the least innovative sectors in our society,” Dr. Sperling said. “When I look at these new mobility companies coming, where they’re using information and communication technology, at a very high level it’s long overdue and should be embraced with open arms.”
SOURCE: NYTimes.com, Heritage.org