“If you want to make enemies, try to change something”
— Woodrow Wilson
Uber has plenty of enemies. The Web-based taxi service opened for business just five years ago, but recently its reputation has instilled enough fear in competitors to tie up traffic not just in Boston but in London, Paris, and a dozen other European cities. The protests staged were intended as a defiant stand by cabbies against the “unregulated” car service. Instead, they were an advertisement of a different sort: for outdated business models, archaic regulatory structures, and entrenched business interests that are desperately fighting to protect the status quo.
It’s difficult to exaggerate how little the taxi industry has changed during the past 75 years. In the late 1930s, there were nearly 14,000 “medallions” issued to New York City cabs. By 2012, the number had actually dropped to 13,237.
In most big American and European cities today, taxi services look more like a bureaucratic conspiracy than the product of a competitive marketplace. In London, regulators consider use of a taxi meter to be a privilege and have erected exorbitant barriers to protect that status. Most notoriously, attaining “The Knowledge” required for a taxi license involves memorizing hundreds of routes, business locations, and places of interest throughout the city. Charming, but expensive — and quite unnecessary in the age of smartphones.
This glacial pace of change is a product — not a failure — of regulation. Medallions and similar quotas create an artificial scarcity that insulates the market from competition. That lack of competition, in turn, undermines any incentive for innovation or investment in new technology. Most Washington, D.C., cabs didn’t accept credit cards until this year. The cab companies prefer it that way. They own the medallions, earn a premium for their use, and put precious little back into the business.
Into that vacuum stepped Uber, which operates more like an information broker than a transportation company. They own no vehicles or medallions, but vet local operators, manage the application connecting drivers with users, and provide a rating system for both.
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