Uber Cab app threatens death of taxi dinosaurs

Published Jun 16, 2013 at 05:00AM

People can run into two problems when they need to find a taxi. The first is that they don't know whether a taxi will be available. The second is that they don't know when a taxi will be available.

Uber Technologies Inc., a San Francisco-based company, was set up to solve both problems. A user can download its app, and it will find and come pick him or her up. It will also tell him or her when it is coming.

In fact, the app's screen shows exactly where the vehicle is. Once a credit card is entered, the customer doesn't have to pay with cash or decide on a tip; everything is automatic.

The company uses crowd sourcing to promote quality. After every trip, customers are asked to rate their drivers, which creates incentives to do the job well. Customers can see the average rating of their driver before the vehicle arrives.

In some cities, Uber's services are limited to town cars, which are luxurious and cost more than standard taxis. Some people are willing to pay extra for one. Others aren't delighted by the higher price. In some cities, you can use the app to order a taxi at the usual rate. The difference between Uber and the standard taxi service is the certainty the taxi is on its way.

Uber is available in numerous cities, including Atlanta, Boston, Chicago, Dallas, Detroit, Los Angeles, New York, Philadelphia, San Diego, San Francisco and Washington. The good news is it is serving tens of thousands of customers (and creating jobs in the process).

The less good news is that it is having to fight a series of absurd regulatory battles, which provide a revealing case study in interest-group efforts to block new entrants and innovative approaches. One goal of regulation isn't to protect consumers. It is to entrench current providers and to limit competition.

With respect to taxis, some states have a system that isn't altogether different from socialist-style planning. Some longstanding regulations have the purpose and effect of squelching new entrants. And in the face of fresh competition, the industry has been creative and occasionally shameless.

For example, Miami has long imposed something close to a ban on innovative services, by requiring an $80 minimum fare for limousines. Las Vegas has also imposed a high minimum. The Colorado Public Utilities Commission has proposed rules designed to prevent Uber from operating in the state — for example, by prohibiting sedan companies from charging by distance or from being within 200 feet of a restaurant, hotel or bar.

For its part, the District of Columbia has been seriously considering technological payment requirements that might well shut down Uber's taxi service. In Chicago, regulations have been proposed that would ban public passenger vehicle licensees (such as Uber) from using any device “to measure and calculate passenger fares based on distance and/or time traveled.”

In a free market, of course, governments should usually welcome new entrants, on the ground that competition is in the interest of consumers.

True, there is an important place for rules designed to promote safety and to prevent fraud or deception. But regulation of the taxi industry goes far beyond those goals. That regulation is a dinosaur; it should become extinct.

Uber's innovative approach raises a still more fundamental question. In countless domains, people have to spend a great deal of time and effort on searching and matching. For auto repairs, home repairs, household help, tutors and even child care, it can be difficult to find a convenient and reliable service. Wouldn't it be a great improvement, indeed an amazing boon to people (and the economy as a whole), if a wide range of services, available on simple apps, emerged to decrease the costs of search?

Because of the happy combination of new technologies and private entrepreneurship, that possibility is getting more realistic every day. We shouldn't allow pointless regulatory barriers, and self-interested private groups, to delay its time of arrival.