Why is Uber in the News?

Bill Crittenden
December 26, 2014

Uber has been in the news and making news a lot lately. Its management missteps, technical glitches, horror stories, traditional cab drivers protesting against it, and especially outright bans from some cities against the service have kept it in the spotlight for months now.

So what is it? Uber was supposed to be a part of the "sharing economy." "I'm heading upstate tomorrow, anyone want to share the ride and give me some money for gas?" We can connect on the Uber app (or similar but less-controversial service Lyft). While I'm out of town I can rent my empty apartment out on AirBNB.

This is the next generation, the service generation, of online companies that began with sales and trades of physical objects on eBay and Freecycle. But this generation struggles, because services are regulated in an entirely different way from sales of physical objects, something with which most people are familiar.

This new generation of the sharing economy had been stuff for the average person to score an occasional few extra bucks. But then the systems eventually get hijacked by people looking to make an easy living using them full-time. Would-be professional cabbies signed on as Uber drivers, using the service as a taxi dispatch company, something that they normally could not access without employment by a licensed taxi company, licenses which are often limited by cities. They skip the entire specialized process of becoming a cab driver.

That's going to be a problem to most city managers.

Cities limit taxi licenses most often, it seems, to limit the number of cabs on the streets and keep the service restricted to a limited group of cars, drivers, and dispatchers who meet a set of minimum standards. This is supposed to keep cabs from clogging the streets, and keeping prices a bit higher a trade off for eliminating the scary bottom-feeders that would pop up in an unregulated market.

It's worth noting that there's some disagreement over the intent and efficacy of the regulations. Do they really exist to protect existing companies from competition? Do they drive down standards by eliminating competition? This has existed for years voiced by Libertarians and Libertarian institutions such as the Institute for Justice.

That's the setup for the current confrontation. The free and unregulated internet where good services will prevail over bad, against the real world where road space is limited, local politics matter, and the consequences of dishonest operators can be more dangerous than nuisance malware.

On one side are the cities, which are armed with legally tested regulations and motivated by local concerns and a disdain for a California company with no connection to the city and no concern for a city's overall well-being that, by its attitude, believes its drivers to be above the regulations and local ordinances that they seem to see as the pointless writings of meddling yokels.

On the other side is one of the most powerful motivators in the world: money, either sought by Uber management, drivers looking for a paycheck, or customers looking for a better value: a more comfortable or more convenient ride. The power of that motivator will keep the fight going with a new company stepping into Uber's place even if Uber's management missteps cause it to fall (I already mentioned the less-controversial Lyft doing almost the same business).

Uber was a fantastic idea to connect people in "ride-sharing" arrangements. But it's evolved into a way for unlicensed professional cabbies to proliferate. Silicon Valley is trying to challenge the very concept of municipal taxicab regulations. Their aggressiveness will be a major factor in the outcomes of each individual fight. Their harsh approaches make them a competent adversary, but their harsh tactics make them the kind of easy-to-hate enemy that galvanizes opposition.

At stake are the basic concepts of taxicab regulation for the next generation wherever it operates (53 countries so far). So to the their segment of automobile transportation, Uber is a big deal, especially to the city dwellers who rely on taxis as basic transportation and the industry's drivers who rely on a paycheck earned driving a taxicab to feed their families.