Uber:

Next Generation Transport

Introduction
The way travellers hail cabs has changed little over a hundred years or more. One either
stood on the side of a street and waved at a passing taxi, or stood at a rank either in a
designated part of a street, an hotel or in an airport. Bookings can also be made by
telephone where it is more convenient for patrons to have a car arrive outside their house
than to wait in the street.
All that changed in 2009 when Uber was founded in 2009 by Garrett Camp and Travis
Kalanick with seed funding of $200,000. From humble beginnings Uber has grown to have a
market capitalisation of several tens of billions of dollars. At break-neck speed, the company
expanded out of the United States into European capitals, Asia-Pacific and Africa. In June
2014 Uber launched services in Tijuana, Mexico.

The Business of Uber

Unlike conventional taxi companies, Uber does not own any cars, nor does it have drivers on
its payroll. Instead drivers are expected to have their own vehicle and are contraced by Uber
who provide an intermediary role matching demand from customers with supply from
drivers.

Uber screen drivers and cars to ensure that passengers travel in safety and in return for
somewhere around 20% of the fare, drivers have a smartphone app that allows them to see
when customers are looking for a ride. They are given directions through their app that
navigates them to the destination and handles payment.

Customers have an app that allows them to get an estimate of when a car might be
available and also an approximation of the cost of their journey. Its possible to choose from
a basic car to something more luxurious two or three different choices are available in
some countries, whilst in others the choice is limited.

Uber then is a company whose core value proposition is an app that links drivers with
customers. They have a flexible model meaning that in times of higher demand they are
able to apply surge pricing where fares rise by 100% or more ostensibly to encourage
more drivers onto the roads to pick up customers.

Uber and the Law

Uber has not been met with universal acceptance in countries and cities where it has set up
business. Indeed it has spent considerable time and money fighting regulators.

In London, for example, drivers of the iconic black cab spend several years learning the
knowledge, which allows them to negotiate the thousands of roads, landmarks and tourist
attractions of the city without need of a satellite navigation system and by taking streets
which are less busy at the time of day that the passenger is picked up. Uber was taken to
court on the basis that their app constituted a meter, which can only be used by licenced

black cabs. In November 2015 the London High Courts said that the app was not in breach
of the law, but the case has further to run.

In Paris taxi licences are highly regulated and sought after commodities a licence can cost
240,000 to obtain, and even then the licence restricts drivers on where they can go. Uber
was seen as such a threat to this model that in Jan 2016, 1200 taxi drivers blocked major
roads with some arrested for violence, carrying weapons and starting a fire. Others in
Toulouse, Lille and Marseille also protested the Uber application.

Uber Pop cars which are small five-door cars driven by people with nothing more than a
normal driving qualification and no operating licence were banned by the Dutch
government in November 2015.

In India the tax authorities are investigating the Uber company structure, arguing that the
Dutch company through which it operates is a tax-avoidance scheme.

Negative Publicity

Rightly or wrongly, Uber has had bad publicity. A United States based website called whos
driving you chronicles alleged assults, deaths, kidnappings and other criminal activities they
say are undertaken by Uber drivers.

Around Heathrow Airport in London, residents of a town close to the airport have
complained bitterly about drivers they say are Uber employees who use their roads as
waiting areas to avoid paying parking charges in the airport. In January 2016 the London
Evening Standard newspaper ran an article listing the grievances of locals which included
blocking streets, noise and other anti-social behaviour.

Some of the negative publicity comes from its own drivers. Some argue that drivers are
disguised employees that should benefit from unemployment insurance, health cover and
public liability insurance. Others argue that their slice of the fare is too high for the service
they provide.



Questions

1. Using a table similar to the one on page 49 of the textbook, describe the service
concept of Uber?

2. What is the key challenges and opportunities with the Uber taxi service? How should
they be addressed?