Uber Will Never Be the Next Taxi

PORTLAND, Ore. (TheStreet) -- In towns where cabs are not only sparse but awful, Uber is the mythical savior that riders have been waiting for.

Emphasis on the mythical portion.

Back in 2011, WBUR-FM confirmed what most of its listeners in Boston already knew: It was more expensive to take a cab in Boston than in any other city in the country. The hundreds of thousands of dollars cab drivers pay for medallions to operate their vehicles in the city of Boston and their inability to pick up passengers in Brookline, Newton, Cambridge, Somerville or any of the other Massachusetts towns that are de facto boroughs of the city jack up per-mile rates to make up for lost return trips.

Uber made its debut in the Boston area that year with a few key distinctions from other cab companies. On top of its namesake app that lets users request a swanky private ride through their smartphones, Uber came in cheaper than its competitors and shrugged off regulation to expand its reach into all portions of the Boston metro area. A year later, it launched the UberX low-cost taxi service to compete directly with cab companies.

However, Uber spent 2013 being sued by cab companies that alleged the service dodged city cab ordinances and state law. The company was also threatened with a strike by UberX drivers upset over a drop in fares, though such labor action never materialized.

To riders, none of that mattered. As long as the service saved them time, money and the hassles associated with Boston and Massachusetts' antiquated restrictions on regular cabs, there wouldn't be a problem.

In mid-December, UberX eliminated all of those positives by initiating a fare hike that jolted regular users across the Northeast. Using a "surge" pricing model that increases fares when demand is at its peak -- like during rush hour -- and lowering fares when demand slips, UberX jacked up prices seven to eight times the normal price during a winter storm. The company argued that demand far outstripped supply and that it was well within its rights to charge as the company saw fit. Uber also argued that the higher prices offered drivers incentives to get on the road during a brutal winter storm.

What they don't do is provide incentive for customers to use Uber's service. Yes, the touchscreen convenience is still there, but the pricing leaves a whole lot of riders out in the cold. Uber notes that riders have other options including bikes, trains, buses and their own cars, but that argument undercuts what appeared to be Uber's entire purpose.

Uber Chief Executive Travis Kalanick has made it clear that he hates taxis as they currently exist. Absolutely loathes them. He and his company feel they are part of an inconvenient, archaic system that makes people expend valuable time waiting for them and subjects riders to needless regulation. He wants Uber to replace conventional taxis and become the indispensable service that cabs are in nearly all major cities.

But that just isn't going to happen.

Instead of taking down cab companies and cleaning out competition through innovation and value, Kalanick and company have steered Uber into luxury territory at every opportunity. This New Year's Eve, Uber put all its riders on notice. There would be fare hikes during the times they need a ride most, there would be no caps on that surge pricing and anyone who didn't like it could go elsewhere. That earned Uber a rebuke from New York Times economist Paul Krugman, who likened such fare hikes to the lowering of wages during a recession.

"Employers didn't cut wages, even when unemployment was high and they knew that employees had no place to go, because they believed that morale and workplace cooperation would collapse if their employees felt that the company was exploiting a bad economy for its own gain. The parallel should be obvious..."

But in UberWorld, it isn't. Not only does Uber actively drive customers away from its service though price hikes and generate a whole lot of bad publicity for itself, it draws potential customers' attention away from the negatives of the cab experience and toward the positives.

In New York City, for example, taxi passengers get a standard fare and a Bill Of Rights that applies to both taxicabs and higher-end livery drivers. Most importantly, they get the assurance that they aren't going to be gouged under any circumstance and, failing that, they get accountability. They get a cabbie's name, license number and a receipt with the cab's plate number on it just in case there's a grievance.

It isn't a perfect system, but it's one filled with enforceable protections for passengers that Uber lacks.

It's also responding to Uber's challenge. In New York -- as well as Chicago, Atlanta, D.C. and 11 other cities -- cab companies and drivers use the Hailo app to book rides and take payment from users' smartphones. Here in Portland, for example, the regulated and nearly ubiquitous Radio Cab now offers an app that allows customers to request a cab from their smartphone, check the status of a vehicle and provide a driver with an exact pickup or dropoff location. That app, developed by GoFastCab, has also been picked up by cab companies in Chicago, Los Angeles, San Diego, Phoenix and San Francisco.

Even if the challenge from unter cabs doesn't phase Uber, the reaction of similarly connected competitors should. Ride-sharing service Lyft, for example, has used Uber's recent series of missteps as a means of promoting its own, more fare-stable service throughout the country. That means, unwittingly, Uber's Ayn Rand-approved Objectivist fare system helped a pseudo-socialist, kumbaya cab company get a leg up.

This wouldn't be an issue if all Uber wanted to do was disrupt the system. That mission's been accomplished. By showing what cab riders want and what they're willing to pay for it, they've set a template that even the most intractable cab companies have had to embrace if they want to survive. They've made they've made non-cash payment options a must, they've made mobile hails an essential portion of the business and they've made cabs in general more user friendly.

But they've also made it nearly impossible to accomplish their real goal of becoming to the taxi industry what Amazon is to retail. Uber is going to do whatever benefits it most and doesn't particularly care what customers think is "fair."

In some cab-deprived cities and suburbs, that just might work out for lack of other options. When the alternative is an accessible system that riders think is less likely to fleece them, passengers can tell Uber what that company tells cash-strapped customers during peak hours: Keep moving, pal.

-- Written by Jason Notte in Portland, Ore.

>To contact the writer of this article, click here: Jason Notte.

>To follow the writer on Twitter, go to http://twitter.com/notteham.

>To submit a news tip, send an email to: tips@thestreet.com.


Jason Notte is a reporter for TheStreet. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, the Boston Herald, the Boston Phoenix, the Metro newspaper and the Colorado Springs Independent. He previously served as the political and global affairs editor for Metro U.S., layout editor for Boston Now, assistant news editor for the Herald News of West Paterson, N.J., editor of Go Out! Magazine in Hoboken, N.J., and copy editor and lifestyle editor at the Jersey Journal in Jersey City, N.J.

More from Opinion

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Time to Talk Tesla: What Happened This Week, Elon?

Time to Talk Tesla: What Happened This Week, Elon?

Apple Needs to Figure Out Its Self-Driving Vehicle Strategy

Apple Needs to Figure Out Its Self-Driving Vehicle Strategy

Throwback Thursday: Tesla, Chip Stocks, TheStreet's Picks

Throwback Thursday: Tesla, Chip Stocks, TheStreet's Picks