New studies point to Uber's unstoppable surge

A pair of discussion papers released today show Uber and similar app-based ride dispatchers are a virtually unstoppable force with the potential to benefit cities that regulate, rather than ban them.

The studies, posted on the City of Ottawa's website today, are the third and fourth of six discussion papers commissioned to help inform the debate around reforming regulations governing the local taxi industry.

The first, authored by public policy think-tank Mowat Centre, is an overview of the new app-based businesses that are reshaping the face of the industry, and forcing municipalities to re-imagine how they regulate taxis and limousines to make room for emerging technology.

Harnessing technology

According to the report, companies like Uber, Lyft and Sidecar "are harnessing technology to connect riders and drivers in new ways that bypass traditional dispatch/booking services and upend regulated environments which limit the number of licenses and set specific fare rates."

Companies like Uber, which entered the Ottawa market one year ago, distinguish themselves from the licensed taxi industry by "operating without the high costs of plate ownership/rental, when compared to traditional taxis."

At the same time, Uber has also developed its own approach to insurance coverage and driver reference checks "which may not align with local regulatory requirements."

A key distinction is Uber's use of drivers operating without the high costs of plate ownership/rental, when compared to traditional taxis.- Mowat Centre

According to the researchers at Mowat Centre, Uber's valuation has skyrocketed from $60-million to $51-billion in just four years, making it one of the fastest-growing companies of any type, ever.

At the same time, uptake among users is also exploding.

In New York City for example, Uber use increased ten-fold between 2013 and 2015. A key component of the boom has been the technology's popularity among business travelers, whose use of Uber in the U.S. has expanded from 15 per cent to 47 per cent over the last year. (Business travelers' spending on traditional taxis and limos fell from 85 per cent to 52 per cent over the same period.)

Good impressions

Here in Ottawa, where Uber has only been operating for 12 months, the data is more difficult to track. But according to a Nanos survey commissioned by the company, 60 per cent of respondents had a positive or somewhat positive impression of Uber, while 84 per cent support the idea of a new regulatory system that incorporates new technology.

In Toronto, where the company has been around longer, 21 per cent of residents said they've used Uber in the past year, compared to 58 per cent who've taken a licensed taxi. However, customer satisfaction in Toronto is far higher among Uber users (65 per cent) than among taxi customers (29 per cent).

The report also tests the claim that Uber has taken business away from the traditional taxi industry.

Some licensed drivers have claimed they've seen fares drop by 30 per cent since Uber's arrival. 

Again, data for Ottawa is inconclusive, but in New York City, while Uber's entry into the market undoubtedly ate into the "yellow cab" business in Manhattan, overall business increased in the outlying boroughs with "little impact to the business of licensed cabs."

Other approaches

Like another discussion paper released last week, the Mowat Centre study looks at what lawmakers in other jurisdictions have done -- or haven't done -- to regulate app-based business models like Uber.

More than 20 U.S. states have established a parallel licensing scheme that allows the companies to operate, but also requires them to obtain commercial insurance and conduct background checks on drivers. The City of Toronto appears to be moving in that direction as well.

Boston has taken it one step further, entering into a data-sharing agreement with Uber so officials can both keep tabs on the company, and use the information to improve traffic flow and avoid congestion. 

Elsewhere -- in Paris, Germany, Spain and South Korea -- lawmakers have taken a prohibitive approach, banning Uber altogether.

Strict regulations in Vancouver forced Uber to suspend operations after just six months but other Canadian cities including Waterloo, Hamilton, and Edmonton are reviewing their taxi regulations to determine whether app-based companies may eventually be allowed to enter the market.

Economic benefits

Finally, the report points to the potential economic benefits Uber can bring with it: For drivers, flexible employment at average wages six dollars higher than those earned by taxi drivers; for customers, faster, more convenient service that's also generally less expensive.

But the report warns that without competition, companies can raise prices and introduce surge pricing during peak periods that can just as easily turn customers away. 

The second report, prepared by consultants KPMG, looks at the issue of accessibility, and how changes to the taxi industry could affect passengers with disabilities.

While 16 per cent of Ottawa's licensed taxi fleet is wheelchair accessible, the report concludes the Uber model "inherently does not lend itself to accessible-friendly service as the majority of private vehicles are not equipped with the required equipment for the transportation of mobility impaired persons."

Two more discussion papers -- one on customer experience, the other on "taxi economics" -- are due next week.

KPMG's final report and recommendations for changes to the city's taxi by-law are due by the end of the year.