Uber and such disruptions

SAN FRANCISCO – Uber and other companies providing what is known as transport network vehicle services or TNVS is disrupting the traditional taxi service in many big cities, including Manila. Taxi operators in the major US cities like New York are complaining of unfair competition.

 Indeed, traditional taxi operators pay a bundle for the right to operate the service and they are highly regulated. Then this service born out of the digital revolution comes along and eats their lunch, and maybe even their dinner.

The thing with TNVS is that regulators are struggling as to how these service can be regulated. Or should they be regulated at all? Surely, a system has to be devised to tax them, or the taxis and hotels can validly claim unfair competition.

Over the last weekend, my wife and I had an experience with a TNVS service called Lyft. We had to get to San Francisco in time for a rehearsal of my daughter’s wedding ceremony and we were out there in the East Bay area where my son lives in a city called Newark.

The driving distance between San Francisco and Newark is about 60 kilometers, depending on what route is taken. Again depending on traffic flow, we could be in San Francisco in 45 minutes to an hour.

My son couldn’t drive us because he had other things to do and my daughters in Millbrae were preoccupied with wedding preparations. My son got us going via Lyft. Using an app on his iPhone, he got us a ride that was ready to pick us up in six minutes.

The cost of the ride, at less than $60 was not bad. I am sure a taxi would have cost more, if you can get a taxi service to do that at all. In this sense, Lyft was not being disruptive, but provides a needed service.

There is another thing… my son chose to put us on Lyft because it was a bit cheaper than Uber. He was able to get estimates from his phone to make the purchase decision.

As promised the red Toyota Camry came around within six minutes, and Carlos Alberto, the 57 year old Bolivian driver, cheerfully helped us with our luggage. And we were off to San Francisco.

Our experience taught us going to San Francisco by Lyft or Uber is the better option than driving a car. Street parking is almost impossible to get in the city. Parking can cost $60 a day in public garages.

If you are lucky enough to find street parking, you will find out that trying to save on the garage parking fee will cost you more. Cars are broken into. It happened to my other son-in-law’s car parked near our hotel on Post Street a couple of blocks from Union Square. They took even the wedding gifts in it.  

Indeed, during our brief stay in the city, Uber or Lyft was the most convenient option for moving around. In this sense, TNVS provides a welcome disruptive service.

The big problem is government. The LTFRB doesn’t understand what the service is about and is struggling to regulate it. Of course it should be regulated, specially now that we have an effective monopoly after Grab bought out Uber. The Philippine Competition Commission has pointed out, Grab charges have significantly increased after Uber left.

As economist Robert Y. Siy pointed out, “the challenge is to find the mix and balance of regulations that best promotes public welfare.”

TNVS  is just one indication of the changing attitude towards car ownership here in America. There is also Zipcars, a car sharing service. You subscribe for membership that cost from $7 a month and once you have joined, you can reserve a car by the hour or by the day for rates that depend on the city and car model.

 One of their strong selling points is saving on car ownership costs. No worries on maintenance, insurance, and registration fees. You do not get stuck with one car or car model if you need or fancy another type. They claim this is the future of car ownership.

I am sure this development is worrying car manufacturers and car rental companies that must now adjust to this rising trend.

What should government do? It is obvious that our laws, rules, and regulations should keep up with technological developments.

Economist Siy points out that at least for the TNVS segment, “regulators need to clarify objectives in managing the TNVS market. Should they work to guarantee widespread access, as implied by a cap on fares, or to prevent oversupply, as implied by a ceiling on the total number of vehicles? Applying both may not lead to the desired results…

“In general, users would rather have the availability of TNVS when they need it even at a higher price, than to have low fares, but no TNVS available…”  

Mr. Siy thinks government should allow competition on price and quality. “Better yet, require all TNVS to sign on to a common app and IT platform that will allow users to compare prices on the same route… similar to the apps that are already available for comparing airfares for different airlines. This would go a long way towards making TNVS services more convenient and competitive.”

Indeed, in TNVS, the free market economy works for the drivers too. Our Bolivian driver used to drive for Uber, but shifted to Lyft because Uber charges a share of 35 percent from his earnings compared to 25 percent for Lyft. “It’s my car, my gasoline,” our driver exclaimed, “why should Uber get 10 percent more?”

I share the economist’s final observation that regulators may need to have a “lighter touch” and a good measure of flexibility, while keeping a close ear to commuter welfare.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco