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Will Uber’s litigious retreat from Vancouver spread to other cities?

In Vancouver, the only city to date that ride sharing service Uber has left, The B.C. Passenger Transportation Board has not issued a new taxi license for 25 years. (Photo by Travis Nep Smith)

The darling of the sharing economy sector, Uber, recently raised $1.2 billion at a valuation of approximately $18.2 billion, signalling that the game is on for those businesses who make money from the utilization of underused assets. The most prominent denizens of this new vertical are Uber itself, its most immediate competitors Sidecar and Lyft, and property rental player Airbnb, which recently closed a half-billion dollar round at a $10-billion valuation.

It may seem that the sky is the limit for Uber, but the company consistently faces real problems when it rubs up against the traditional economy and the municipal, state and federal agencies that are charged with regulating it.

Writing for the Washington Post recently, Emily Badger detailed how Uber has impacted the price of taxi medallions in different U.S cities. These licenses to operate a cab fetch upwards of $700,000 in Boston and more than a million dollars in New York City. The value of medallions has more than doubled since 2009 and has outperformed the S&P 500 in that period, a time when returns were none too shabby.

One lawsuit filed on behalf of medallion holders claims that taxis are an essential public service and that the public would be endangered by a flood of clunkers on the road.

“The taxi industry warns that without medallions, cities will lose their control over an essential public service,” writes Badger. “Uber counters that medallions have created a cartel that operates for its own benefit — and not in the best interests of the public.”

“If in fact the taxis were doing what they were required to do with providing universal service, why would Uber, Lyft and Sidecar exist?” offers David Estrada, Lyft’s vice president of government relations. “The only reason we exist is because current regulations and the current system is not serving people.”

But Uber’s competitor Lyft says its simply fills in the holes in a system that simply isn’t working.

“If in fact the taxis were doing what they were required to do with providing universal service, why would Uber, Lyft and Sidecar exist?” offers David Estrada, Lyft’s vice president of government relations. “The only reason we exist is because current regulations and the current system is not serving people.”

The fact that Lyft employs a VP of government relations tells you a lot about the biggest challenges faced by sharing economy companies. In places are far flung as the U.K., Belgium and Germany, Uber is currently up against legal actions, including one pending London decision that aims to determine if its app is, effectively, a cab meter. In New York, the attorney general’s office recently subpoenaed the records of 15,000 Airbnb hosts.

So far, the kinds of legal issues Uber faces hasn’t led the company to walk away from any market, except one: Vancouver.

Uber came to Vancouver midway through 2012 with a soft-launch that included rides to high profile events that was spread through a word of mouth campaign. Hootsuite founder Ryan Holmes was among the first to use the service. But when the company was ready to make its entry into the Lotusland market official a few months later, it found a major roadblock had been placed in the way. The B.C. Passenger Transportation Board notified the company that its service was being classified as a limousine and the minimum rate for limousines is $75 per trip.

Uber cofounder and CEO Travis Kalanick told the Georgia Straight that regulatory hurdles the company faced in Vancouver were some of the most challenging the company had faced.

The reasons Uber left Vancouver were not based on any battle it had faced and lost, and indeed, the company has had success in the courtroom, including a high-profile victory in a case launched by the New York City Taxi and Limousine Commission.

But cracks may be beginning to show. In April, Uber lost a case against Berlin’s taxi association, when it was determined that the company was essentially a rental car businesses and not a taxi. Uber continues to operate in Berlin today because the association has chosen not to enforce the ruling. More recently, The California Public Utilities Commission warned Uber, Lyft, Sidecar that they are not allowed pick up or drop off passengers from any airport in the state.

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Vancouver-based lawyer Tim Murphy of Murphy and Company says the danger for Uber is that a precedent held up in one jurisdiction could become a potential template for lawsuits launched elsewhere.

“Lobby groups representing taxi and limousines services will look at all the legal challenges being made to Uber in every market,” he says. “It’s likely that they are considering which one of these options may work best in their particular jurisdiction. The fact that Vancouver is the only city that has kept Uber out means that lobby groups may pay special attention to that option.”

In Vancouver, where the B.C. Passenger Transportation Board has not issued a new taxi license for 25 years, the cost of a license has soared to more than $800,000. This means a shortage of cabs and an inflated price. Vancouver passengers pay more for a cab than in Toronto or Montreal and 73% more for a five kilometre ride than passengers in Washington, D.C.

One expert thinks the taxi industry, which operates under a bylaw that keeps the number of permanent taxis in Vancouver to 588 is actually its own worst enemy. Ottawa-based economist Dan Hara, who watches the international taxi industry closely, says the public image of taxi service in Vancouver has suffered because the limited number of cabs can’t efficiently handle the volume of business in the city.

“You have network failure where a whole group of people stops using taxis because they can’t find them,” he says. “What you discover with these revealed markets is that companies start coming forward and you get this expansion and the revenues expand with it. Suddenly there’s more taxis everywhere so people are getting better service.”

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

Comment

  1. Berlin court ruled Uber illegal. China outlawed all ride-sharing taxicabs in its major cities. Israel’s transportation minister explained in detail in his recent statement why ride-sharing
    corporation are committing fraud and are in violations of laws and regulations.

    There is no doubt about it – ride-sharing is a fraudulent transportation model. It profits on blatant refusal to comply with regulations, on non-payment of municipal business permits,
    on evasion of local taxes and regulatory fees. This failed model has been tried before. Self-regulation of public transportation services by private, and in this case – a private offshore(!)-based corporation, is dangerous, irresponsible and just doesn’t work.

    Just a few days ago – a young woman was kidnapped by a “well”-rated Uber driver:
    http://www.reviewjournal.com/trending/uber-driver-arrested-kidnapping-drunk-woman

  2. Taxi companies protesting against Uber is akin to telegraph companies protesting against email. Evolve or perish. Go to http://www.lyftvsuber.com/ to try out Uber or Lyft for yourself! The website compares the two most popular ride-sharing services. $30 of FREE ride credit for new passengers and $500 sign-up BONUS for new drivers!! Drivers can make as much as $40/hr! Hope you can see what all the hype is about 🙂 Thanks!!

  3. The problem with your statement is that Uber and Lyft aren’t the problem. The antiquated laws are. So, while they are circumventing the system and exploiting loopholes, it is only because such barriers should not exist.

    You don’t think there have been incidents with taxi drivers? Drivers who, for the record, don’t even have a rating?

  4. How does it serve the Vancouver public to have rule saying a Limousine ride costs a minimum of $75? Even in expensive NY City you can hire a limo to pick you up at La Guardia airport and take you to downtown Manhattan for around $30.

  5. I think a good compromise is to have all the 588 cabs with medallion licenses group into Group 1, and when they are dispatched out within a reasonable radius, allow dispatch of these other companies like Uber, Lyft, Sidecar work as “Permittee”. Drivers can be made to require a Class 4 license, and upon completing certain amount of work, should be given the opportunity to get a Group 2 medallion taxi license where the dispatcher for the taxi company will dispatch those with the current 588 licenses before Group 2 taxi drivers are dispatched. A Taxi Union of sort could be made. Group 2 drivers would mainly have to find passengers that flag them down as a means of work, whereas those Permittee drivers will be limited to those who call them on their apps. I feel that something like this which would require refinement would be a good compromise.

  6. We need someone like Gordon Campbell who is a master of union busting Healthcare to bust the taxi industry.

  7. Sounds too good to be true that a driver will make $40/hr. Infact sounds very untrue. Uber claims that they will charge around $30 to airport from downtown which takes good 45 minutes in rush hour and another 45 minutes to het back to downtown. Making 30$ minus gas per 1:30hours and giving 40$ per hour??? Arent you calling uber studip in other words??

  8. Throw those diamonds in the garbage!! We will go to market with 588 “taxis” for the next 50 years!
    http://en.wikipedia.org/wiki/Cecil_Rhodes

    As my Dad said when he moved back to Vancouver after 45 years away- “same hick town, 3 times as big…………and I STILL CAN’T get a DAMM CAB!”

    Lets face it these taxis cartels have it too good at $250K-$1MM per medallion-thats a sure sign “envelopes are being exchanged”.

    Uber and others will start the public led process of exposing all this “teamster” talk and get the taxi rates down to “levels that single working Mom’s can afford”.

    regards,
    Stuart

  9. My entire life has been enriched by the technology. Seriously, I utilized the programs to get from your house to work and back. Were I want transport services and I am located I do not have great accessibility. Uber and lyft supply a service that is much more affordable then taxi cabs. I managed to attempt Lyft from this website http://lyftgyft.com/best-free-ride-code and I have been pleased with the program and quickly pick ups.

  10. Nick – I wrote to the Passenger Transportation board and got this update –

    You asked about approval of new taxi licences and the statement that the
    Board has not approved a new taxi licence in 25 years. Actually, the
    Board has only been in existence since 2004. Previously, taxis were regulated by the Motor Carrier Commission.

    The Board has not approved more taxi companies to operate in the City of
    Vancouver. However, as the chart below shows, the Board has approved
    increases in number of vehicles that companies may operate.

    In addition to the vehicles listed below, the Board has approved 99 taxis,
    among the four companies, to operate on weekends at peak period and
    other high demand days.

  11. @August: You are using worst case scenario to break the $40/hr rate. I think the common sense approach would be using average case to get $40/hr. Uber works. I talk to drivers and they are happy. It’s not a dream job for them but as a transitional job it sure beats waiting tables. They also are much more interested in customer satisfaction then the average taxi drivers. It is also really convenient to get an Uber.

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