It happened to record companies, movie rental giants and travel agencies. Now the taxicab business is finding itself the latest industry shaken by advances in web technology. Several startups in recent years have introduced apps that allow customers to order cabs directly using their smartphones. If the apps catch on, taxis could operate independently, and we wouldn’t need taxi companies anymore— the apps themselves would essentially become the dispatchers.
One of the first to market was San Francisco–based Uber, which lets users virtually hail available cab and limo drivers with the touch of a button, via their phone’s GPS. Uber initially offered black-car service in 2010 but since has expanded to include taxis in most of its 12 North American locations. That’s when the trouble started.
Uber has run into regulatory roadblocks that require it to become a licensed taxi brokerage. On the surface, the fight appears to be a classic case of traditional incumbents using outdated regulation to resist innovation and new competition. But on the ground in Toronto, the reality looks a lot more like upstart arrogance under the hype-heavy guise of industry “disruption.”
Uber ceased its taxi operations in New York this October following opposition from the city’s Taxi & Limousine Commission. Soon after, a number of Chicago cab companies jointly sued the company, alleging Uber is in violation of a number of city and state regulations, and that by allowing any cab driver to use its service, Uber is cashing in on established taxi brand names and reputations to further its own business goals.
Uber first launched its black-car service in Toronto back in March, and in Vancouver a few months later. In September, it started its Toronto taxi service. Bruce Robertson, director of licensing for the city’s Municipal Licensing and Standards Division, says the department had discussions with Uber, explaining the bylaw requiring anyone who takes calls for taxis to be licensed. The startup insists it’s a technology company, not a cab company. The city has taken Uber to court, with the case expected to move to trial in early 2013.
“We’re not the ones driving the cars or running a taxi company,” says Andrew Macdonald, general manager of Uber Toronto. “We’re doing what Expedia does for Air Canada, except in real-time for cabs.”
But Expedia is still an accredited agent by the International Air Transport Association. Toronto has a bylaw that requires any service taking calls of any kind for taxicab service to be licensed. Robertson says it’s not about outdated regulations but Uber simply refusing to comply with a simple bylaw. “These app-based dispatch systems are just another way for the public to call a cab,” says Robertson.
U.K.-based Hailo chose to become licensed as a cab company when it came to Toronto in September. But it has courted controversy of its own. Justin Raymond, president of Hailo in Toronto, recently sent a letter to city officials accusing Beck Taxi, the city’s largest brokerage, of bullying drivers not to use its app. “Drivers work for themselves, and taxicab companies in Toronto are basically call centres,” says Raymond. “They don’t own the vehicles or employ the drivers.”
Kristine Hubbard, operations manager of Beck Taxi, calls the bullying accusations absurd and says that even though drivers are independent contractors, once they’ve signed on with Beck, they shouldn’t be using another company’s dispatch, whether via radio or app. Beck launched its own smartphone app in May, and the start-up disrupters don’t exactly have it quaking in its boots. “Our app launched well before they got here, and we have more than 30,000 downloads of our app on iPhone alone,” she says. “Competition is good. It just gives us more reason to up our game.”