Posted Tuesday, Oct. 16, 2012, at 2:20 PM
Uber, the smartphone car service dispatch company, tried to break into the New York City yellow cab market recently and immediately found itself in trouble with regulators. Today they are officially giving up and it looks like they'll end up losing money on the venture.
An unforgiving regulatory climate continues to be a huge problem for Uber's business model in my opinion. When I first wrote about the company I was enthusiastic that they'd essentially found a way to use software to exploit loopholes in misguided anti-competitive rules that govern taxi services in most American cities. But the problem is that those anti-competitive rules aren't there by accident, they're meant to shelter owners of existing taxi franchises from competition. Consequently, they don't just need to worry about complying with existing rules but also with the fact that the rules can be changed by the relevant boards to uphold their aim of limiting competition. Ridesharing services like San Francisco's Sidecar face the same problem—the regulatory environment in the United States is overwhelmingly premised on the idea that everyone should own a car and should drive it around to get places with alternatives held to a much higher standard.
This is all enormously regrettable. There's tons of excitement about the possibility of computer-driven cars without an adequate level of recognition that a computer-driven car is essentially a taxi. If it works and can be made at scale, it would be an extremely cheap taxi. And I think ubiquitous super-cheap cabs would be great! But it's already the case that human-driven cabs could be cheaper and more ubiquitous than they are if the market were opened up to more competition rather than cities running the industry for the benefit of the license owners.