Last week New York City backed down from a plan to cap the explosive growth of Uber's vehicle fleet. The mayor's office declared the deal it reached to be a win-win for both sides, and warned Uber that an eventual cap is still a possibility if it doesn’t comply. But that threat seemed hollow given how abruptly the city had caved. Rather than highlighting a corporation brought to heel, the ending seemed to affirm Uber's enormous ability to shape the political process.
In the week leading up to the scuttled vote, Uber rolled out a tidal wave of attack ads, robocalls, influential allies, and an advanced get-out-the-vote campaign among its users. And in hundreds of cities, states, and countries around the globe, it's waging a similar campaign, with astonishing success. At this point it’s worth asking: if Uber can't be stopped, what does the future look like?
China would seem to have the best chance at reining in Uber. It’s a market that has stymied giants like Google and Facebook, and local technology firms often enjoy the tacit or explicit support of the government against foreign competitors. But Uber is braving these challenges. Its offices have been raided and equipment has been seized. Its two largest Chinese rivals merged, creating Didi Kuidai, which claims a 95 percent market share. But Uber is also growing incredibly quickly. It recently hit nearly 1 million rides a day in China alone, and says the country will soon be its largest market. Uber is moving to raise a $1 billion war chest so it can grow from 11 cities to 50 in China.
Uber encourages drivers to operate illegally and pays their fines
In France, police squads have been created to arrest drivers of UberPop, which allows drivers with no special license to pick up riders who hail them through the Uber app. The French government says UberPop is illegal, and Uber is fighting them in court. Meanwhile, it pays the tickets for UberPop drivers who get caught and encourages them to get back on the road. "We tell them, if you get fined, come to us and we’ll support you," Uber's head of operations in France told The New York Times. "We want them to feel as confident as we feel about what we’re doing and our interpretation of the law." He is now headed to court, facing two years in prison. Uber isn’t slowing down.
Uber gained global attention after a sexual assault occurred in one of its cars in India. That brought a temporary ban in its biggest city, Delhi, and regulators simultaneously swarmed around the question of how its app accepted payments. But Uber has since rebounded, announcing earlier this month that it would resume its expansion, adding seven new cities.
The story is the same everywhere you go. Uber operated over government opposition in Australia, Belgium, and the Netherlands. It is contesting bans in Germany, and its CEO, Travis Kalanick, has been hit with criminal charges in South Korea. Taxi unions have set the streets ablaze with flaming tires, trying to motivate authorities to curb Uber. Yet the company continues to find ways to do business across all these markets.
There is one city where I was surprised to find Uber was not yet available. During the annual Verge pilgrimage to Las Vegas for CES 2015, I learned that ride-hailing apps were still banned. Whenever I asked drivers in Sin City what was preventing it from simply moving in over the objections of local government, the way it had elsewhere, they laughed. It's not bureaucracy or taxi unions keeping Uber out, I was told; it's the mob. Whether it was politics or gangster tactics keeping Uber out, even this last bastion of Uber-free America is set to fall, with legislation in progress that could put it on the streets by Labor Day.
The lesson is that for a multitude of reasons and in many different ways, governments have tried to regulate Uber and failed. Uber is far and away the dominant ride-hailing company in the United States. And while it might be smaller than local rivals in countries like India and China, on a global scale no other company comes close to its size. If lawmakers are having trouble containing Uber now, what chance will they have in five years, when it is far larger and more entrenched?
Uber’s goal is to replace private car ownership with driverless vehicles that arrive on demand. It says that competition will ensure that it doesn’t charge usurious rates even if it becomes a virtual monopoly. But Uber can and does subsidize the salaries its drivers earn from fares, drawing from its massive pile of venture capital and loans. Competing with Uber on cost is only going to get harder for smaller competitors. If you don’t believe me, just ask Uber CEO Travis Kalanick. When asked about competition from other services like Lyft last year, he replied bluntly, "In the US, in many ways, the table is set. We’re 10 times bigger." Monopolies don’t have equal competition. That’s what regulation is for.
It’s true that much of the opposition to Uber around the world comes from entrenched interests in the taxi and limousine industry. When pure protectionism is at work, legislators should be stepping in to create a level playing field. But in many cities, like New York, Uber’s fleet is now larger and better funded than the incumbent taxi industry. Uber is no longer the underdog, in fact it is often the one that now has an advantage, especially in cities where its cars and drivers aren't subject to the same costly regulations as government-sanctioned monopolies like the Taxi and Limousine Commission.
Uber wants to be regulated like a technology, not transportation, companyUber wants to be treated as a pure technology company, not a transportation company, creating a platform where anyone with a car and a smartphone can pick up passengers. Where that happens, UberX cars are able to avoid many of the requirements around licensing, insurance, and background checks that add cost to expanding a traditional taxi or black car service. It’s dynamics like this that are devastating the taxi business in Toronto and London.
Uber says in its attack ads and press releases that it’s an antidote to the bigoted practices of the taxi industry, which often avoided poor or minority neighborhoods. But Uber has no control over where its driver operate, or who they choose to pick up and avoid. If you don’t believe me, take Uber’s word for it. The company is battling a class action lawsuit in California that argues its drivers should be considered employees, not contractors. Uber says that, aside from surge pricing to incentivize drivers to hit the road, it doesn’t exert control over when and where they ply their trade.
Sensible Uber regulation would ensure there is a level playing field in the competition against the incumbent taxi and limousine industry. But it would also focus on the social goods that regulations are designed to encourage: equal access for people with disabilities, taxes that help fund more egalitarian forms of mass transit, ensuring safety and battling congestion. It would ensure Uber can't sidestep the Americans with Disabilities Act by claiming it's just a tech company, and therefore exempt. Last but not least is the question of workers right. Uber is facing a series of class action lawsuits that question its practice of treating all drivers as contractors, not employees, shifting the burden of insurance, overtime, and other taxes onto them.
When Hillary Clinton raised the mere question of how governments should grapple with the rapidly growing gig economy, she was immediately attacked for being against Uber, against innovation, and against job creation. Uber has become a political lightning rod. But what she said makes a lot of sense. "This on-demand, or so-called gig economy is creating exciting economies and unleashing innovation. But it is also raising hard questions about work-place protections and what a good job will look like in the future."
Fred Wilson, a venture capitalist and investor in companies like Twitter and Kickstarter, is not afraid of disruptive innovation. But he also recognized the value of Clinton's questions. "Many in the tech industry are taking these comments by Hillary Clinton yesterday as an ‘attack on Uber and the tech sector.' My view on these comments is that Hillary is right," he wrote. "We should not be afraid of this discussion. We should embrace it and have it."
We should be wary of Uber, which has so far flouted almost all attempts at regulation. Its CEO Travis Kalanick is an avowed acolyte of Ayn Rand, and his swashbuckling style a perfect fit for a modern day John Galt. In the wake of New York City’s defeat, a discussion of how to regulate it, partner with it, and sensibly grow it is more pressing than ever.