Tech Start Up Uber to Directly Challenge San Francisco’s Regulated Taxi System

July 9, 2012

The new UberX service launching this week will offer rides with an eco-friendly Prius fleet.Reset regulars know we follow transit issues closely, and we have reported frequently on San Francisco’s taxi system, both the many broken elements and the few bright spots.

Now here comes tech start-up Uber to directly challenge San Francisco’s regulated taxi system with a new service that comes closer to the city’s existing taxi rates.

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In a very real sense, this new service pits the power of a private algorithm against the power of an entrenched government bureaucracy. This will be a story to follow, not just for San Franciscans frustrated about poor transit service but for the broader community of Gov 2.0 and those promoting, and profiting from, the growing field of “Social Enterprise.”

The High-Tech Uber Fleet

The new UberX service launching this week will offer rides with an eco-friendly Prius fleet – and while it will be more expensive per mile than a taxi, the price difference is likely to make it competitive enough to challenge the existing fleet with many customers.

Uber, for those who have not used it, is a town car dispatch service that works from a smartphone app. Sign up once and then use it to hail a ride. The app knows where you are, knows where every free Uber driver is, and immediately matches the closest driver to the passenger. It also uses an algorithm to predict where riders are likely to be, and when, so the independent drivers using the system can pre-position themselves to be closer to customers.

Hail a ride from your phone and Uber will tell you exactly how long it will be until you are picked up, show you a map of your driver's progress, give you the name and cell phone of your driver and even some user-generated feedback on the driver.

And, as they say, that’s not all. The Uber system has your credit card pre-loaded, so the ride doesn’t end with a lecture about how the driver doesn’t take credit cards. The Uber driver only takes credit cards and tip is included.

It is exactly what San Francisco’s balkanized taxi dispatch system is not – Uber is a universal dispatch system that matches riders with rides efficiently and with certainty.

Until now Uber has been largely the plaything of those tech millionaires so common in San Francisco. It can be up to twice the cost of a taxi, which is saying something considering San Francisco has some of the most expensive taxis in the nation. It is certainly out of reach for most Clipper Card holders.

The New UberX Will Challenge More than Taxi Drivers

Rates published for the new Prius fleet show it is still going to cost more than a taxi ride, but not the severe premium of the Uber Town Car fleet. The cost per mile is $3.25 for UberX versus $2.75 for a San Francisco taxi. Still not for everyone, even most folks. But when you consider that a San Francisco taxi driver expects up to a 20% tip, and Uber says tip is included in their fare, the difference narrows.

In all, good news for passengers, who will have another option to the city’s un-reliable taxi fleet. Bad news for the independent drivers in the regulated fleet, who must pay the taxi owners and medallion holders a flat “gate” every time they take out a taxi and can actually lose money if they don’t make back the gate charge plus the gas, which they must pay themselves.

While the San Francisco Metropolitan Transportation Agency that oversees both the taxi fleet and the Municipal Railway has been showing a refreshing willingness to reform, the taxi system itself is almost hopelessly out of date.

Unlike Uber, which is a universal dispatch system, all of the city’s more than a dozen taxi companies have their own dispatch process. So you could call a Yellow Cab and wait an hour when a Luxor cab was right around the corner. You wouldn’t know if the cab you called was actually coming because there is no tracking you can see. And the driver wouldn’t know if you had given up and called another cab, since there is no direct communication.

For various reasons, mostly political, it wasn’t a very good system for the 20th Century. It is a sad relic in the 21st. 

Tech Innovation versus Political Process

Anyone who has looked for a cab on Thursday, Friday or Saturday nights or anytime a big convention is in town or anytime it rains knows there is a market for more taxis. And as Reset has covered, car sharing has proven to take private cars off the street, which promotes a virtuous cycle including faster Muni service.

But what’s going to be interesting is how San Francisco city government, which calls itself a tech-innovator, responds to the challenge of this high-tech startup.

In the District of Columbia, the city’s taxi commission has tried to keep Uber out of the market. There have been similar challenges in other cities, with local regulators saying that Uber was violating local taxi laws that left “hailed” rides to the regulated taxi fleets.

San Francisco has long had a tradition of “scheduled” limo services, which Uber calls itself. But the new service is a direct challenge to the city taxi fleet – not town cars but the city’s favorite ride, a Prius. Not cheap, but not much more expensive than a regular taxi. And in terms of efficiency and certainty, it is everything the existing taxi service is not.

The question now is will the SFMTA attempt to use regulation to keep UberX from competing, as other cities are doing? Or, will they rise to the challenge, and use the same technology Uber is using to make their own regulated service efficient and certain?

Which will it be? We’ll keep you updated.

And we’ll keep following stories like this – because it is about more than how hard it is to hail a taxi. As technology improves faster than most governments seeming ability to respond, we’ll see more and more conflict between the power of government regulations and the power, and profit motives, of private “social innovators” like Uber.

 

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