blog Those of you who keep a close eye on vehicle sharing developments around the world will recall that on-demand ride service company Uber, which has traditionally worked with taxi and private car hire companies to make it easier for passengers to book a car, deployed a new aspect to its service internationally in April 2013. Dubbed ‘ride-sharing’, the service allows anyone with a car to offer lifts to anyone else, for a price. The service competes directly with rivals such as Lyft and SideCar, which have launched in the US but which have not yet achieved any traction in Australia.
Up until now the service hasn’t caught much attention in Australia, although Uber and rivals such as GoCatch and Ingogo have been steadily growing in Sydney, in coopetition with existing taxi and private car hire companies. However, late last week the issue came to the fore as Victorian Transport Minister Terry Mulder said the state’s Taxi Services Commission, chaired by former ACCC chair Graeme Samuel, was investigating Uber’s ride-sharing service. The Sydney Morning Herald reports (we recommend you click here for the full article):
“On the face of it, Mr Samuel believed that Uber was not complying with the Victorian public transport legislation. “If they are not complying with the law we’ll prosecute,” he said.”
The obvious impetus for most of the angst is the amount of revenue being pulled in by taxi organisations and taxi drivers all around Australia, who have predominantly seen the uptake of services such as Uber, GoCatch and Ingogo as a positive up until now, due to the fact that they boost taxi utilisation rates and hence individual drivers’ revenues. The new ride-sharing service, on the other hand, has the potential to pass revenue off to private car owners.
Such services threaten taxi revenues; and predictably the Australian taxi organisations are in an uproar already. State Governments also make a lot of money from regulating the taxi industry, especially selling lucrative taxi plates, meaning they too have quite a bit to lose if taxi utilisation rates sink.
However, there’s also quite a lot of indication that ride-sharing is ultimately to the benefit of consumers due to lower costs and increased freedom of choice, and that the dangers of consumers using unregulated individual car ride-sharing services may be exaggerated. US technology magazine Wired published an excellent yarn last week on the wider issue in general. The magazine reported (we recommend you click here for the full article):
“The sharing economy has come on so quickly and powerfully that regulators and economists are still grappling to understand its impact. But one consequence is already clear: Many of these companies have us engaging in behaviors that would have seemed unthinkably foolhardy as recently as five years ago. We are hopping into strangers’ cars (Lyft, Sidecar, Uber), welcoming them into our spare rooms (Airbnb), dropping our dogs off at their houses (DogVacay, Rover), and eating food in their dining rooms (Feastly). We are letting them rent our cars (RelayRides, Getaround), our boats (Boatbound), our houses (HomeAway), and our power tools (Zilok). We are entrusting complete strangers with our most valuable possessions, our personal experiences—and our very lives. In the process, we are entering a new era of Internet-enabled intimacy.
This is not just an economic breakthrough. It is a cultural one, enabled by a sophisticated series of mechanisms, algorithms, and finely calibrated systems of rewards and punishments. It’s a radical next step for the person-to-person marketplace pioneered by eBay: a set of digital tools that enable and encourage us to trust our fellow human beings.”
What the Wired article makes clear is that the Uber ride-sharing service is just the tip of the iceberg. The United States is going through a remarkable wave of capitalist change at the moment, driven by the encroachment of the ‘sharing economy’ on traditionally regulated market structures. I would suggest to Ministers such as Terry Mulder and regulators such as Graeme Samuel that they need to look at this phenomenon in greater depth before passing judgement on this specific aspect of it.
Other Ministers, such as NSW Transport Minister Gladys Berejiklian, appear to be a little more on top of the situation and its long-term potential, and some commentators are also already on board, pointing out that the taxi industry has had a stranglehold on its sector for far too long.
It will be interesting to see how things develop as more and more ‘sharing economy’ services hit Australia over the next several years. I suspect such platforms will be quickly taken up by consumers and will provide valuable niche alternatives to large corporate services, while regulators will struggle for at least the next decade trying to work out how or whether they should be controlled.