The Long View On Uber

The public mood has shifted radically in the year or so that Uber has been operating in Ottawa. People and policymakers are gradually realizing that legacy taxi companies will have to evolve and compete on a level playing field if they want to survive.

But that doesn’t mean the question is settled. There’s still a serious risk we’ll create more problems in the coming years with myopic regulation that doesn’t serve the public interest. The legal and regulatory questions surrounding Uber, ridesharing, Transportation Network Companies (TNCs), and Self-Driving Vehivles (SDVs) will be some of the most important municipal policy issues in the coming years, and the current conversation doesn’t seem to be taking this long-term perspective into account.

Last week, I attended a public consultation hosted by the City of Ottawa about the future of ridesharing in Ottawa. Below are some point-form notes of the key points I made:

The policy debate on transportation is just getting started

Self-driving vehicles (SDVs) will be viable in the near future. Ridesharing networks are likely to be natural monopolies, so we will have to be proactive in ensuring a competitive marketplace. The transportation industry is about to change in ways we can’t even imagine, and the current question of Uber Vs. Taxis is just the beginning.

If you think Uber is disruptive today, just wait ten years

The future of ridesharing is electric SDVs with operating costs approaching zero. When this happens, the competitive market price of a ride will decrease exponentially. Car ownership and human-controlled driving will become an unnecessary luxury for a small number of hobbyists, like horse-riding.

As Uber CEO Travis Kalanick told crack investigative journalist Stephen Colbert:

When there’s no other dude in the car, the cost of taking an Uber anywhere becomes cheaper than owning a vehicle. Even if you want to go on a road trip, it would just be cheaper. The magic there is that you bring the cost down below the cost of ownership, for everybody, and then car ownership goes away.

Technology moves faster than government

The new regulations we develop for TNCs will be obsolete by the time they’re implemented. An obvious example: by the time new standards for driver licensing take effect, we’ll have already begun the transition to SDVs.

The regulations we impose on ridesharing will actually help Uber establish a monopoloy

Regulatory compliance costs money, and Uber is a massive company with a first-mover advantage. An arduous regulatory burden won’t hurt Uber, it will just keep competitors out of the market.

Ridesharing is one of the most important tools we have to address sustainability and climate change

Ridesharing takes cars off the road, decreases congestion, and encourages adoption of electric and hybrid vehicles. Ridesharing is the most powerful tool we have to encourage clean tech adoption in developing countries, which is a far greater factor in reducing global GHG emissions than anything we can do locally. If you care about the environment, you must be open to the massive opportunities provided by ridesharing.

Ridesharing decreases the long-term viability of public transportation infrastructure

Mass transit is no longer viable when anyone can take a private luxury car door-to-door for the same price as bus fare. TNCs will probably make local public transportation and intercity rail networks obsolete.

Ridesharing increases the political viability of congestion pricing

No economist who has studied congestion pricing can deny that it’s a fundamentally good idea. The primary obstacle to implementation is that it’s a political non-starter. However, when the majority of cars on the road are operated by TNCs, congestion pricing will be much easier to sell to the public.

Conclusion and Recommendations

TNCs have the potential to make transportation safer, more convenient, more affordable, and more sustainable, while reducing the burdens of infrastructure and public transportation on municipal budgets.

There are areas where we need common-sense regulation and enforcement of existing laws: TNC vehicles must be insured, and vehicle operators must be upfront with their insurers regarding their commercial activities; vehicle operators must obey the rules of the road and pay their taxes.

But the wrong approach is to impose unnecessary and burdensome regulations on the service itself – safety, pricing, and availability. Such regulation is unnecessary, as consumers are smart enough to use whichever ridesharing company offers a service that meets their needs.

It’s also anti-competitive. Regulatory compliance costs time and money, which prevents new entrants from entering the Ottawa ridesharing market. The lighter the burden we impose on new ridesharing providers, the greater the incentive for all companies to continuously improve their offering.

Bottom line: our policy response to Uber and TNCs should be to ensure a competitive market in transportation by resisting the urge to regulate the industry to an extent that it becomes a natural monopoly.

We truly have no idea what ten, twenty, or fifty years of innovation the transportation sector will bring us, but a competitive market will ensure consumers get the best deal possible.