2. Introduction
Uber is not only a transportation service, but it is becoming a global phenomena. It represents a new
concept of transportation. In fact a customer could book directly the vehicle through his or her own
mobile phone and the car closer to the client will be there in few seconds. Its big success has
involved many complaints from taxi services and also Governments. As a consequence in many
countries Uber is considered an illegal company and it is prosecuted with penalties. The purpose of
this paper is to analyse what challenges face each actor and how the actors co-exist in this
environment sometimes focusing on the differences between Italy, where I come from, Canada and
the rest of the world.
The company
Uber is an American company founded in San Francisco. In 2009 Travis Kalanick and Garret Camp
developed the app UberCab and in june 2010 they launched the related mobile app for iPhone and
Android phones. The main feature of the service is that Uber drivers do not need a taxi license or a
taximeters because all payments are made through the mobile app using a credit or a debit card.
Thus the company do not purchase any car. Since 2012 Uber started to expand internationally
following the path of globalization and nowadays it is available in almost 60 countries and in more
than 300 cities worldwide. In Canada Uber is working in Edmonton, Quebec City, Ottawa and in
Toronto, which is the biggest Canadian market. In fact the company is going to create by the next
year 15.000 high quality jobs, thus taking off the city's roads almost half a million cars. It is
important to also consider that the company is struggling to create its own market share. In Italy
Uber service is available in Milan, Rome Genoa, Padua and Turin. In june 2015 (Economist
06/2015) the company was valued by its investors around $18.2 dollars.
The service
Uber is mainly an online service, so it requires an internet connection. The app is available for the
main operating systems like Apple and Android. Wherever Uber company is present, the customer
can download the app and use it. A peculiarity of the service is that it is possible to book a Uber in
few seconds and knowing exactly where the car is, how far it is and how much time it will require
to pick up the client. Before starting the ride, both for safety reasons and transparency the passenger
can have a look to who the driver will be, which are his or her records and at the end of the service
it is possible to give a feedback on the quality of the ride experienced. Prices are made available
since the beginning as soon as the app is calculating the route for the client destination. Usually the
cost of a Uber ride are cheaper that the traditional taxi service. In addition the passenger does not
need to have cash in the pocket because all payments are made online through a Visa or MasterCard
circuit.
The actors
There are some actors involved in the Uber case, here is a list of the major players on the field:
• Uber drivers
They represent the main actors. People that are looking for a job “behind a wheel” are
highly interested in the company. In fact, being a Uber driver is not so much difficult and it
does not require a lot of red tape work. The driver can use his own car, with its related car
insurance, by becoming a Uber Partner; finally the driver installs the app from the most
suitable store and then search for a ride. The major advantages are a completely schedule
free program, that allows the employee to set his own daily working hours and a weekly
payment. Drivers are required to have the right training and knowledge; a CDL license is
compulsory for demonstrate the person's physical ability and expertise to drive a
commercial vehicle. Every violations or fines will negatively influence the record and put in
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3. danger the CDL certificate, eventually ending up being fired. Usually the company takes the
28-30% of the earnings, leaving the remaining 70% to the driver.
• Traditional taxi drivers
They are the first competitors and in particular what can be define as the injured party. In
Italy, as in Canada taxi drivers firmly believe that Uber is pursuing an unfair competition
and, as a consequence, they want to drive it out of the market. In Italy traditional taxi drivers
are referring to the law n° 21/1992 that states that the employee must be hired by the
company in its headquarters and not while is out of it; and payments has to be settled later
on, not before the service is done. That is quite the opposite of what Uber does and that is
the reason of the dispute between the two taxi services.
I had the possibility to interview and ask some questions to a taxi driver in Milan.
1. Have you noticed some changing on the demand side?
-Yes, but taxi clients are always the same. They care about the quality of the service and do
not want to change. I believe that we can divide consumers in two different typologies:
foreigners and native. Most of the people that take taxi are ordinary consumers: people that
do not live in the city and do not know well where to go. Those kinds of people are still
loyal to taxi and do not have neither time neither willingness to looking for a Uber car. On
the contrary, natives know well where to go and how, so they start thinking on possible
ways to minimize their transportation costs. Uber is definitely cheaper than taxi service.
2. One of the major claims made by taxi drivers is the license, in fact Uber drivers have not a
certified one. What does need someone to become a taxi driver instead?
-It's a long and a very expensive procedure in Italy; and in addition, what bother us is that
Uber drivers make money without doing it. There are some requirements to respect; these
can be divided in subjective and technical ones: being an adult and Italian citizenship, do not
have any criminal record and have this as the only job. Moreover you need a driving license,
attend a 3 month taxi driver course. Subscribe on taxi driver category and purchase a taxi
driving license. The latter costs around € 80000 up to € 100000.
In Canada a traditional taxi driver license cost around $250000.
3. What if there is an accident?
-It's actually a good point. Uber drivers do not have a real taxi license so if something
happens they are protected, but clients are not. Instead with traditional taxi service the
customer is fully covered by assurance.
In Canada, among the principal cities, like Ottawa and Toronto, taxi drivers started protesting as
soon as the service came out. They, in fact, report Uber to steal customers using a not legal service,
since the Uber drivers, in first instance do not need a license to transport passengers. During the
summer, in Ottawa, taxi drivers blocked streets and protest against Uber which was temporarily
shut down.
• Governments
Governments play a key role in the Uber case. In fact, in many countries the innovative
service has been considered illegal mainly because of unfair competition that could
inevitably drive out of the market others competitors. According to economic theories and
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4. marketing principles, a competition based in lowering prices will came up with the default
of the company that does not have enough earnings to cover its fixed costs. In recent days,
in Toronto the Major John Tory and the Council, have decided to shut down Uber because
of unlicensed drivers and low prices not regulated by laws. The taxi industry in fact says its
business has dropped with the arrival of the new transportation service. In the city cabs have
a base fare of $4.15 while Uber $2.25 (The Canadian Press, 10/2015). So Uber started to
raise questions among politicians on its doubtfully behaviour. Institution will have
ultimately decide the future of Uber ride sharing. Nowadays cities that initially banned the
company to operate are trying to develop new regulations. For instance, Vancouver is
reviewing the impact of ride-sharing technologies; Ottawa has launched a review of its taxi;
a service similar as the one of Uber and Sao Paolo, in Brazil, the major and the main
consumer association are finding a “middle path” to address the issue.
Uber around the world
Uber is becoming an important international company. But as it grows, it experiences all those
problems that a huge company can face. After being accused of raping passengers in New Delhi,
being suited by San Francisco, Los Angeles, Portland and the Oregon districts attorney's office,
courts limited its operation in Spain, Belgium, France and the Netherlands. However, it's nothing
compared to the huge public relations trouble in which it ran into in Sydney on the last December.
During the hostage crisis at a Lindt chocolate cafe the system began charging a surge pricing out of
the central business district as people tried to flee the area. Uber works through an automatic system
that can calculate the demand of client rides and the offer of taxi Uber. At that time the demand was
exceeding the offer; as a consequence the centralized Uber system was increasing the base rate fare.
It was a real setback to Uber's reputation, especially for an application that mostly depends on social
media. It was accused of taking advantage of the situation.
On November 2014 it was reported by the Globe and Mail of Toronto that the company was trying
to hire investigators to discredit journalists. But this revealed more and it played against Uber: the
company was collecting tons of data on its passengers. Uber did not have in fact a clear privacy
policy in place and called its data collection “Godview”. In other words the company employees
could see the riding patterns of any passenger and use those information for their own purposes.
It is quite clear that Uber has faced numerous lawsuits and protests by conventional taxi companies
who see the service, which operates through an app, as unfair competition. Recently, on september
2015, France, Italy, Spain and Germany have outlawed UberPop, that is the main service that the
company offers, siding with taxi companies that argued the service did not conform with local
transportation rules. London, at the end of september 2015, imposed a set of rules that would in
future change how companies like Uber operate; for example, if these new regulations will be
enhanced, cars will have to wait five minutes before picking up customers, available vehicles will
be banned to being displayed on the screen and customers will be forced to pay fares upfront. In the
same period Rio de Janeiro became the first Brazilian city to impose a ban on Uber service and
similar technologies. In canada Uber was kicked out of Vancouver after six months from the day it
became active, Ottawa consider it illegal and so does Montreal.
On the other side, Uber participates and collaborates with many organizations and it is striving to
create a good reputation. For example in April 2015 UN Women and Uber launched a partnership
around the world toward a share vision of equality and women's empowerment. They started a long
term program to create one million jobs for women globally on the Uber platform by 2020. In
addition in Canada Uber is offering a free ride on UberXL to all those customers that bring a friend
to the new service.
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5. Sharing economy: The Uber effect
“The Sharing Economy is a socio-economic ecosystem built around the sharing of human
and physical resources. It includes the shared creation, production, distribution, trade and
consumption of goods and services by different people and organizations.”
(Lorna Gold, 2004)
It has become common today talking about sharing economy. Inevitably, the globalization, defined
as the shift toward a more integrated and interdependent world economy has created both a
globalization of markets (standardization and no barriers to trade) and a globalization of production
with an increasing of FDI (foreign direct investment) all over the world (Charles W. L. Hill, 2014).
The main driver of globalization is the technology that has drastically reduced transaction costs,
making sharing assets cheaper and easier that ever before and therefore possible on a larger scale.
What has changed is the availability of more data about people and things, which allows companies
to find their competitive advantage. Smartphones with GPS system let people to see where the
nearest car is; social networks provide a way to check up on people and build trust; and online
payment systems handle the billing. So it seems that sharing economy is like an online shopping
website, but it has its drawbacks. 15 years ago, when it started in USA people were worried about
security and privacy (Alex Stephany, 2015). Today, the success of companies such as Amazon.com
or eBay.com has lowered the anxiety of making an online purchase. Uber does not purchase cars or
hire new employee, but for the company problems don't stop here. In may 2015 in Ottawa started a
controversy over the Uber app that has already taken almost a quarter of the city taxi drivers'
business. The introduction of the new transportation service was friendly welcomed by customers,
in particular it is popular among young adults that prefer an innovative service to the traditional
one; thus increasing the revenues for Uber and dropping the sales for cab drivers. Ottawa city
council has always followed a policy of “restriction” regarding the taxi industry, in order to give to
traditional drivers extra earnings and the possibility to pay insurance and fuel (Dan Hara, 2015). As
a consequence taxi drivers have never faced such an aggressive competition. In addition due to long
waitings and not efficient taxi service, customers started very fast to use Uber new system. The
connection between the driver and the client is fast, easy to handle and safe. The use of social media
has improved the availability of the service and the knowledge of the company throughout the
world. In Ottawa in order to introduce the service, Uber conducted a social media blitz offering free
rides to users and free iPhones to new drivers, violating the city's taxi regulations. Dan Hara, an
Ottawa economist, argues that Uber has captured the right moment to make business; an easy
smartphone app, an undersupply of cabs and an increase in the use of social network.
The economic environment
The taxi industry is not the first to be overcome by a new type of technology. The globalization, as
we have seen before, has been brought by technological change and improvements. Mp3 substituted
CDs while CDs themselves fired tapes. The internet has replaced postal delivery, music, travel,
television and movie industries and even gambling. Uber is living and growing in a relatively new
environment, supported by the new generation. This means also a social change, testified by the
shift from “what is mine, it is mine” towards “what it is mine, it is also yours”. Uber is indeed
operating in a changing economic world and in fact its success is related to the new generation of
users and their own status symbols. Possibility of growth are out of discussion since the company is
earning around $40 million dollars per year (Financial Times, 2015). The most of the success comes
from new markets and emerging nations, characterized by a relatively young population affected by
western new trends. Governments are arguing if there is enough room in the transportation business
both for traditional taxi drivers and Uber drivers. Moreover institutions are striving in the creation
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6. of regulations concerning the legalization of the service. And a question arise quite easily, will the
Uber effect be permanent? The answer is not immediate. Uber continues to operates fighting
charges in most cities where it has been banned, including Paris, Amsterdam, Ottawa and Montreal.
Conclusions
Uber case is in a continuos evolution process. Like the globalization it is spreading around the
world bringing with itself all the components of the sharing economy and all those new innovations
that affect younger generations. Technological change is inevitable and people must to bear this in
mind. But as the future is coming very fast it is important also to keep in mind traditions and habits
of the world before. Since the introduction of the first social network the way the information is
travelling around the globe as fastens. As a consequence Uber challenge has become one of the
main transportation concerning around economies. Taxi drivers, so “trendy” in the 80s and 90s are
struggling to gain the past prestigious and earnings. It seams that legal problems are playing in
favour of traditional taxi drivers, since Uber drivers do not need the same requirements to do the
job; but Uber does not stop here. The introduction of Uber service was almost inevitable since the
technology of smartphones and sharing is increasing, particularly in the last decay. People are
happy to spend less, gaining in time and in the quality of the service. Governments and institutions
are trying to find a middle path way in order to create enough room in the transportation business.
Anyway it is not simple; they are feeling the pressure of customers associations and transportation
departments. It is not clear how the issue will be over. In either case Uber is operating in what can
be defined by some cities courts, against the law. The future will depend on how traditional taxi
drivers, governments and institutions will cooperate together to find a deal.
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7. References
Bibliography:
• The Sharing Economy: Solidarity Networks Transforming Globalization Hardcover – Aug
2004 by Lorna Gold;
• International Business: Competing in the Global Marketplace Hardcover – Feb 10 2014 by
Charles W. L. Hill
• The Business of Sharing: Making it in the New Sharing Economy Hardcover – Apr 7 2015
by Alex Stephany
Web sites:
• Uber is good for Canada's taxi drivers, says strategist David Pluffe
[http://www.ctvnews.ca/canada/uber-is-good-for-canada-s-taxi-drivers-says-strategist-david-
plouffe-1.2578377], last review 27th september 2015;
• Toronto Uber vs. taxi driver confrontation caught on camera
[http://www.cbc.ca/news/canada/toronto/toronto-uber-vs-taxi-driver-confrontation-caught-
on-camera-1.3190708], last review 27th
semptember 2015;
• Uber vs taxi: why the taxi industry will never be the same
[http://www.cbc.ca/news/canada/hamilton/news/uber-vs-taxi-why-the-taxi-industry-will-
never-be-the-same-1.3194893], last review 1st
october 2015;
• Uber v. taxi [https://thewalrus.ca/uber-v-taxi/], last review 1st
october 2015;
• Uber will appeal order to shut Brussels service using non-professional drivers
[http://www.reuters.com/article/2015/09/24/us-uber-brussels-
idUSKCN0RO1PW20150924], last review 2nd
october 2015;
• Legal status of Uber's service [https://en.wikipedia.org/wiki/Legal_status_of_Uber
%27s_service], last review 2nd
october 2015;
• Uber [http://www.thecanadianpress.com], last review 3rd
october 2015;
• The rise of the sharing economy [http://www.economist.com/news/leaders/21573104-
internet-everything-hire-rise-sharing-economy], last review 3rd
october 2015;
• The Uber effect: how the “sharing economy” has shaken Ottawa's taxi industry
[http://ottawacitizen.com/news/local-news/the-uber-effect-how-the-sharing-economy-has-
shaken-ottawas-taxi-industry], 4th
october 2015;
• Uber and rivals: the promises [http://www.ft.com/cms/s/0/24f6aec4-6688-11e5-97d0-
1456a776a4f5.html#axzz3neGPWjAT], 4th
october 2015;
• Uber vs. the world: how cities are dealing with the ride-hailing technology
[http://www.cbc.ca/news/business/uber-versus-the-world-1.3252096], last review 4th
october
2015.
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