Uber: Incumbents Holding Back Progress?.

In a shocking display of protective business moves New York City taxi goers have had the ability to use Uber stripped away from them. David Yassky, chairman of the New York City Taxi and Limousine Commission, issued a statement yesterday saying that cabs in the city could not use the app Uber (download for iPhone or Android) to collect fares. He said the San Francisco startup’s app would violate the city’s contracts for accepting credit card fare payments with two other companies — Creative Mobile Technologies and Verifone.

This is a clear illustration that incumbent businesses not only cannot innovate with consumer behaviour changes, and service demands, but they are also prepared to do all they can to prohibit others from progressing.

Uber is simply brilliant… it brings to New York City a simplistic user experience that appeals to the millions of smart phone users. Uber (formerly UberCab) is a venture-funded startup company based in San Francisco, California that makes a mobile application that connects passengers with drivers of luxury vehicles for hire. The company arranges pickups in the San Francisco Bay Area, New York City, Los Angeles, Seattle, Chicago, Boston, Washington, D.C., Vancouver, Toronto, Paris, and Philadelphia. Uber drivers have cars such as Lincoln Town Cars, Cadillac Escalades, BMW 7 Series, and Mercedes-Benz S550 sedans. Cars are reserved by sending a text message or by using a mobile app. Using the apps, customers can track their reserved car’s location.

Uber’s operations is not with controversy. In May 2011, Uber received a cease-and-desist letter from San Francisco’s Metro Transit Authority, claiming that it was operating an unlicensed taxi service, and another legal demand from the California Public Utilities Commission that it was operating an unlicensed limousine dispatch. Both claimed criminal violations and demanded that the company cease operations. In response the company, among other things, changed its name from UberCab to Uber. In January 2012, an Uber driver’s cab was impounded as part of a sting by the Washington D.C. taxicab commission. The commissioner said the company was operating an unlicensed taxicab service in the city. Following a social media campaign by Uber’s users, the D.C. City Council voted in July to formally legalize this type of service, with no minimum fare. On August 1, 2012, the Massachusetts Division of Standards issued a cease and desist letter to Uber, on the grounds that the GPS-based smartphone app was not a certified measurement device. But on August 15, the agency reversed its ruling after prodding by Governor Deval Patrick, saying that technique was satisfactory because it was under study by the National Institute of Standards and Technology.

Three strong indications that the Taxi industry is full of self serving protective organisations, that not only monopolise their incumbent position, but are also prepared to aggressively defend their turf. Thus creating market early challenges for innovative entrepreneurs to improve the industry historical association with poor service ethos, and little to no innovation.

Marc Andreessen, serial entrepreneur, said that he would love to invest in Uber. Telling CNET, “Uber is software eats taxis. It’s a killer experience. You watch the car on the map on your phone as it makes its way to you.” The New York Times has called Uber “clever but costly,” noting that the cars are “particularly nice by livery standards” and that pickup times were slow compared with traditional New York City taxis and black cars. Several drivers have credited Uber for increasing their potential earnings by 30%. The drivers and riders rate each other after each trip, improving the experience for both the driver and the rider.

Many cities around the world have similar apps in the market, and have seen amazing growth and success… creating an unattended benefit of improving safety and security, as consumers are electronically linked to a specific car. Making it trackable for both the driver and the passenger.

Personally, I feel this move by New York City is a poor one… it says clearly that incumbents will be protected, even if a superior service enters the market. Effectively, David Yassky is a thug and should come under investigation. City contracts that prevent or lock out future superior offerings should never be entertained by public bodies. This one will go down as a case study of incumbents blocking innovation, a strong follow on form my last blog post.

I put a call out to all New Yorkers to voice your opinion on this move by the city, as it could set a precedence for other industries that realise superior innovations.

 

© Scott Bales 2014. All Rights Reserved.