What to Do with Uber?
Uber, the ride-hailing service that connects passengers to drivers, has managed to make a lot of enemies in its relatively brief existence. Taxis feel like they are being unfairly robbed of business. Drivers complain they are being exploited. Passengers decry perceived price-gouging. Last year, the City of Toronto filed a legal action against Uber, claiming that its operations are in contravention with the law, and demanded that it be shut down. On June 1, proceedings will begin to decide the future of Uber in Toronto.
In an opinion piece to the Toronto Star, Daniel Debow, Senior Vice President of the global cloud computing company, Salesforce, wrote that the current debate over Uber in Toronto presents a false dichotomy between the adoption of existing taxi rules and the unregulated “wild west” that operates now. A third option, one taken up by cities such as Washington, Seattle, and Dallas, is the creation of a new body of legislation specifically tasked with regulating ride-sharing. If adopted here, the new rules would “require drivers to get background checks, training, vehicle inspections and appropriate insurance.” In short, regulation equals safer rides. For their part, Uber (unsurprisingly) favours the prospect of regulation over litigation. But regulation or no, Uber’s position in the Toronto market is not as secure as it might seem.
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Last month I used UberX in Toronto for the first time. UberX is the service that has attracted the company the majority of its critics. Distinct from UberBlack or UberTaxi, which connect riders to rides from already regulated, professional drivers, UberX provides access to rides from regular folk in their everyday cars. I’d had my Uber account for months, but hadn’t used it since the first day I downloaded it. It was during a road trip through the States with a couple of friends. We were spending the night in Chicago, staying in a cheap motel on the North side of the city, drinking warm (and wonderfully inexpensive) beer. We needed a way to get to Wrigley Field in time to see the Cubs, and someone brought up the option of Uber. One friend gave me his referral code, I tapped it into my phone, and we both received a credit for a free ride worth up to thirty dollars, more than enough to get us to the game and back at the end of the night.
My return to the app six months later was the result of a hold up on the TTC; some sort of passenger disturbance had shut down service going west past St. George Station. My brother had met me for dinner and a couple of drinks, and we were in a rush to get home so that he could submit an application for a study abroad program before the midnight deadline. Given the time constraint and my lack of patience for TTC delays, we said the hell with it and sprang for an Uber.
I confirmed the pick up details on my phone and within minutes Larry pulled up in his minivan. The car didn’t smell and the floor was clean— a good start. Larry was nice, but disengaged. When he spoke about his work outside of Uber he came across like a kid reluctantly telling us about his day at school. His speech was absentminded, distracted. (To be fair, he was driving at the time.) I wanted to get to another subject, one that had been on my mind since Chicago. Given the relatively low fares riders are being charged, how much money can drivers actually be making? And following from that, should we be tipping our drivers?
In general, Uber passengers do not tip. One of Uber’s selling points is that it’s a cashless system. You input your credit card details into the app when you sign up, and that’s it. Whenever you want a ride you put in your location and you receive real-time updates on when your car will arrive. The driver hits a button at the start and end of the trip, and your card is automatically charged. It’s clean and it’s quick. But it’s a hassle for people that want to leave something extra, as Uber has yet to add a tip option in the app. They’re official stance is that tipping is unnecessary. Yet in a society where we routinely tip members in service jobs (taxi drivers, servers, bellhops), the no-tip default can easily lead to confusion—and discomfort. Larry confirmed that, no, people usually don’t tip, although you have the option to leave cash if you want to. This led him into a diatribe against Uber practices in general. He told me how, nowadays, it’s becoming increasingly difficult to earn decent money driving for Uber.
It’s something we’re beginning to hear more and more. Despite Uber’s claims that their driver partners average out at earning $19/hr (this is in the US), that figure doesn’t account for expenses such as maintenance, insurance, gas, or even the car. Not only that, driver’s have been subjected to repeated price cuts, which eat away at their bottom line.
Introduced in Canada for the first time this winter, Uber argues that price cuts drive up rider demand for the service. And that may be true. In polls completed by Forum Research, the proportion of Torontonians who have used the service have risen to 17 percent, up from just 12 in November. Increasing demand is then supposed to translate to more trips per hour for drivers, thereby upping their income from the service. Yet as shown in a report put out at Philadelphia City Paper recently, while gross fares being brought in by drivers appear to be higher, after Uber deducts its portion of the earnings, drivers are taking home significantly less than they were prior to cuts, but doing more work. In her investigation, reporter Emily Guendelsberger drove over 100 rides and brought in an average of only $9.34/hour.
At the end of my ride with Larry I was automatically billed for the trip. My brother and I hopped out, and before closing the door I handed Larry a five, seemingly taking him by surprise. He took it, though, and as he drove off I turned to my brother.
“I couldn’t very well not tip him after all that.”
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You don’t have to Google very hard to find other examples of current and former Uber drivers denouncing the company. Uber has a knack for distancing itself from its user base. It’s just that, before the cuts, the complaining was usually coming from the passenger’s seat. On July 8, 2013, Toronto suffered from severe thunderstorms that threw down over 100mm of rain, turning transportation in and around the city into a nightmare. Highways, subway tunnels, and train tracks were overrun by flooding. Fourteen hundred people had to be rescued from a GO train that got stranded in the Don Valley. Meanwhile, as demand for rides rose, rates for UberBlack (the only Uber service available in Toronto at the time) shot up. People were pissed.
Similar surge-pricing has occurred in a number of Uber markets from time to time, and each one results in the same predictable backlash from the passengers. To them, price-surges look like little more than gouging your customers when they need you most. In general, the company's response has been that the institution of surge pricing is a good thing, in that it incentivizes more drivers to get out on the road and rewards them for driving when nobody else wants to (e.g. during a blizzard, or on New Year’s Eve).
In hindsight, it’s tempting to laugh at the thought of people moaning about being stuck in the rain, angrily tapping their phones as if they’re the only things that can save them. But there is at least one case in recent history where Uber’s surge-pricing was obviously wildly inappropriate. On December 15, 2014, a lone gunman entered a Lindt Café in Sydney’s central business district, holding staff and customers hostage in a siege that lasted sixteen hours and ended with the gunman and two hostages dead. As the situation became known to the public, the area around the café was evacuated. It wasn’t clear if there were going to be other attacks, and people scrambled to get away from possible danger. The jump in demand for rides out of the CBD plugged into Uber’s algorithm, resulting in highly inflated rates for people that were literally running for their lives. Naturally, that didn’t go over well. Although Uber— incredibly— initially defended the price-surges, they soon backed down and went on to cover the costs of all rides out of the CBD and refund those who were overcharged.
The events in Sydney revealed a company that is still in its adolescence, operating with little regard or foresight into how its actions affect those around it. Uber has often maintained an infamously indifferent attitude to the majority of its users, and a strongly adversarial relationship with those that threaten its expansion. When competitor Lyft was going through a round of fundraising, Uber intentionally tried to undercut their efforts. Now, preparing to face down with the City of Toronto in court, Uber has missed an opportunity to collaborate. Lyft isn’t making that mistake. The rival company has been reaching out to regulatory bodies across the US, and now in Toronto, to work with them in crafting rules that suit the unique nature of the ride-hailing business.
Lyft doesn’t yet service Toronto, and Uber generally remains the best deal in town. Sooner or later, though, ride-hailing services will receive the regulation that people are demanding, and the competition will come. The question is, when that happens, will Uber have any friends left?