Taxi or techie?

Taxi or techie? EU courts will decide on Uber’s identity crisis
by Leonid Bershidsky
An important trial started this week at the Court of Justice of the European Union, the EU’s top judicial authority. The judges are trying to determine whether Uber is a taxi company or merely a tech platform that enables customers to find drivers, and the decision, which is not likely to come before April, will serve as a precedent for other sharing economy companies.
The first day of hearings in the case referred to the ECJ by a Barcelona court last year showed that while Uber sticks to its self-description as an enabling platform, the other parties’ stances are diverse and nuanced.
The original plaintiff, the Associacion Profesional Elite Taxi, which represents Spanish taxi companies, says Uber is a transport company because customers pay it for transportation rather than a tech service. Spain as a nation backs the industry group. The Netherlands, where Uber’s European holding company is incorporated, tends to agree with Uber that two services are being provided – an intermediation one and a transport one. Ireland and France say Uber works “in the field of transportation” but is not necessarily a transport company: These countries don’t want to be seen as unfriendly towards tech platforms, since France is home to the long-distance ride-sharing firm, BlaBlaCar, and Ireland is the European domicile of Google, Twitter and Facebook.
This set-up is typical of the European dilemma when it comes to technology-enabled business models. On the one hand, Europe wants to safeguard its labour market models that are more protective of workers than the American one. On the other hand, European countries would like to profit from the success of agile US firms directly or learn from it and compete. They also want to guard labour market models that are more protective of workers than the US one.
That creates a climate of political uncertainty for the US tech leaders. But the matter of the tech firms’ identity as service providers or mere intermediaries can be argued on the merits, too – something the ECJ will attempt to do.
The matter of Uber’s identity as a tech company or a taxi one arose because in the former case, Uber must be allowed to operate unhindered throughout the EU, and in the case of a taxi company, a country can make it subject to an “authorisation scheme”. Uber began to operate in Spain in 2014 without asking the local regulators’ permission, and the taxi association, whose members are subject to strict regulation, took exception to that. So with its ruling, the ECJ won’t kill off the “sharing economy” in Europe – it will simply make its evangelists subject to national regulations, whatever they may be. Some countries may decide that Uber and, say, Airbnb merely provide an “information society service”. Others will treat one as a taxi operator and the other as a hotel chain.
‘Indirect network effects’
In a paper discussing the case, Damien Geradin of Tilburg University in the Netherlands argued that Uber is an intermediary. He wrote:
“Uber does not create value by performing transport services, but by enabling direct interactions between two distinct categories of users. Like other platforms, such as eBay or Airbnb, Uber’s platform is also two-sided in that the two sides that the platforms connects (partner-drivers and riders) are linked by “indirect network effects” in that a large number of drivers benefits riders, and vice-versa. Traditional taxi companies hold none of these features.”
The Spanish argument, however, is no less convincing, and not just because Uber charges customers for transportation rather than intermediation. In the US, there’s a tendency to regulate Uber and its competitors as transportation companies, requiring that they obtain the appropriate licences and insurance. California, for example, has created a special regulatory category of “Transportation Network Companies” for “companies that provide prearranged transportation services for compensation using an online-enabled application (app) or platform to connect passengers with drivers using their personal vehicles.”
The US way of dealing with matters of tech company identity is less bureaucratic than the European one: Regulators and judges try to go to the heart of the matter, the intent of a business model rather than its formal attributes. The 2013 Supreme Court case American broadcasting Cos. v. Aereo is a good example.
Similar argument
Aereo was a company that rebroadcast TV shows on demand to its subscribers. Each of them was sold an individual antenna, kept in the company’s warehouse. The customer selected a program from a list on a website, that triggered the antenna to begin receiving the show, and an Aereo server streamed it to the customer with a few seconds’ delay. The company’s founders thought this was a legally airtight scheme to circumvent copyright laws: Aereo only sent the content to individual customers, and it didn’t do so simultaneously with the original broadcast. Aereo made an argument similar to Uber’s – that it was merely enabling customers to access programming that was already publicly available. In the same way, Uber’s technology provides customers access to drivers whom they otherwise couldn’t get.
The Supreme Court, however, ruled that Aereo was essentially providing the same service as a cable company, just without the costs associated with producing content. The ruling destroyed the company’s business.
Uber, too, provides the same service as a taxi company, only without most of the associated costs. The US Supreme Court hasn’t had a chance to rule on Uber’s elusive nature, but there’s a chance it might take the same approach as with Aereo.
Clearly, it benefits Uber to ignore local taxi regulations: Rapid global expansion is one of the few positive stories the huge money-shredder can sell to investors. Besides, the service is easy to duplicate, and many local competitors have already done so. Time is of the essence.
Leonid Bershidsky is a Bloomberg columnist.

Uber targetting Southport, Qld.

Paul Weston, Gold Coast Bulletin
December 10, 2016 12:30am
Subscriber only

AT least 600 people have signed up as Uber drivers in Southport alone as the Gold Coast taxi drivers hit a financial wall with their licences halving in value.

Southport MP Rob Molhoek, who has been approached by concerned taxi operators, was told the Uber drivers in his electorate were averaging about 11,400 pick-ups in a month.

“It does suggest to me that it would be a higher than the normal rate (of drivers),” Mr Molhoek said. “Southport is easy pickings in terms of renumeration. There’s probably 10,000 students living in the area.”

Southport Rob Molhoek has had visits at his electorate office from taxi owners concerned about their financial future.
Uber estimates it has about 2000 drivers on the Coast but for commercial reasons does not release ride share numbers.

“We know that more than 140,000 Gold Coast residents have embraced ridesharing as a safe, reliable and affordable way to get from A to B,” Uber Queensland general manager Sam Bool said.

“Additionally, there are around 9000 Queenslanders accessing flexible income opportunities driving on the Uber platform, including 2000 who are based on the Gold Coast.”

Experienced Coast taxi operators said they were concerned about the value of their licences.

“If those figures are correct I feel there are some Uber drivers who are starving,” a senior Coast taxi source said. “We do a million trips a week.

“The financial stress is certainly huge but it’s the emotional stress, the instability that hurts us all. The banks are no longer lending.”

Data provided by the Taxi Council of Queensland to a hearing in State Parliament shows the value of Gold Coast taxi licences has decreased from $580,000 to $230,000 since the introduction of ride sharing.

A submission by First Class Taxis at Burleigh Heads said Coast taxi drivers had experienced a dramatic drop in income due to ride source platforms.

“Taxi drivers have seen income decrease by up to 30 per cent on selected shifts,” the company said.

Gold Coast Airport has designated rideshare waiting bays for Uber drivers and their passengers. Frequent Uber user Nikita Johnston gets dropped off by Uber driver Dennis Tampemawa.
Mr Molhoek said the Government was “back to front” on its relief package after giving the green light to ride sharing in September.

“We basically took the shackles off and said to Uber “go your hardest”. Then we said “now we are going to look at what we can do to compensate the taxi industry and help them deal with the some of the hardship issues that have come out of that on-the-run decision,” he said.

The Government had “destroyed the balance sheet” for the $500 million industry which included 3286 taxi licences in Queensland, he said.

Drivers who were earning $4056 for nine shifts in 2013 were now receiving as little as $750 a week for the same of number of hours, Mr Molhoek said.

Burleigh MP Michael Hart supported amendments for the recent Heavy Vehicle National Law bill but also believed the compensation of two lots of $20,000 was not enough.

He said an elderly Coast woman who with her late husband had invested $1 million of their superannuation saving into two taxis could not sell the vehicles.

Next Meeting 13/12/16 & more news

A reminder that the next ATLOA General Meeting is 6pm Tuesday 13th December at Goodwood Community Centre, 3 Rosa Street, Goodwood.

Below are 2 more links to news items thanks to Richard once again.

https://motherboard.vice.com/read/australian-woman-kept-getting-emails-for-uber-rides-in-kenya

https://motherboard.vice.com/article/gsearch?query=uber

Uber would need to quadruple fares to be profitable

Uber would need to quadruple fares to become profitable, expert claims
DECEMBER 2, 20162:39PM

Frank Chung
news.com.au
@franks_chung
http://www.news.com.au/finance/business/travel/uber-would-need-to-quadruple-fares-to-become-profitable-expert-claims/news-story/df96001b40f6d9bf0412714e7362b64a
The company is “staggeringly unprofitable” and relies on billions of dollars in subsidies to undercut taxi operators. And once the competition is wiped out, the transportation giant would need to “quadruple” fares to become profitable.
That’s the warning from Hubert Horan, an expert with 40 years’ experience in the management and regulation of transportation companies, who has dug into the sparsely available financial info of the most highly valued private company in the world.
“Unlike most start-ups, Uber did not enter the industry in pursuit of a significant market share, but was explicitly working to drive incumbents out of business and achieve global industry dominance,” Mr Horan writes in Naked Capitalism.
“Uber’s growth to date is entirely explained by its willingness to engage in predatory competition funded by Silicon Valley billionaires pursuing industry dominance.”
With operating losses of $US2 billion ($2.7 billion) a year — more than any other start-up in history — Mr Horan argues there is “no evidence that Uber’s rapid growth is driving the rapid margin improvements achieved by other prominent tech start-ups as they ‘grew into profitability’.”
In fact, the “absolute magnitude of losses has been increasing”, he writes.
According to limited financial information provided to investors, for the year ending September 2015, Uber posted losses of $US2 billion ($2.7 billion) on revenue of $1.4 billion ($1.9 billion), a negative 143 per cent profit margin.
“Thus Uber’s current operations depend on $US2 billion in subsidies, funded out of the $US13 billion ($17.5 billion) in cash its investors have provided,” he writes.
“Uber passengers were paying only 41 per cent of the actual cost of their trips; Uber was using these massive subsidies to undercut the fares and provide more capacity than the competitors who had to cover 100 per cent of their costs out of passenger fares.”
The Financial Times argues Uber’s “entire business model [is] questionable”.
“This is critical because it suggests we’re dealing with a charity case in disguise,” the paper notes.
“Silicon Valley elites justify the subsidies in the name of monopolistic growth expectations and the building of ‘eco-systems’. They believe if monopoly status is achieved, profitability will follow naturally from that point.
“[But] there is no reason to assume Uber’s obliteration of local competition across the planet will create a sustainable business in the long term.
“Costs are costs, even if you’re a monopoly. As long as people have cheaper alternatives (public transport, legs), they will defect if the break-even price is higher than their inconvenience tolerance threshold.”
Mr Horan said claims in recent media articles that markets in developed countries were expected to generate “billions of dollars in profit” in coming years would require fares to quadruple.
“[The] $US4 billion ($5.4 billion) profit improvement needed to convert today’s $US2 billion losses into a $US2 billion profit would require some combination of the most staggering efficiency gains in the history of private enterprise … and humungous fare increases (fares would need to have quadrupled to have produced a $US2 billion profit in 2015).”
The Financial Times points out that “with the economics of the core business model looking that bad, small surprise Uber is currently preoccupied with pivoting its way to viability”, with initiatives such as carpooling, “optimised pick-up points”, and the “equally questionable” UberEats.
“[Customers’] preferences are … subtly massaged and managed with discount incentives and other behaviour moderating mechanisms (like crappy app navigation which makes it impossible to opt out of a pooled journey),” the paper writes.
Mr Horan argues that Uber’s refusal to consider an IPO “may best be explained by the recognition that publishing detailed, audited financial data confirming these massive losses and the complete lack of progress towards profitability could undermine public confidence about its inevitable march to industry dominance”.
However, Bloomberg reporter Eric Newcomer, the original source of some of the financial information cited in the report, said the analysis was “flawed”. Newcomer said Mr Horan was mistaken in claiming the losses from Uber’s China venture were not included in the financial figures.
“Uber’s first-half of 2016 losses included China,” he tweeted. “Uber owned 87.5 [per cent] of Uber China. Losses WERE consolidated. Support Uber scrutiny. Agree Uber is so big it should share its numbers. But this analysis seems flawed.”
Blair Davies, chief executive of the Australian Taxi Industry Association, said consumers should “prepare themselves for significantly higher prices … as Uber marches on to monopolise ride-sourcing markets in Australian cities”.
“Up until recently, Governments around Australia regulated taxi fares to protect consumers and the public benefit of that protection was commonly accepted,” he said.
“In the personalised transport market, there are many opportunities for service providers to exploit periods of high demand and take unfair advantage of consumers.
“Uber’s surge pricing is a classic example of how prices can be increased elastically when demand exceeds supply, reaching levels that have absolutely no connection with the real costs of the service being provided.
“The surge pricing rates of [New Year’s Eve] 2016 will likely become the new norm as Uber transitions from expansion mode to milking mode. And ordinary consumers will probably be left wondering why on earth their state governments abdicated their role of protecting them from price gouging in the personalised transport market.”
Uber declined to comment.

Federal Labor MPs speak out against State colleagues over taxi reforms

Federal Labor MPs speak out against state colleagues over taxi reforms

Federal Labor MPs have come out in support of Victorian taxi drivers, in a defiant stand against the Andrews Government’s “insulting” support package for taxi licence holders.

Hundreds of angry cab drivers and their families rallied outside Parliament on Saturday to protest the state government’s taxi reforms, which include a controversial buyback scheme and plans to legalise ride-sharing service, Uber.

Traffic on Spring Street was diverted around the crowd for more than an hour as they chanted, “No deal!” and “Pay back, pay fair!”

Federal Labor MPs David Feeney and Peter Khalil both addressed protesters, pledging their support for taxi owners and promising to lobby their state colleagues for a better deal.

Mr Feeney said he was proud to fight alongside taxi drivers, who had been left “stranded” by the Andrews Government’s plan to deregulate the industry.

“We know that we can have a constructive dialogue with this government but only united will they hear our voice,” he told the crowd.

The member for Batman said the message to the state government was simple: “A fair go for working Australians who made an investment in this country in good faith. Anything else is unfair on you and it’s unfair on the broader community.”

Mr Khalil, the new federal member for Wills, said taxi drivers and their families had been coming to his office in tears, concerned about their future and asking for help.

David Feeney speaks to members of the Taxi industry at a protest. Photo: Chris Hopkins
“They looked into my eyes and they told me their stories and what I saw was deep pain, deep frustration, anxiety,” he said. “David and I will be making further representations to the minister and to the government to get a fair package, a just package.

“Don’t forget there are many state MPs who are also on your side and work very hard behind the scenes. They are making the case as well because we all seen the pain in your eyes, we all see our own families when we look at you, we all feel the same frustration and anger that you feel.”

Under the scheme, taxi licences would by dumped and owners compensated up to $100,000 for their first licence and $50,000 for their second. The reform also includes a $2 levy on every taxi, Uber or hire car trip.

Greenvale taxi driver, Aytac Arman, said he bought a taxi licence two years ago for $290,000. “Now the government is offering to buy it back for $100,000 so we lost almost $200,000 in two years,” he said.

“I know other people who paid half a million dollars for their license. It’s not fair so we just won’t give up.”

Taxi drivers protest on the steps of Parliament House, Melbourne. Photo: Chris Hopkins
Minister for Public Transport Jacinta Allan this week said the government was committed to supporting taxi licence holders and regulating ride-sharing

“The industry is changing – these reforms will ensure hard working Victorians aren’t left behind,” she said

Qld News

How much can you really make as an Uber driver?
QLD News
Uber in Queensland: Taxi industry assistance package changes

Trenton Akers, Frank Chung, The Courier-Mail
December 2, 2016 11:22am
Subscriber only

THE taxi industry assistance package is set for a shake up, with the eligibility criteria for compensation payments to be expanded after amendments were passed in State Parliament overnight.

The assistance package was announced by the State Government to help the industry after ride-sharing services such as Uber were made legal in September.

It included up to $20,000 per taxi license — up to a maximum of two — and $10,000 for each limousine license.

But during a parliamentary speech Transport Minister Stirling Hinchliffe announced changes which include allowing compensation payments to trusts and companies which own taxi licenses and including operators in the scheme.
Minimum wage rallies planned in 340 U.S. cities
Operators could include people who lease a taxi off the license holder but not drivers, who would be classified as employees.

Mr Hinchliffe said the $100 million assistance package would not be increased but changes to eligibility criteria would help those affected by making ride-sharing legal.

“I can announce, based on the recommendations of the committee, all ownership structures will be eligible for transitional assistance payments, including individuals, trusts, companies and superannuation funds,” he said.

“I want to acknowledge the committee for highlighting the complex nature of taxi ownership and operation structures.

“It is important that transitional payments reach those who most need it, including those who have taken steps to incorporate or purchase a taxi licence as an asset in their superannuation fund.”

The move by the Queensland Government comes as an expert warns Uber is “staggeringly unprofitable” and relies on billions of dollars in subsidies to undercut taxi operators. And once the competition is wiped out, the transportation giant would need to “quadruple” fares to become profitable, News.com.au reports.

That’s the warning from Hubert Horan, an expert with 40 years’ experience in the management and regulation of transportation companies, who has dug into the sparsely available financial info of the most highly valued private company in the world.

“Unlike most start-ups, Uber did not enter the industry in pursuit of a significant market share, but was explicitly working to drive incumbents out of business and achieve global industry dominance,” Mr Horan writes in Naked Capitalism.

“Uber’s growth to date is entirely explained by its willingness to engage in predatory competition funded by Silicon Valley billionaires pursuing industry dominance.”

Uber drivers talk of their ride-sharing experiences
With operating losses of $US2 billion ($2.7 billion) a year — more than any other start-up in history — Mr Horan argues there is “no evidence that Uber’s rapid growth is driving the rapid margin improvements achieved by other prominent tech start-ups as they ‘grew into profitability’.”

In fact, the “absolute magnitude of losses has been increasing”, he writes.

According to limited financial information provided to investors, for the year ending September 2015, Uber posted losses of $US2 billion ($2.7 billion) on revenue of $1.4 billion ($1.9 billion), a negative 143 per cent profit margin.

“Thus Uber’s current operations depend on $US2 billion in subsidies, funded out of the $US13 billion ($17.5 billion) in cash its investors have provided,” he writes.

“Uber passengers were paying only 41 per cent of the actual cost of their trips; Uber was using these massive subsidies to undercut the fares and provide more capacity than the competitors who had to cover 100 per cent of their costs out of passenger fares.”

The Financial Times argues Uber’s “entire business model [is] questionable”.

“This is critical because it suggests we’re dealing with a charity case in disguise,” the paper notes.

“Silicon Valley elites justify the subsidies in the name of monopolistic growth expectations and the building of ‘eco-systems’. They believe if monopoly status is achieved, profitability will follow naturally from that point.

“[But] there is no reason to assume Uber’s obliteration of local competition across the planet will create a sustainable business in the long term.

“Costs are costs, even if you’re a monopoly. As long as people have cheaper alternatives (public transport, legs), they will defect if the break-even price is higher than their inconvenience tolerance threshold.”

Uber: Smoother Rides, Safer Roads
Mr Horan said claims in recent media articles that markets in developed countries were expected to generate “billions of dollars in profit” in coming years would require fares to quadruple.

“[The] $US4 billion ($5.4 billion) profit improvement needed to convert today’s $US2 billion losses into a $US2 billion profit would require some combination of the most staggering efficiency gains in the history of private enterprise … and humungous fare increases (fares would need to have quadrupled to have produced a $US2 billion profit in 2015).”

The Financial Times points out that “with the economics of the core business model looking that bad, small surprise Uber is currently preoccupied with pivoting its way to viability”, with initiatives such as carpooling, “optimised pick-up points”, and the “equally questionable” UberEats.

“[Customers’] preferences are … subtly massaged and managed with discount incentives and other behaviour moderating mechanisms (like crappy app navigation which makes it impossible to opt out of a pooled journey),” the paper writes.

Mr Horan argues that Uber’s refusal to consider an IPO “may best be explained by the recognition that publishing detailed, audited financial data confirming these massive losses and the complete lack of progress towards profitability could undermine public confidence about its inevitable march to industry dominance”.

However, Bloomberg reporter Eric Newcomer, the original source of some of the financial information cited in the report, said the analysis was “flawed”. Newcomer said Mr Horan was mistaken in claiming the losses from Uber’s China venture were not included in the financial figures.

“Uber’s first-half of 2016 losses included China,” he tweeted. “Uber owned 87.5 [per cent] of Uber China. Losses WERE consolidated. Support Uber scrutiny. Agree Uber is so big it should share its numbers. But this analysis seems flawed.”

Reformed buyback agreement gives taxi licence holders up to $100,000 compensation

Reformed buyback agreement gives taxi licence holders up to $100,000 compensation

Annika Smethurst, National politics reporter, Herald Sun
December 1, 2016 4:33pm
Subscriber only

TAXI licence owners will be able to access up to $100,000 more in compensation after the Andrews Government succumbed to political and industry pressure and reformed its buyback agreement.
Metropolitan licence holders will be offered $100,000 for their first taxi licence raised through a $2 levy on all taxi, hire car or ride-share services trips.
The government will then offer a further $50,000 for a second, third or fourth licence, extending the cap from two to four.
The sweeping changes come ahead of a rally outside parliament this weekend in support of drivers and their families who claim the original scheme was inadequate.
Federal Labor MPs Peter Khalil and David Feeney were planning to attend the event, saying the original package offered by the State Government “simply isn’t enough”.
The two MPs said their state colleagues had “more work to do” to provide support to those financially impacted by the changes.
“Thousands of families have invested in good faith to facilitate an industry that has been getting you home safe for decades,” Mr Khalil said in a promotional video for the rally.
“This is about fairness in the transition and standing up for families who may lose their livelihoods in the process of these reforms.”
Transport Minister Jacinta Allan thanked the industry for their feedback and said the government would continue to work with drivers to deliver $50 million fund.
“The industry is changing — these reforms will ensure hardworking Victorians aren’t left behind,” she said.
Opposition public transport spokesman David Hodgett accused the government of creating a “deeply divisive” package.
“Daniel Andrews has mucked this up from the start.”