To Uber or not to Uber

I finally had the chance to use the Uber app in Manila.  Unfortunately, it didn't work.  Neither did GrabTaxi and not even the most conventional way of getting a cab - hailing it  I guess in the situation I was in, nothing will, except the old time-tested reliable way of transportation - walking!  I was invited to an ASEAN Roundtable Discussion on Logistics, and for some unknown reason, it was scheduled on February 25, in a hotel in the middle of Ortigas.  Which, of course, was closed to all modes of traffic in commemoration of EDSA Day.

Aha, I said to myself, now I can try Uber.  I registered myself to the app as well as to GrabTaxi, too, just in case. GrabTaxis are regular taxis which can be contracted by a cellular phone (or PC) application. You need to pay a fee on top of the meter-displayed fare.  I don't know how this sits with LTFRB and whether this is not allowed, but I know many people who use this app for the convenience of it - no need to hail any passing taxi and no need to line-up in a taxi stand.  You just pay something extra.  And in a city like Manila, it's worth it.

Uber is entirely different as it uses private cars, oftentimes the more luxurious models, to service passengers, contracted through online applications.  There are no regular or metered fares, instead, fares are quoted in response to an inquiry.  In both Uber and Grabtaxi, the app will inform you on how many units are nearby, and will also show their location on a display map.  It also shows the approximate time for these to reach you.  In GrabTaxi, you pay the regular way as when you ride a taxi (metered), with an extra fee (fixed) for the pick-up; in Uber, you pay online by credit card, on the agreed quoted price, - which is variable.

Let's focus on Uber, since this is the system being debated upon now.  GrabTaxi is a regular taxi, and thus governed by its LTFRB franchise, and regulated by it.  Sooner or later, LTFRB will have to resolve the propriety of the extra pick-up fee.  But Uber still needs to be decided upon.  Firstly, its units are private cars/vehicles, which automatically raises the issue of whether it is a public service or not.  There is an age-old distinction between privately-owned vehicles and public transportation.  And while the latter maybe privately owned, these are operated under a franchise, and regulated by government.  How about Uber?

In economic terms, Uber can be seen as using idle assets more efficiently.  Everybody knows that the most efficient way to use a transport vehicle, especially those devoted to public use, is to use them as often as possible, with the least idle time.  That's why airlines always say the only time their aircraft makes money is when they're on the air.  This is true in most, if not all, assets, equipment, plants, and other productive machinery.  Most private cars, on the other hand, are idle 90% of the time.  Using them more would be good to the economy!

The surge pricing mechanism of Uber also tends to flatten the peak-off-peak curve.  Since the fare is variable, their system actually offers higher fares when demand is high (called surge price).  The higher fare invites more Uber operators/drivers to field their cars when the available supply drops at peak.  The price is higher but most users don't mind - you're usually willing to pay more when you can't get a ride, right?  Unfortunately, this is bad for regular taxi companies.  Not only are they threatened with competition (with better cars at that), they are facing a system that offer lower fares at off-peak.  That's why they're up in arms.

At the end of the day, government has to decide.  I think there are even pros-and-cons.  But what I'm worried about is that we might be giving an opportunity to the rich to earn more, while displacing a marginalized sector who can't beat the competition.  It's a difficult decision to make.