Taxi app Uber's Canadian growth causing battles with cities, cab companies

Technology has fractured all kinds of established businesses, from music and retail sales to the mail and news media, sweeping away whole sectors that are not able to adapt quickly enough.

Now an industry many of us love to hate is up against the wall, but the taxi business will not going down without a fight.

Uber, the San Francisco-based taxi app that’s exploded into hundreds of cities worldwide in just five years is facing stiff resistance in Canada.

The City of Toronto is embroiled in a legal fight with the company while Vancouver has put off a decision on whether to permit it entry into the city’s under-served cab market.

Meanwhile in Ottawa, Uber drivers have been targeted by an undercover sting operation and slapped with hefty fines.

We are witnessing what may be the opening rumbles of a tectonic shift that could fundamentally change the taxi business in the same way Amazon revolutionized consumer retailing and iTunes helped kill the neighbourhood record store.

What is Uber?

Uber (from the German word über, meaning over or above, adapted in hipster-speak to mean outstanding) launched their app-based service in 2009, connecting riders with registered drivers via their smartphones.

Customers download the Uber app, register with their credit card information, and request a ride. The app sends their location to the nearest Uber driver and sends back an estimated pick-up time. At the end of the ride, the credit card is automatically charged and no cash actually changes hands.

In the tradition of other successful IT startups, its growth has mushroomed and the company how claims to have operations in more than 200 cities in some 45 countries. Estimates put its value at US$17 billion.

Uber spokeswoman Arielle Goren told Yahoo Canada News the company offers three types of service:

• Uber Taxi, which operates through existing cab companies and drivers, giving them another avenue for reaching customers;

• Uber Black and Uber SUV, which essentially does the same with owners of limousines and large vehicles that are often sitting idle;

• UberX, which utilizes private vehicles whose drivers are not in the mainstream taxi industry.

Uber Black is operating successfully in Halifax and Uber Taxi in Montreal, said Goren.

So what’s the problem?

It’s UberX that seems to be causing the largest kerfuffle, because the business model is an arrow aimed right at the heart of the old-line taxi business, namely the requirement of a valid taxi licence.

UberX is open to anyone with a driver’s licence and a safe late-model vehicle, whether they own a cab or just want to make a little extra money.

“With Uber they can work on their own time, be their own boss,” said Goren.

Uber performs a criminal background check and local police check on would-be drivers, as well as a lifetime check for sexual offences. Qualified drivers are covered by a $5-million insurance policy when carrying passengers in their personal vehicles, she said.

The platform has worked in several cities including New York, said Goren, where UberX drivers are given licenses to operate.

“We’re very successful there,” she said, noting traditional taxi licences change hands for up to US$1 million.

But there’s no common template for making Uber work.

“What works in City X probably doesn’t work in City Y,” she said.

Certainly not in Canada. While Montreal seems to have accepted Uber Taxi, Toronto officials are resisting UberX’s establishment in the country’s biggest market.

“Based on the information currently available, the city is concerned that the UberX service may pose a serious safety risk to the public, including those who are signing on as drivers,” Tracey Cook, executive director of Toronto’s municipal licensing and standards office, told Yahoo Canada News via email.

“The city is concerned that the drivers do not hold a city-issued licence, which ensures the adequacy of the background screening, nor have the drivers taken the required training as mandated by the city, which would also include safety awareness training for the driver.

“The vehicles may not be equipped with the same security provisions as licensed taxis, such as cameras, nor have they undergone city mandated mechanical inspection and may be inadequately insured.”

Cook cautioned that drivers working for UberX “may want to seek legal advice regarding their participation.”

Already facing legal battles

City of Toronto spokeswoman Tammy Robbinson added that Uber is already facing 30 charges, including operating an unlicensed limo service and unlicensed taxi brokerage. A trial date is still pending.

In Ottawa, bylaw officers dropped the hammer on two local drivers for operating unlicensed taxis, slapping them with $650 fines once they accepted payment, CBC News reported.

Uber’s Canadian spokeswoman Lauren Altmin condemned the tickets in a statement and said the company would stand by the drivers.

"Costly sting operations that seek to protect a monopoly that has remained unchanged for decades only hurts the consumers that have been asking for expanded transportation choices," said the statement, according to CBC News.

Uber got some apparent high-level support Saturday night when Foreign Affairs Minister John Baird tweeted about waiting vainly for an ordered cab for 75 minute. It never showed up despite five calls, he said.

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Battle beginning in Vancouver

Vancouver is not at war with Uber yet, but the opening moves have been made. Last week, city council put off a decision on how to deal with the company following hearings that considered plans to expand conventional taxi services and heard testimony from an Uber executive.

Vancouver has the lowest number of cabs per capita in Canada, and it’s notoriously difficult to get one if you’re downtown on a weekend evening or during major sporting events.

“There’s a general agreement that there should be expansion and innovation,” Coun. Geoff Meggs of the governing Vision Vancouver civic party, told Yahoo Canada News. “I just think we need to do it in a balanced way so that we try to protect what we’ve already got and work from there.”

Meggs rejects Uber supporters who suggest opposition to the company’s business model is about protecting entrenched cab companies, not ensuring the safety of riders.

“I hear that charge quite a bit and I think that people need to look a little deeper and see what the tradeoffs are there,” said Meggs.

Taxi operators are subject to provincial and municipal regulations designed to protect both drivers and riders. Drivers are also trained to aid disabled riders in accessible vehicles.

Existing cab companies accept that change is coming, said Meggs, but Uber’s actual plans aren’t clear, even though it’s apparently hiring staff already.

“Are they going to want to do what they’ve done in other cities and simply launch outside the usual processes, or are they going to come through the same doors everybody else goes through?” he wondered. “We just don’t know.”

Meggs wouldn’t say if Vancouver would unleash its bylaw-enforcement machinery if UberX rolls out in the city.

“Nobody’s going to do anything unless Uber starts up in some way that’s outside the current framework. We’ll see if that’s what they do.”