Writing for The Guardian, Evgeny Morozov repeats a number of well-worn, but misguided, objections to Uber’s continued growth. He predicts that Uber will spell doom for consumers and drivers. It will drive its competitors out of business in order to charge monopoly prices to its customers and squeeze “even more cash or productivity out of Uber drivers.” This is all thanks to the “rich venture capitalists” and tech-giants whose tax-avoidance supposedly enables them to fund Uber’s expansion. With their backing, the company can “afford to burn billions in order to knock out any competitors, be they old-school taxi companies or startups.”
“Uber is not just improving on the existing taxi model in major U.S. cities, it is expanding transport options and extending service to areas that were previously underserved”
Morozov and other who make the same anti-Uber argument are mistaken on a number of levels. Uber and other ridesharing companies benefit consumers and drivers, both now and in the long run. Uber will continue to face competition and it will not monopolize the for-hire vehicle transport industry, unlike its government-protected taxi predecessors did.
In the States, for far too long for-hire vehicle transport has been heavily regulated to the point of suppressed competition. This lack of competition, driven by taxi companies’ donations to local politicians, led to a noticeable decline in taxis’ customer service. Increased competition fueled by ridesharing’s growth has even forced taxis to improve their service.
Uber is not just improving on the existing taxi model in major U.S. cities, it is expanding transport options and extending service to areas that were previously underserved. Data show that as Uber’s popularity grew in New York City, its reach into low-income neighborhoods outside busy Manhattan grew at an even faster rate. This makes clear the dire need for increased travel options. Ridesharing can provide this, especially in residential neighbourhoods and late at night when taxi dispatch services are unreliable and public transportation is scarce.
In addition to affordable fares, customers value the convenience and improved safety that ridesharing platforms provide.
The number of American Uber drivers doubled over the course of last year. If drivers felt as if they were being exploited, they would not be trying to drive with Uber. Over half of Uber drivers are still actively working for the company a year after they signed up. While some Uber opponents may try to use this statistic to show that many people choose not to continue driving, the ability to easily start and stop driving with Uber is one of the main benefits of the service. This flexibility is valued by Uber drivers.
Flexibility is particularly valuable. Students who want to earn extra money between classes and mothers who can only work when children are at school benefit from the ability to work when they want.
A further accusation levelled by Morozov is that Uber is engaged in predatory pricing, aggressively lowering prices to the extent that competitors will be forced to shut down. His evidence for this is that “during the first three quarters of 2015 Uber lost $1.7 bn while booking $1.2 bn in revenue.” It is common for companies—especially new ones—to lose money during periods of expansion. Recall Amazon’s long record of quarterly losses.
Lyft’s success (the company recently raised another $1 billion, including $500 million from General Motors) and the continued introduction of new ridesharing companies across the globe points towards the industry being anything but a natural monopoly. Indeed, in cities where there the taxi market is relatively open and there are no medallion requirements, multiple taxi companies coexist.
A common argument used to support the idea that the ridesharing market will become a monopoly is based on so-called “network effects.” For example, the more people who use Facebook, the more attractive the service becomes. While these undoubtedly exist for ridesharing, as no one would drive with Uber if there were few riders to pick up, they disappear once companies can get average ride wait times low enough. Those who are worried about reduced levels of competition should welcome Uber for breaking up an actual government-enforced monopoly, rather than falsely accusing it of trying to create a hypothetical one.
“Those who are worried about reduced levels of competition should welcome Uber for breaking up an actual government-enforced monopoly, rather than falsely accusing it of trying to create a hypothetical one.”
Elsewhere in the article, Morozov lists other Uber competitors, including “India’s Ola, China’s Didi Kuaidi, U.S.-based Lyft and Malaysia’s GrabTaxi.” These companies “have formed an alliance, allowing customers to book cabs from each other’s apps in countries where they operate.” In London many car hire services such as Fairway and Kenwood provide competition for Uber. Customers can order these cars with an app, set up an account, and, even better, book them in advance—a feature that is currently not possible with Uber or Lyft.
In the end, it does not seem to matter to Morozov whether Uber will monopolise the industry or not. He argues that “replacing Uber with Lyft won’t solve the problem, as it pursues the same aggressive model.” That “aggressive model” is nothing more than market competition, the positive consequences of which are numerous for both passengers and drivers. Uber’s game plan to “drive the rates so low as to increase demand” is simply charging passengers less so they will use Uber more. This is common to many firms across a wide range of industries, and is hardly the nefarious plan being portrayed by Uber’s detractors.
This piece originally appeared in Forbes
This piece originally appeared in Forbes