Is Uber too Cool for KC?

It’s the tale of two states as Kansas and Missouri grapple with Uber’s high-tech rideshare program, disrupting a staid old industry with the swipe of a smartphone app.



     It’s been about a year since Uber entered — some would say invaded — what euphemistically is being called Kansas City’s “rideshare” market (come on, people, it’s a taxi service), but the controversy surrounding it has endured. Some riders swear by it, calling it faster, more efficient and relatively cheaper compared to organized cab companies and limo services. Other riders, however, argue Uber is risky, has a haphazard approach to driver quality (“any goober can drive for Uber”) and worry that cheap rides can become expensive rides depending on time, place and destination. Examples of Uber surge pricing during particularly in-demand periods like, say, Fashion Week in New York City, are aplenty. You’ve been surged!

   For its part, Uber has shrugged off the criticism. The company considers itself nothing more or less than a disruptor of an industry that it says hasn’t really changed in centuries and has yet to reap the benefits of high technology.

   Traditional ride-for-hire companies counter that Uber’s founder is just another rich, arrogant Silicon Valley nerd with no respect for rules.

 

Uber’s Staying Power

     Whatever else is true, Uber certainly is tenacious. In an April city council meeting, Kansas City, Missouri, Mayor Sly James publicly scolded Uber for not responding to city requirements that drivers obtain business licenses, have proof of insurance and submit to background checks. While railing “the idea that we are kicking Uber out, that is so much garbage,” James nevertheless led the council to strengthen hired-car requirements and said if there were no compliance there would be no Uber.

   If ridesharing companies pay $45,000 annually, the individual driver’s vehicle permit fee would be waived. In addition, the law called for each driver to obtain a business license, a medical check and a chauffeur’s license.

   Uber promptly said it could not live with that kind of regulation and announced it was withdrawing.

   Within two weeks, however, a behind-the-scenes compromise was struck where the city would accept Uber’s background checks on drivers, and the city would be shielded from any litigation arising from accidents. In return, the city agreed that individual drivers could be exempted from the annual fee.

   Uber was back.

   Likewise, the Kansas State Legislature booted Uber out of the state in the spring, but Gov. Sam Brownback vetoed the legislation, essentially saying “let’s wait and see what happens.” The Legislature didn’t like the governor’s attitude, however, and overrode the veto, forcing Uber out again.

   But, as in the case in Kansas City, Missouri, leaders for both the Legislature and the company continued to talk in an effort to find common ground.

   As of our press date, a compromise was offered that mandated that individual drivers who had liens on their cars have comprehensive, liability and collision insurance. Drivers without liens needed only liability insurance. Also, the state said it would accept Uber’s background checks on drivers rather than requiring Kansas Bureau of Investigation checks.

   The Missouri State Legislature also had to waltz around with Uber before allowing it to operate in St. Louis and other parts of the state. Same thing in Nebraska.

        

Uber as a Universal Disrupter

     What’s important to understand is that Uber is not just controversial in Kansas City. Uber is controversial everywhere. (The ubiquitous rideshare service is currently available in 58 countries and more than 150 North American cities.) New York City wants to “review,” which means regulate, the apps that are used by car-hire services because it really doesn’t like the way Uber operates and neither do the existing cab companies there.

   In Portland, Oregon, the city council has allowed Uber to operate a pilot program even though it calls the service “an illegal company.” Said one council member, “We’re not voting on whether we like Uber – we’re voting on whether to allow a different business model to operate.”

   In Las Vegas, which churns out $400 million per year in hired transportation, Uber outraged locals by setting up without informing the city or making even a token attempt to comply with regulations. It took a judge to close them back down until the Nevada State Assembly decides what to do.

   Even the European Union has taken a shot at Uber, filing a lawsuit against it for anti-trade practices.

 

Old-School Regulations vs. New-School Technologies

     And that seems to be the crux with Uber. Authorities everywhere have well-established rules for running transportation companies, including, insurance, car maintenance, training and business licenses, and background checks on drivers. Uber, however, says none of those rules apply to it.

   Uber founder Travis Kalanick maintains the San Francisco-headquartered company is NOT a “taxi business” but is a technology company — a transportation network that allows riders to click on an app to summon someone with a car to give them a ride wherever they want to go. Like other technology companies protected by the original Internet Freedom Act, which declared Congress would not try to regulate the Internet so to encourage its development, Uber argues it is simply exploring how the Internet can be used to make the transportation sector more efficient.

   Kalanick says Uber owns the smartphone app, but nothing else — it owns no cars, no garages, no taxi medallions, no maintenance facilities. Nothing but the app. Its drivers are all independent contractors who operate their vehicles, pay their own upkeep and insurance, set their own hours, and can accept or reject rider requests at their own discretion. That, says Kalanick, is not a cab service — it’s just a bunch of folks cruisin’ around with the same app on their phone helping people get from one place to another. For the right to use that app, Uber takes 20 percent off the top of every fare, which it pre-calculates via GPS. Tip not included.

   In short, Uber wants to do to the taxi cab industry what Google has done to encyclopedia sales.

Uber_Kansas_City

 

The Viewpoint of Uber’s Competitors

     Uber’s competitors, of course, point out there is a world of difference between pushing data and driving people, and Bill George, owner of the Kansas City Transportation Group, is more than happy to meet the challenge. KCTG is the umbrella organization that owns Yellow Cab, 10-10 Taxi, SuperShuttle, Carey Limousine & Towncar and a comparatively new entry, zTrip, KCTG’s directly competitive service to Uber. zTrip allows riders to use a smartphone app to order either a taxi or a “black car” (there are usually more taxis available than black cars, which means they arrive sooner) and, unlike Uber, the rider can call for a car “now” or “later.”

   "We have no problem competing with anybody in this space," George says. "We just want to make sure we all have the same rules and pay the same fees."

   George says the fee compromise the Kansas City city council offered Uber, and by extension all other transportation companies, will actually save KCTG more than $100,000 per year. But beyond that, George points out that service ultimately will differentiate KCTG from Uber or anyone else. “To ride with Uber, you need a smartphone and a credit card,” George says. “A lot of people don’t have those things but still need to get places. And there are many people who have smartphones who aren’t comfortable downloading apps.”

   He also notes that people who want to arrange travel in advance can do so with a taxi service — something that cannot be done with Uber. Also, riders who become comfortable with specific taxi drivers can call ahead and make sure that driver is available to pick them up. With Uber, cars respond when needed, and riders have no control over who shows up.

   Which gets back to one of the key sticking points between Uber and the Kansas City government: vetting drivers. Uber insists it screens drivers, but claims it should not have to provide the city with any documentation, citing privacy. Drivers for other taxi services, however, must be cleared through the city’s background check procedure. Uber ended up compromising, agreeing to provide regulators in Kansas City with the results of background inquiries.

   George also points out that when consumers use a taxi or zTrip car, the fare is going to be pretty consistent, regardless of time of day. Uber, alternatively, not only bills on the basis of time and distance, but also charges “surge” fees for when there is high demand but fewer cars available — think late nights when the bars and restaurants are closing. These surge fees can turn a $50 ride into a $100 ride. However, when an Uber car is ordered up, the anticipated fare is displayed on the screen, and it’s up to the rider to decide whether to proceed or not.

   It also needs to be said, as many riders suggest in social media exchanges — where Uber versus cabs is the subject of frequent and heated debate — Uber can be a godsend on a hectic day. A typical pro-Uber user effuses, “Uber is one of the greatest things that has happened in urban settings. I am picked up quickly, in a nice car, with a driver that has my destination already in his GPS.” And, another note, “You know exactly how much you will be paying beforehand. No meter clicking while you idle at traffic lights.”

   Another plus that comes straight from Uber’s website: “You don’t need cash when you ride with Uber. Once you arrive at your destination, your fare is automatically charged to your credit card on file — there’s no need to tip.”

 

But does “Uber” rhyme with “future”?

     Perhaps what is most surprising about Uber, which many people may not realize, is that it is a huge corporation — huge as in a $50 billion valuation. In fact, Uber is currently valued higher than Facebook was just before it went public. And many on Wall Street believe Uber's venture capitalist investors could push that valuation to $70 billion this year — a figure that makes the Securities and Exchange Commission nervous because it is not yet publically traded. If Uber is just another California tech firm with a neat little app, why does it need all that cash?

   First, clearly, it is having to go state-by-state and city-by-city to hire lawyers and lobbyists to overcome what it considers stifling regulation. But Uber’s plans go far beyond that.

   Wall Street insiders recently took interest in Uber’s bid to buy Nokia Corporation’s road mapping technology – called HERE – that is similar to Google’s, which theoretically could be used for the same purpose: navigation systems in driverless cars. Some speculators believe that what Uber really wants is to dominate the hired-car business when drivers are eliminated entirely.

   That day could be years in the future, they concede, but they also believe the race to get there has already begun.

 

A TEST RIDE: UBER VS. zTRIP

     Despite the perks here and there and the government compliance issues that need to be worked out, reality is that most consumers are likely to be just as happy with Uber as they are with other transportation alternatives.

   435 Magazine recently tested Uber and its most direct competitor, zTrip, and found our expectations were basically met by both.

   Choosing to ride at midday on a Saturday, the waiting times for both services were within reason, and the fares were exactly as quoted. Both cars were clean, the drivers were friendly and courteous, chatted amicably and, quite frankly, neither really had anything derogatory to say about either their employers or their competitors. This suggests that any business hostilities were being resolved much higher on the corporate chart.

   The Uber car, a Honda Pilot SUV, arrived without identifying marks, and the driver, when asked where the rider should sit, responded, “Anywhere you want. Front, back. It doesn’t matter. The car is yours.” The driver was somewhat challenged in finding the destination, a little surprising given that it was a fairly well-known shopping center. Still, that could happen to a taxi driver too.

   The alternative choice was a black car from zTrip. Again, the car was ordered on the spot via a smartphone app, and the wait time was not unreasonable. The car was a sleek, black Chrysler, guaranteed to turn the heads of the envious and the ecologists, and the driver was in a chauffeur’s uniform. The fare to the same destination was somewhat higher than the Uber car, but not extraordinary given the type of ride being provided. And the tip was included. (The tip for the Uber driver was not included).

   Both fares were charged to a credit card.

   Conclusion: Either Uber or a taxi will get you from one place to another. If you’re going to a special event, however, or even if you just feel you’d like to go a little upscale, zTrip is definitely the way to go.