Martin Agerup, who works for the Danish think tank CEPOS, sees Uber’s activities differently and in a more positive light. His article (below) was published in Jyllands Posten.
“Monday a Copenhagen taxi company announced that it lowers off-peak fares by 25 percent to compete with Uber, which once again proves that competition is good for consumers. My own experience as Uber-passenger is that Uber is just about 25-30 per cent cheaper.
On Tuesday the first Uber drivers went to court, accused of breaking the taxi law. This situation is completely unacceptable. We can not have a law that prevents innovation and competition in a private business. The Taxi Act is fortunately also being redone, and it seems to contain a significant piece of liberalisation, so Uber drivers can be allowed to practice their profession without being reported to the police. But one fears obstructions, effectively prohibiting Uber’s business model, for example by limiting the number of licenses.
Uber’s business model is an innovation that increases productivity by taxi.
The taxi industry and other opponents of Uber present Uber’s competitive advantage as a simple circumvention of regulatory requirements like security clearances, etc. They also suggest that Uber’s business model would be based on drivers not paying taxes. If there are Uber drivers who do not pay taxes, it is obviously an issue that must be handled. It may also be relatively easy to do that. On the other hand, there is a very foolish regulation of the profession, which should be abolished.
Uber’s competitive advantage is not based on these conditions, but on a business model and a technology that raises the efficiency of taxi driving and is in many respects superior to traditional taxi driving. A working paper from Princeton University finds that Uber drivers in two American cities have customers 59.7 percent of their working time compared to taxi drivers only 39.9 percent of the time (there are no figures for Denmark).
Four factors determine that Uber has such a significantly higher productivity: First, more efficient technology to match the driver and passenger. Taxis often have to run around looking for passengers hailing them. With the Uber app, drivers can immediately see where the next customer is located. Second, Uber has economies of scale which the taxi trade has not. Thirdly, the current foolish taxi regulation forces taxis not to pick up customers outside their own city.
And fourth: Uber’s business model provides a flexible range of drivers, which is a huge advantage in a market where demand varies markedly depending on whether it is Sunday morning or Friday evening. Some drivers are running full time, but others run Uber as a sideline and run only when there is high demand. Their car is primarily a consumer product, and they therefore do not need to constantly have it on the streets to recoup the investment. On top, the Uber let prices vary with demand. If it rains, the price increases so that more drivers see an advantage in jumping in the car to earn an extra penny, and capacity adjusts to demand.
Uber’s business model is an innovation that increases productivity by taxi – in the US study by up to 33 per cent. It implies that Uber can take a markedly lower price and still guarantee drivers for the same turnover.
The perspective for Denmark is much greater than Uber and taxis. New technology creates opportunities for innovation. Innovation is the foundation of our prosperity. It’s devastating for a community to build control walls that keep out innovation and protect special interests from competition and change. Uber is not a piracy drive. Uber’s the future.
• Uber is the future for Denmark’s taxi and transport industry, writes Martin Agerup.