Lentis/Real-time Ridesharing

Introduction

Real-time ridesharing (RTR) provides car service to individuals who need to go from point A to point B. The major characteristics of RTR are:

1. On-demand: real-time ridesharing responds within minutes to the individual that requested it. RTR cannot be hailed, like a taxi, and must be summoned.
2. One-time: real-time ridesharing is not a contract service but rather a single ride service, similar to a taxi.
3. Smartphone-dependent: real-time ridesharing companies use smartphone GPS systems to best match drivers and users

For this case study, we will focus on the most well-known RTS company, Uber. We will focus on the groups that are in support of RTS and against RTS (as well as their interactions) in the context of Uber, but an investigation of other companies might reveal socio-technical interactions that we have not considered.

History

Ridesharing first became prominent during World War II as a way of carpooling to and from work. Oil and rubber shortages at the time caused citizens to become more wary of using private vehicles for personal transportation. However, after the war had ended people went back to their old ways and ridesharing fell out of favor.

Ridesharing was reintroduced in 1973 when members of the Organization of Arab Petroleum Exporting Countries (OAPEC) declared an oil embargo on United States due to their involvement in the Yom Kippur War . What soon became known as “the first oil shock”, caused the price of oil per barrel to go from $2.90 to $11.65 . Oil prices continued to soar as Americans faced “the second oil shock” causing oil prices to reach more than $38 per barrel . This sparked companies such as Chrysler and 3m to organize vanpools in order to cut down on fuel consumption at a much larger scale . The years following this, the percentage of ridesharing individuals in the United States had steadily declined .

The idea of real-time ridesharing came about in the 1990s with the goal of allowing individuals to find with a rideshare service within a relative short time from departure . At the time these real-time ridesharing used telephone to connect people with a ride, however many of the services failed to create the necessary user base. Companies continued attempting to create real-time ridesharing systems as telephones were replaced with Internet and smartphone technologies. A 2006 report from the U.S. Department of Transportation stated that the best solution at the time was next day responsiveness .

In 2012, San Francisco startups (such as Lyft, Sidecar, and Uber) tackled the issue of responsiveness by creating apps that would connect users to their rides within minutes of a request. These companies quickly expanded their market to not only the rest of the US but also to more than 50 countries worldwide .

Participants

Groups that are generally in support of real-time ridesharing include the consumers that use RTS, the companies (Uber, Lyft, etc.) that provide the back-end support to RTS, and the RTS drivers themselves. There are also groups that are aligned against the growth of RTS companies, some of whom are aligned in their opposition. The most vehement anti-RTS groups are taxi drivers, but state and local government groups are also seeking to limit the growth of RTS.

Users

Users of real-time rideshare services have an overwhelmingly positive view of the companies as measured through app feedback. On iTunes, Uber receives 4-star, Lyft 4-star, and Sidecar 4.5-star ratings. An important caveat, though, is that app ratings are subject to self-selection bias--that is, people who feel strongly about the services are most likely to participate. Further, the apps themselves frequently encourage users to rate the app--but dissatisfied users are presumably not using it, and thus not getting the reminder to rate, deflating the likelihood of negative reviews.

Safety is one concern cited by users. There have been limited cases of harassment and even assault by Uber drivers on passengers, the most recent being a rape accusation in Delhi. Other incidents include a hammer attack in San Francisco and an alleged kidnapping in Los Angeles .

Companies

There are many RTS companies, but for the purpose of our analysis we will consider the largest example, Uber. Uber offers many types of RTS services, and we will focus on UberX, which is most similar to a taxi service. The major differences between UberX and taxis are:

1. Vehicles: UberX allows drivers to use their own vehicles, with certain standards, while taxi companies require their drivers to use standard fleet vehicles.
2. Drivers: UberX allows anyone to sign up and drive, after passing a background check. To drive a taxi, a driver must have a qualifying medallion that is issued by the municipality.
3. Passenger connection: UberX connects users and drivers with a universal smartphone application, doing the matching work on the back end. Most taxis are either hailed on the street, or arranged via phone with a dispatcher. While some taxi services have similar apps, there is no 'one app' for all locations such as Uber's.
4. Revenue model: UberX takes a commission of every ride on the service. Taxis companies (source required)
5. Scope: Uber operates across cities, states, and countries, while taxi companies in the United States are limited to the municipality in which they are registered.

Uber is considered to be wildly successful, and raised $1 billion in December 2014, valuing the company at over $40 billion.

Drivers

Uber drivers come to drive for the firm for a number of reasons. Personal interviews throughout the summer of 2014, for instance, found that drivers joined to take advantage of a more flexible alternative to a taxi career, to supplement income from a second job, to put money away for a honeymoon, to help pay for school tuition, to start a career in America without the delays of a taxi company, and to make ends meet during a period of unemployment. Though the sample size was relatively small (less than 50) and the interviews not standardized, this informal study at least demonstrates the breadth of Uber drivers' backgrounds.

However, some drivers are not pleased with the company and have formed organizations such as the California App-Based Drivers Association, which desire better pay and working conditions.

Taxis

Taxi companies see UberX as an existential threat to their business model, alleging Uber's services are equivalent to "illegal pickups" . Many taxi drivers have ditched their cab leases: for example, half of the United Taxi Workers of San Diego now drive at least part-time for Uber. Those that stay are organizing and protesting. And even in New York City, there are signs that Uber's growing influence is draining vitality from the taxi industry: the value of taxi medallions (needed to legally register a cab with the city) has fallen for the first time in decades, now resting below $900,000.

State and Local Government

State and local governments having been cracking down on Uber, with Los Angeles and San Francisco recently suing the company for making false and misleading statements about how it protects consumers. California's Public Utilities Commission, after acquiescing to Uber's business model by creating a new class of companies (Transportation Network Companies), recently shut down a new business offering, Uber carpool. In addition to US complaints, authorities in Germany, India, and Brazil have banned Uber in all or parts of their respective countries.

However, many cities, states, and countries are working to accommodate Uber. Uber is now operating in 137 U.S. cities and 52 countries around the world .

Ongoing Conflict

An example of a taxi strike blocking streets in Bologna, Italy. (courtesy Wikimedia Commons)

Protests

Groups opposing real-time ridesharing companies are using various techniques to try and retain market share. One way taxis attempt to gain support is through protest. One such public protest was put on in June 2014 by the D.C. Taxi Operators Association, a Teamsters-affiliated group. The protest, involving a long string of taxis driving (passengerless) on a slow route, was intended to create gridlock--and attention to the idea that app-dispatched ride sharing services were competing unfairly by skirting rules and regulations taxis were burdened with.

Some public response to the taxi protests, though, has been very negative, with much of the reaction on social media expressing frustration towards taxi drivers. Tweets during the D.C. protest, for instance, included "How about improving your product/service instead of complaining?" and "I better grab an Uber and get out of here."

Regulation

Local governments also are putting roadblocks in the way of ride-sharing companies, with California's Public Utility Commission (PUC) recently limiting the ability of Uber to perform 'carpool' style ride pick-ups between multiple users. While Uber and Lyft claim environmental and traffic benefits to such programs, the PUC cites state law that requires only airport-shuttle-type services be allowed to charge individual passengers separately.

Similarly, the Illinois House of Representatives in April passed HB4075, which, if confirmed by the Senate, would drastically change Uber's (and other RTS services') operation in the state. The bill would mandate drivers get chauffeur's licenses and commercial insurance. It would also bar drivers from picking up or dropping off at airports, convention centers, or taxi stands.

Uber, though, is not going down without a fight. They have set up their own action portal through their website and app, encouraging users to communicate to their congressmen and governors that they want ridesharing to survive. It remains to be seen if public response will be strong and voluminous enough to combat the entrenched influence of taxi corporations lobbying organizations, and if ridesharing services will comply with regulation if it is passed.

Theory

This cycle of protests by stakeholders of an older technology in the face of a new one, alongside regulatory challenges to the very existence of the new technology, is an example of the turbulence that can accompany disintermediation. In this case, it is taxi companies being disintermediated, as RTS services connect travelers directly with willing drivers. These taxi companies, then, are incentivized to use all the resources available to them--including well-established lobbying operations--to preclude RTS services from fully displacing them. Thus are born protests and restrictive regulations.

Conclusion

Real-time ridesharing (and in particular, the focus of this case study, Uber) has seen explosive growth since 2012. That growth, though, has come with the growing pains of a new technology. While early adopters give the service good reviews for ease and efficiency, stakeholders in the status quo have fought back. Taxi companies and governments across the country and world have leveled charges that RTS services are shirking rules and regulations designed to keep travelers safe. Protests and new regulation are characteristic signs of disintermediation at work, and whether the pushback will be enough to stunt the new technology's growth is an open question for the next few years to answer.