Uber: A game-changer in passenger transport in South Africa? been argued in other countries, will lessen negative externalities and other market failures | The entry of the app-based Uber service into South Africa's local passenger transport industry in associated with this and similar services. |2013 raises important competition and regulatory issues. Uber is a taxi smartphone application that uses the customer's smartphone to detect their specific location using the global positioning On the other hand, stiff competition from the entry of Uber in places like New York, has forced system (GPS), and instantly connects the customer to the nearest available driver. Uber taxis work traditional metered taxis to become more innovative, through the introduction of a new taxi app in exactly the same manner as traditional metered taxis in that they both take the customer to to compete with Uber. In South Africa, a new cabhailing app called Taxify was introduced in 2015 their intended destination for a metered fee. However, Uber is a technology-driven service that in the main cities of Johannesburg and Cape Town as a direct competitor to Uber. In Vancouver, uses a convenient electronic taxi-hailing system to find, book and pay for taxi services. This Canada, the entry of Uber forced the four main metered taxi companies to integrate and develop presents an innovative new technology platform in the local taxi industry. In South Africa, Uber an eCab application in order to compete with Uber and ensure their survival in the industry. operates in the major cities of Johannesburg, Pretoria, Cape Town and Durban and is planning to expand into smaller cities. Beyond South Africa, the internet ride-sharing service has been Price comparisons between Uber service and the average quoted prices of four anonymised introduced in Nairobi, Kenya and Lagos, Nigeria. Uber's rapid expansion in terms of market share sedan-based metered taxi companies for five different short and longer distance routes is used to and geographic areas since 2013 shows an innovative new entrant that has disrupted the existing assess the impact on prices following the entry of Uber into the industry. A cheaper line of Uber's systems in the passenger transportation industry. taxi offering, Uber X is used in the analysis. The routes assessed comprise a busy route from the Sandton Gautrain station to O.R. Tambo International Airport, Johannesburg to Pretoria and short However, the entry of Uber into the local taxi industry was met with hostile challenges around distances within Johannesburg. regulations and allegations of unfair competition practices in several cities such as Washington, Paris, Mexico City, Lisbon in Portugal, Bandung in Indonesia and Cape Town in South Africa, Uber is significantly cheaper than metered taxis across all distances. Metered taxis charge amongst others. South Africa's Metered Taxi Council accuses Uber of engaging in unfair significantly higher premiums for short distances reaching as high as 265% above Uber X. competition practices and failure to comply with local transport regulations. Metered taxi operators have alleged that Uber is using aggressive below-cost pricing and operating without However, it is clear that price is not the only competitive factor driving the growth of Uber metered taxi permits which are charged on an annual basis or as a once-off payment (approx. services. Before the entry of Uber, the majority of Uber customers were indifferent about using R 1500.00) according to Section 54 and 62 of the National Land Transport Act No.5 of 2009. Uber traditional meter taxis as an option. Is growing demand for Uber service purely driven by cheaper is apparently also failing to comply with transport rules and regulations for metered taxis such as prices or is there other competitive aspects driving its rapid growth in market share? This also sealed meters for the purpose of determining the fare payable, detailed description of the specific raises the question of whether Uber is directly taking customers from traditional metered taxis, route, stipulated minimum and maximum fares per kilometre, displaying of approved rates on the drawing in new demand in the market, or a combination of these effects. Although metered taxis vehicle and on the sealed meter, vehicle standards and safety specifications. and Uber share common features they have different users and user experiences. Importantly, the growth of Uber services demonstrates the responsiveness of consumers to lower prices and Uber's business model appears to have enabled it to bypass local transport rules and regulations improved services, and the ability for improved product offerings and prices to create benefits for including successfully adopting technological solutions to overcome local transport regulatory not only existing, but new customers as well. barriers. In response, South African regulators are currently amending the National Land Transport Act to include a new section for Transport Network Operators that caters for the Uber has an additional convenience-based competitive advantage which allows the service to tap regulation of operators using technology platforms such as Uber. Appropriate regulation, it has into a whole new market of unmet demand for convenient, fast, and flexible point-to-point urban transportation. The Uber application makes it easy to hail or order a cab from any location, at flexible times. Unlike Uber, traditional taxis are usually located at central depots or central places discounts. Uber's partnership with Hilton Hotels around the world to provide hotel guests with a such as bus stations or train stations. In some instances, the customer keeps the taxi's cellphone reliable means of transport to and from hotels, airports and restaurants directly takes away number contact the driver whenever the customer needs the service. This means that a customers that were traditionally served by metered taxis. customer needs to physically walk and search for a taxi or place a phone call to order a taxi and wait for the taxi to arrive. This process is relatively more cumbersome from the perspective of Uber appears to have identified a gap in the taxi market and used innovation to gain a competitive consumers. With Uber, a customer simply orders a taxi right at their doorstep at the least cost edge over incumbent traditional metered taxis. Incumbent operators have been forced to search with the added service to track the arrival time of the Uber taxi through a dedicated driver- for new solutions in order to respond to new forms of competition driven by technological passenger Uber application. Uber may thus be filling a 'convenience gap' in the market. developments. Competition policy has its objective to encourage competition not only on price, but through innovation, effort, consumer choice and quality. To the extent that the introduction It is likely that the app-based service is tapping or inducing new demand of customers that were of new services such as Uber encourages these outcomes, existing and new consumers are likely previously using their own vehicles through providing a reliable and apparently safer mode of to benefit significantly. It is worth cautioning, however, that directional selling and instances of transport that is an attractive alternative to driving. Uber is attractive for its consistent shorter below-cost pricing (as alleged) can lead to anticompetitive outcomes as demonstrated in several waiting and travel times rendering the service more reliable than traditional taxis. Customers other markets such as air travel in the relationship between airlines and travel agents. Similar know with precision the approximated time of travel to their destinations using the dedicated practices and the use of loyalty rebate schemes provided by airlines have been investigated by the driver-passenger application which tracks the entire journey. Uber also has a quality-based competition authorities in the context of the South African market. It is important for those that competitive advantage in terms of cieanliness and customer service standards including a rating have raised concerns regarding these services, and those regulators tasked with addressing these system for drivers. The current system is that the driver's details are sent to the customer upon new challenges, to consider carefully the propensity of incumbent firms to use regulation and ordering an Uber taxi which provides some degree of passenger security. lobbying behaviour to protect their position in the market. On the other hand, there are clear socio-economic issues resulting from the displacement of traditional service providers through In terms of fares, customer requirements for a secure, transparent and easy payment system are technology that cannot be ignored in a developing country context, and regulation at least has to important considerations. Uber's transparent, standardised way of calculating fares per kilometre, ensure that conditions for competition (including licensing requirements) are consistent and fair which is all available on the app, is likely to be appealing to customers. Customers are able to across competing services where possible. request a quote for a trip before hailing an Uber taxi allowing the customer to know beforehand the cost they are going to incur. Uber's ease of payment means that customers are not required Source: Dube, S. 2015. Uber: A Game-Changer In Passenger Transport In South Africa? Centre for to hold cash for the purposes of paying for the trip as the application deducts the cost of the trip Competition Regulation and Economic Development (CCRED). [Online]. Available at: directly from the customer's bank account. In a context like South Africa with a high crime rate, http://www.competition.org.za/review/2015/11/22/uber-a-game-changer-in-passenger- security of payment is essential as holding cash is dangerous. transport-in-south-africa [Accessed: 27 February 2017]. Directional selling by companies such as Discovery, which in this case involves the use of customer incentives agreed between Discovery and Uber to channel customers or traffic towards using Uber services, may also affect competition in the taxi industry, enabling Uber service to tap into new passengers or market segments. This is akin to similar partnerships between Discovery and selected airlines operating in the South African market. Discovery, which provides various health and general insurance products, encourages its customers to use Uber with attached benefits and