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Ben covers the property industry and has a keen interest in entrepreneurship and travel writing. He speaks Mandarin and previously covered housing and urban affairs for The Australian Financial Review.

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Taxi battle heats up as app makers take turf from cabbies

Published 11 December 2012 05:13, Updated 12 December 2012 05:42

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Taxi battle heats up as app makers take turf from cabbies

Smartphone app makers are using technology to bypass the conventional taxi networks that have long dominated the Australian market Photo: Paul Jones

The war is on between established taxi companies and the developers of controversial smartphone apps that threaten to shake up their industry. And both sides have got some powerful allies.

Last week the NSW Taxi Council and Crime Stoppers launched a consumer awareness campaign against “rogue apps”, which are mobile apps offered by non-registered taxi services. The campaign co-incides neatly with the local launch of Uber, a controversial smartphone app that has made waves around the world by connecting private hire car drivers with consumers in a way that enables them to compete with the taxi industry.

Much of the cost of taking an Australian cab comes back to its lucrative taxi plate, a high-performing asset valued at some $400,000 in NSW thanks to government limits on supply. It is rare these days to find a driver who owns a plate, rather they rent the car that has the plate. These rates are much more than it costs to hire a normal car for the day. Critics question what benefit the existence of these tradeable assets actually brings to the transaction between consumers and drivers.

This is where Uber fits in by bringing in chauffeured private cars. They charge a bit more - an $8 flagfall instead of $3.50 for a taxi and $3.25 per kilometre instead of $2.40, 20 per cent more at night. But they’re willing participants because, without the hefty plate hire fees, the drivers keep a far greater proportion of the transaction than taxi drivers.

For consumers, Uber Australia general manager David Rohrsheim says the service is more convenient, and “classier”. There are not credit card surcharges unlike the 10 per cent plus GST now levied by Cabcharge. And the cars show up. About one-quarter of NSW taxi bookings don’t because the job is too short or the driver worries another taxi will steal the job before he gets there.

“The early adoption in Sydney has been as rapid as any city Uber has launched in before,” Rohrsheim says.

Last week Crime Stoppers chief executive Peter Price warned of “the risks and dangers of travelling outside the regulatory protection offered by taxi networks” and explicitly endorsed 10 apps operating within networks that were members of the NSW Taxi Council. “We encourage passengers to use these apps ONLY if they are seeking a taxi,” Price said.

Taxi Council chief executive John Bowe likened services such as Uber to a “blind dating service”.

“Some services simply dispatch work to a mobile phone, in this case the dispatcher has no real way of knowing who is receiving the booking, and whether or not they are in a licensed taxi,” Bowe says. “In my view it is a form of deception, relying on the taxi industry’s reputation for safety without the need to comply with any of the regulations or degree of accountability that makes the industry safe in the first place.”

But Rohrsheim rejects accusations that consumers are somehow at risk from using his service. “Everyone we work with already has a hire car business,” he says. “They already have clients, a NSW hire car operator’s license and a hire car driver’s license. We offer then an additional avenue of business.”

The campaign has echoes of Uber’s run-ins with regulators in various parts of the United States including New York and Cambridge, Massachusetts. Uber is also fighting lawsuits against cabbies in San Francisco and Chicago. Among the arguments are that Uber is operating outside of the regulatory system and threatening consumer safety.

But in Washington DC the exact opposite has happened. After initially attempting to regulate Uber out of existence, Washington DC city officials last week unanimously passed a legislative framework defining a separate class of for-hire “digital dispatch” vehicles that could charge for time and distance, just like taxis. Their prices will not be regulated and the DC Taxicab Commission will be required to issue them licences.

Founder Travis Kalanick, whose former business Scour was shut down after media companies launched some $250 billion of copyright infringement lawsuits, praised the decision.

GoCatch is presumably another “rogue app” as it also doesn’t appear on the Crime Stoppers list. But the app, which allows consumers to book directly with taxi drivers rather than going through the taxi networks, has its supporters. NSW Deputy Premier Andrew Stoner praised goCatch after providing $200,000 of early stage support for its development.

“As part of our plan to grow the state’s economy, boost jobs and improve productivity, the NSW government is supporting innovative, early stage local businesses like goCatch,” Stoner says.

GoCatch basically allows consumers to book a taxi using their smartphone but offers some technological support that promises to make life easier for taxi drivers. By mapping where and when consumers find it easy to get a cab and where and when they find it hard, goCatch produces heatmaps that can direct cabbies to the places they are needed most. Gamification techniques also incentivise cabbies to take the short jobs that they normally don’t want. The kudos a driver gets from taking these jobs increases his ranking and gives him more priority for the better jobs.

“Taxi drivers drive around for about 50 per cent of their shift with no-one in the car,” says goCatch chief executive Andrew Campbell. “If we can increase the efficiency of taxis by using smartphone technologies, then what that means is lower costs for the industry.”

There is a cost for the drivers, however, they don’t get the $2.40 call-out fee that applies when they take jobs from the established networks and they also pay 10 per cent of their driving fee to goCatch.

GoCatch is also said to be developing a credit card payment system that will bypass Cabcharge.

And on the safety issue Campbell puts an argument similar to the debate over other disruptive new companies such as Airbnb which is hitting the hotel industry and, to name a more established one, eBay. Campbell says in the new online world where reputation is everything, the same level of regulation is simply no longer needed. GoCatch tracks every cab driver using their driver authority, card details, license details, bank details, email address and their unique smartphone ID. And it tracks passengers in the same way. Each can rate each other. Five star drivers are going to get more jobs, and passengers with a history of bad behaviour could find it hard to get a ride.

“We’re improving safety,” Campbell says. “We create a location based database about every job that goes through. It reduces the possibility for anonymity.”

Rohrsheim says cities that block Uber will end up worse off.

“What I suspect is we’re headed for a place where there are cities that have Uber and cities that have banned Uber. And those that don’t have Uber are going to start to look ancient.”

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