Skip to content   Skip to footer navigation 

Uber disruptive

One of the hottest political issues right now is how governments should respond to ride-sharing services like UberX.

November 2015

Uber belongs to a category of new businesses, which includes Airbnb, that have shaken up established markets with radical new models. These "disruptive" businesses often play a new role in the market. Rather than directly providing services, they operate as platforms that link consumers with service providers – who are often private individuals.

This raises interesting challenges for governments. At the time that existing laws were framed, this way of doing business was never imagined. Laws about taxi services were intended to cover vehicles that operate solely as taxis, not private drivers earning a bit of cash on the side. Laws about hotels and rental tenancies did not contemplate private property owners letting out an apartment or spare room when it suits them.

The critics of these new businesses call for them to be regulated just like the old-style business models they are challenging. But before we leap to regulation, it's important to work out what sort of problem we're dealing with – or whether there's a problem at all.

The best indication that there is a problem in a market is when consumers embrace innovation in numbers and at pace. And that's how we've seen consumers respond to Uber and Airbnb.

The very fact that big taxi companies and hotel operators are outraged demonstrates that the problem is, in reality, on their side of the market. If taxis and hotels were providing a service that efficiently met consumers' needs and provided good value for money, consumers would stick with it. Consumers only leave if they perceive they can get better service or a better deal.

The new forces of demand and supply that have been revealed by newer business models are so strong that any attempt to suppress them is doomed. But is there a need for some regulation? We say maybe – as long as it's proportionate.

The ACT government's approach to the regulation of ridesharing services like Uber is a good example. It will introduce driver background checks, insurance requirements and vehicle safety checks, but they won't be the same as the requirements for taxi services. And to ensure that taxi services are not at an unfair disadvantage, taxi licence fees will be reduced and they will retain some special rights, like being able to pick up passengers who hail them on the street.

But while much of the debate focuses on Uber, it is not the central issue. I don't care whether or not Uber survives – in fact, I hope it is disrupted by an even better model in the future. I just want our governments to create an environment that ensures that many more businesses like it can emerge. And the winner will be the one that does the best job of meeting consumer needs, at a fair price.

Alan Kirkland, CEO
Twitter: @AlanKirkland