Uber playbook: Why the ride-sharing app will be coming soon to a city near you

Despite objections, Uber is up and running in cities like New York and Portland. Will Canada be any different?

CBC.ca
Jan. 22, 2016
By Paul Haavardsrud

This is part one of a three-part series on Uber.

A memo to the mayors of Canada's biggest cities: Uber, whether you like it or not, is going to win.

Don't agree? Talk to your counterparts in New York, Chicago, Portland and more than 350 other cities around the world.

In the span of six years, Uber, a tech supernova backed by some of the deepest pockets in Silicon Valley, has all but conquered the U.S. Now, the playbook developed in its blitzkrieg through America is being applied in Canada and the rest of the world.

It's said there's nothing new under the sun and that's especially true for Uber. Court injunctions, rioting cabbies, think pieces bemoaning workers' rights, arguments about the "gig economy" and the fate of the middle class — Uber has seen it all before.

For now, Uber is just a cheaper way to get a lift, but that's just the start of its ambitions. Meanwhile, the tactics it uses to get what it wants have larger ramifications than merely catching a ride on a Friday night.

'Principled confrontation'

The details of the Uber experience vary, but big picture: once Uber sets its sights on a market, its arrival is a foregone conclusion.

The reason? Uber is smarter than the cities it's going up against.

Cut to indignant expressions on the faces of Calgary's Naheed Nenshi, Toronto's John Tory and other Canadian mayors who believe they're not exactly intellectual lightweights.

Sorry gents. Not only will you lose, but in a particularly masterful stroke of manipulation, Uber will make you think you're getting what you want.

The Uber experience starts off cordially enough with introductions and city hall agreeing to look at transportation policy. The back-and-forth goes well enough until one day, before any agreement is reached, Uber forces the issue by launching without permission. Uber's chief executive Travis Kalanick likes to call the move "principled confrontation." Cities prefer to say it's illegal.

Regardless of terminology, an unsanctioned launch is Uber's first serious shot at softening up the ground. "We've seen their playbook around the world," said Mario Henriques, Calgary's chief livery inspector. "Their market entry strategy is consistent in all cities."

The preemptive strike allows Uber to gauge a city's resolve to enforce the rules. If regulators waffle, then Uber knows it's almost home.

When cities show more backbone, Uber's non-consensual foray into the market allows it to build a fan base that it can unleash on city officials. By galvanizing public support through online petitions, Twitter campaigns, and even the shameless use of puppies and ice cream, Uber manages to turn customers into lobbyists.

Billion-dollar rationale

An unauthorized roll-out also gives Uber the cover of plausible deniability. How can rules be broken, the company argues, if there are no rules?

Uber's rationale for why it falls outside the scope of existing bylaws is, by now, perhaps the most well-rehearsed part of the company's many talking points.

"We're connecting individuals who'd like to take a ride from point A to point B to individuals who want to use their personal vehicle to share a ride and make some income. They're doing it through the app, which means that they're prearranged rides done between two individuals. That model of business is quite distinct from a taxi," said Uber Canada spokesperson Xavier Van Chau. "In Calgary and Edmonton and Toronto, there weren't rules that define how ride-sharing companies should operate."

Part of the genius behind Uber's scalable global business model is the simple recognition that transportation regulations in cities around the world leave room for interpretation. What Uber considers regulatory ambiguity, however, cities see as the splitting of some very fine legal hairs. Whether cars are summoned through an app or a phone call, they argue there's nothing particularly new about drivers giving passengers rides for money.

Be that as it may, shutting down Uber isn't easy.

Ticketing is the first step. What cities soon find, though, is that identifying Uber drivers is a complex task. Uber also works to defuse this deterrent by paying for tickets and legal costs incurred by its drivers.

The latest estimates put Uber's war chest at more than $8 billion. Besides covering tickets, Uber, by all accounts, spends a good chunk of that cash on good old-fashioned politicking, deploying a small army of lawyers and lobbyists to influence policy in targeted cities.

As those conversations play out in back rooms, the next public step for cities is a court challenge. As Toronto and Edmonton learned that, too, isn't a sure thing.

In Calgary, the story was different. Learning from what happened in other jurisdictions, lawyers there went after 57 drivers they knew to be driving for Uber, instead of Uber as a corporate entity, and won an injunction that neutered the company's ability to operate.

"Once we knew Uber was launching, we knew we had to take some rides," said Colleen Sinclair, a lawyer with the city.

Framing the conversation

For the time being, Uber has shut down its app in Calgary. The city, though, has promised to come back with new rules by Feb. 22. As in other cities, discussion about Uber is now centred on issues such as passenger safety, insurance, background checks and vehicle inspections. Uber would ideally like to keep such costs in check, but they're acceptable if they make the difference between operating or not.

The conversation Uber really wants to avoid is whether its drivers are employees or independent contractors. That would raise the spectre of more onerous costs, such as employment insurance, overtime and health care that would compromise the pricing advantages Uber enjoys on the competition.

Whether skirting such expenses results in downloading the costs of the social safety net on to others is an emerging concern of the so-called gig economy. What a good job looks like in the future, and what happens to employee benefits and protections if employers choose to reinvent themselves as an app, are looming questions that don't yet have any answers. Uber is already facing class-action lawsuits designed to protect workers' rights, but they haven't done much to slow the company's expansion.

For now, such big-picture issues are largely absent from the discussions taking place in Canadian cities.

That's not an accident.

Launching without consent gives Uber the leverage to force cities into shaping new policy before they may be equipped to do so. By dictating the terms of the conversation and the timeline on which events unfold, Uber is able to predetermine an acceptable range of outcomes. A few concessions may be made along the way, but ultimately Uber drivers will be on the road, which is exactly what the company was after all along.

That's good for Uber. But if every company was as smart as Uber, what then?