City divided over-ride-hailing app

Mayor wants to work with firm, but public safety concerns raised

Thestar.com
May 29, 2015
By Vanessa Lu

Uber has become such a part of daily life in Toronto, the ride-hailing app’s name is synonymous with getting to places: “Let’s Uber.”

But many here hate the company, saying it takes business away from legal taxi companies. And other Torontonians are simply leery of getting into an unmarked car.

But if the City of Toronto’s lawyers have their way, the company will be run right out of town. In a court hearing beginning Monday, they hope to win a judicial declaration that Uber’s operations are illegal.

The city is applying for a permanent injunction to shut down all of Uber’s operations here, from its taxi and limo businesses to UberX, which lets ordinary drivers use their own vehicles to ferry passengers at a rate that’s 20 per cent less than that charged by taxis.

Meanwhile, Mayor John Tory has made it clear he believes companies such as Uber and Lyft (which says it has no immediate plans to set up in Toronto) are here to stay - so they need to work with the city.

“Innovative companies and disruptive technologies like Uber need to work with us to establish regulations that allow them to grow while we do the responsible thing to ensure public safety,” Tory said in a speech to the Toronto Region Board of Trade earlier this month.

Regulators and other taxi companies have raised public safety concerns over Uber - from fears over its drivers’ insurance policies to worries about criminal background checks. Last week, an Uber driver was charged with the sexual assault of a female passenger in Vaughan, and Uber immediately removed the man from its platform.

Tory said that while such companies should be allowed to operate, they cannot flout the rules, repeating his oft-used line that Toronto can’t be like the Wild West.

Uber Canada general manager Ian Black believes governments will eventually figure out a regulatory solution, noting that Ottawa city council is going to review taxi and limo rules along with ride sharing.

“I think it is really a matter of time before Toronto city council addresses ride-sharing head on, potentially even the province,” he said. “Government moves more slowly than the economy sometimes, but I think there is an appetite for action.”

Sunil Johal, policy director at the Mowat Centre at the University of Toronto, says Tory’s openness toward Uber’s business model makes the company even keener to operate here.

“For Uber, Toronto is a beachhead into Canada. If they can demonstrate that their business model works and is accepted in Toronto, it is easier to move to other cities,” he said.

“Tory’s approach certainly incentivizes Uber to double down on their efforts here.”

And Uber is softening its approach. After insisting since 2012 that it didn’t need to be licensed because it was a technology company with a smartphone app that merely links riders with drivers, it has changed its tune.

Earlier this month, it applied for a Toronto taxi brokerage licence, which the city is still in the process of reviewing.

“They are looking at the situation and making a calculation that it’s better to have a mediated settlement than not having the ability to operate in Toronto,” Johal said.

(Uber declined to apply for a limousine licence, however, saying the city’s conditions were outdated, restricting the timing of pick-ups, setting minimum fares of $70, and requiring a stretch limo for the first four sedans and then one for every six sedans in a fleet.)

For the city, it’s a tricky policy question of how to have a safe, competitive, accessible transportation network, but “tugging at any one of those strings in the wrong way, you could have a disaster,” Johal added.

“The city needs to move forward in a way that takes a longer-term approach. They are not just looking at this from a licensing perspective, but also market access and pricing issues in the short term, and employment in the long term,” Johal said.

If the city doesn’t think about the long-term issues, there could be pitfalls. For example, Johal said, if Uber is allowed to operate here without other considerations, and consumers - pleased with its pricing model - abandon the taxi industry in droves, that could give Uber a monopoly.

Or Uber drivers could be left in the lurch if the company, which sets the fares, decides to slash rates. If Uber is the only game in town for taxi drivers, the company could drive down wages, which has happened in some jurisdictions.

Although much has been made about next week’s court hearing, Johal believes both sides would prefer a negotiated solution instead of waiting for a judge’s decision.

Even if the court rules that Uber is operating illegally here, city council could still take up the issue and figure out a way to set up rules and regulations that would keep it operating.

“I think you would see the mayor take the debate to council,” Johal said. “I think the consumer interest is so high that it would be difficult for the city to walk away after a court decision.”

Alan Middleton, a marketing professor at York University’s Schulich School of Business, believes Uber isn’t leaving.

“What you are seeing is a clash of cultures,” he said, noting millennials have fully embraced Uber and its platform, and don’t want to give up the app, which tracks cars and allows for credit-card payment.

Uber’s strategy has focused on young passengers in the downtown core, who may not own cars, aiming to get them attached to the service, he said.

The company is already delivering lunch downtown with UberEats, and is offering free pick-ups for used clothes heading to Goodwill on Saturday. Publicity stunts have included setting up a breathalyzer machine for a few days; those who were too drunk to drive got a free ride home. Puppies were brought to offices for play dates.

Ultimately, he doesn’t believe a total ban will occur here, noting that jurisdictions such as London, England, opened the door for Uber.

“Even if it doesn’t get a win (in court in Toronto), it’s a tide that is breaking on the shore. And even though there may be rocks that slow down its impact on the shoreline,” he said, “it will wear away at the rocks.”

Will Mitchell, a strategic management professor at the Rotman School of Management, said part of Uber’s success is simply its popularity with both riders and drivers.

“People like it,” he said. “There is a lot of interest in this. Not just Toronto, pick your city, pick your country.”

He argues that Uber could easily be regulated in such a way that would meet the needs of a city in contentious areas such as background checks and insurance.

And given that Uber has had a bumpy ride in some cities, Mitchell believes eventually a licensing and regulatory regime that works best will develop.

Beyond taxis and cheap rides, Uber eventually wants Toronto to have UberPool, in which commuters share a ride and split the cost with others going on the same route, bringing travel prices down even more.

Johal, of the Mowat Centre, believes Uber could play a critical role in changing the broader transportation network, especially given the region’s gridlock.

“If you are living in Oakville and you could use UberPool to get to the GO Transit station, then you don’t have to deal with parking,” he said.

“Governments have been trying to get people to car pool for decades with almost no success,” Johal said, noting that too often people don’t want to do so because they have to sit around and wait for others.

“This makes it easier to do. You can find people more quickly,” he said.

“Maybe you come in with one person, and you leave with another person because your phone tells you who is ready to leave now.”