Who's the real bully, Uber or New York?

By Nathaniel Mott , written on October 17, 2012

From The News Desk

When Uber announced that it would be pulling its UberTaxi service from New York City after the Taxi and Limousine Commission (TLC) "put up obstacles and roadblocks" to prevent Uber from reaching a critical mass, the usual tech heads (read: technology publications' audience) weighed in.

Slashdot's comment thread lit up with its ever-entertaining snark. One poster, StandardDeviant, remarked: "Seriously tell me hailing a cab is easy after you've tried to do it while standing in the snow an hour after bars close and you don't want to take three more God-forsaken hours to get home to an outer borough shithole apartment that costs $waytoofuckinmuch... Not that I'm bitter. :)" Scutter wrote: "There's no efficiency improvement or human betterment that can't be completely destroyed by bureaucracy and greed." GPierce added: "The free market is a great system as long as you keep your gonads out of the hands of the kleptcrats."

Of course, Slashdotters weren't the only ones who viewed this as a simple clash between an entrepreneurial David versus a fat, faceless bureaucratic Goliath. "AlexH86" commented on The Verge's coverage of the move and said it was a "Classic big government move. Use over-regulation to stifle innovation and eliminate market competition." Others, like the simply-named "NO," commented on the Wall Street Journal: "Ah, yes, the rules. Created by a corrupt alliance between unions and politicians to suck the blood of the citizens." Then, to round it out, "JNGross" added some fuel to the fire on Uber's own announcement, saying "I'm sure once you volunteer to donate some outrageous graft -- I mean commission -- to TLC they'll be happy to take your $$ and let you keep on operating."

It's easy to pick on the TLC. According to its website, it's in charge of some 50,000 vehicles and 100,000 drivers. Uber, on the other hand, operated just 160 vehicles as part of the New York UberTaxi program. Depicting the TLC as a schoolyard bully shoving the little guy around is easy, but most of the group's "haters" are forgetting one thing: Uber had to know that this might happen when it decided to test the UberTaxi in New York.

The New York Times questioned Uber's legality from the get-go, "since city rules do not allow for prearranged rides in yellow taxis." The report went on to state that the TLC "had not yet determined whether Uber was in compliance with the guidelines." Uber's move into the TLC's territory was a gamble from the beginning.

In a widely disseminated press statement, TLC commissioner David Yassky, claimed that the TLC has "undertaken serious diligence and is moving toward rule changes that will open the market to app developers and other innovators," which the Mayor's Office reinforced in a Tweet, adding that it "can't legally change things til February due to contracts."

Uber's response, published on its blog, was downright adolescent, just short of CEO Travis Kalanick stamping his feet. He claimed that the TLC "privately have said [UberTaxi] is legal under the rules. We’ll bite our tongues and keep our frustration here to ourselves." He added, "So what can we say… such is life as a transportation technology innovator, boldly going where no man has gone before (well at least for 30 years)." Kalanick advised users who were upset about UberTaxi's demise to "try UberTAXI in more innovation-friendly cities," like Boston and Toronto. If Kalanick bit his tongue he mustn't have any teeth.

To hear Kalanick tell it, Uber is the victim of a bureaucratic shafting orchestrated by the TLC, with the full backing of the New York regulatory system as a whole. But this isn't the first time Uber has run into problems with working inside the law. Washington, DC took issue with Uber's UberX service for violating a minimum fare rule that would have forced Uber to price its services at five times the minimum fare in the city. (This may be one of the only times Uber has been charged with being too cheap.)  And Boston, the city that Kalanick cites as being "more innovation-friendly" than New York, previously issued a cease-and-desist to Uber trying to block the service based on its reliance on GPS data. Even San Francisco slapped Uber with a cease and desist early on, forcing it to change it's name from "UberCab."

In these previous instances, Uber was able to stir up enough support via Twitter, email, and its official blog that Boston and Washington DC moved to accommodate the service. There's a clear process at work here: Uber "does extensive research" into a city's laws and regulations, introduces a product, and then cries foul when a city says that the service is breaking the law. This being the Internet, where everyone loves the underdog, the company then gathers its troops and uses social media to wear the city's lawmakers into submission.

If the TLC is a schoolyard bully, Uber is a lousy guest that does whatever it wants and makes a big enough stink when it doesn't get its way that the host eventually caves. The beauty of this method is that everyone comes out ahead -- Uber gets to launch a new product or reach a new market, consumers get a far better transportation service, and cities get to say that they're supporting innovation and embracing modern technology.

But it might not play out this way in NYC, where governmental officials and bureaucrats have the thickest of skins. New Yorkers already have their choice of taxis, car services, livery cabs, subways, and trains. You can call a car service and it will pick you up in less than 10 minutes. What exactly is Uber's value proposition here, other than to operate with sliding fares? If I wanted that, I'd pretend to be a foreigner arriving at JFK and have a cabbie take me on a hundred-dollar taxi ride around the five boroughs.

Not every startup chooses to take Uber's "fight 'em til they cave" strategy. Square recently ended a pilot program that put a specialized payments system in participating taxicabs. A Square spokesperson says that the company is "very grateful to the NYC Taxi & Limousine Commission for partnering with us on this pilot," and that it will use what it learned "to further improve Square and make commerce and transportation even easier for millions of riders and drivers in New York and around the country.”

Disrupting an industry is never easy. Conflicts are a natural side effect of the transition of power between two ways of doing things. What Uber may find, however, is that sometimes it's better to make a friend -- or, at least, pretend to -- than it is to pick a fight with everyone all at once. There's always someone that shouldn't be messed with, and Uber may find that the TLC (and New York in general) is it. Rather than fight against the current king's contracts with the city that never sleeps, Square decided to play nice, make a friend, and get what it needed through cooperation instead of force. Square knows when to pick its battles – a lesson that Uber hasn't yet learned.

In his blog post, Kalanick, wrote: "New York City’s TLC will hopefully get things moving, and let UberTAXI back out in the wild next year."

I wouldn't count on it.

[Image credit: Sean Davis]