Why Uber’s business model is not good for our health

Uber’s share flotation last year forced this ‘transportation platform’ to reveal its longer-term plans. The loss-making company had always claimed its service complements public transport. Now it explicitly intends to compete, by promoting a ‘demand responsive’ service (shared taxis and minibuses).

Uber has been very successful in a complacent and lightly regulated taxi industry, offering a better user experience and lower fares. But its fares are subsidised by billions of dollars from investors and lower incomes to drivers (in many cases below the legal minimum wage). This loss-leading investment strategy is premised on crushing competition and establishing a near-monopoly, at which point Uber can raise fares. If it can also do away with its largest cost – its drivers – returns will be even higher. That’s the real prize.

But how will this strategy play out when competing more directly with public bus services?

Uber’s proposition to governments and councils can be seductive. Private investment in shared transport services reduces the pressure to fund public transport at a time when money is tight. A town in Canada ran the numbers in 2017 and concluded the money it spent on buses would be better spent on subsidising Uber. In terms of the number of trips made, the experiment could be called a success.

But shifting trips from buses to taxis in larger towns and cities is likely to backfire.

Uber is offering transport where you want it, when you want it. This is highly desirable, especially in rural areas and new developments, where public transport either doesn’t exist or isn’t convenient. But many of those trips will be into towns and cities. In the short term, it might lead to a small reduction in congestion, pollution and carbon emissions; but, in the longer term, it will make those much worse. What’s needed in and around larger towns and cities, like Cambridge, is to aggregate rides into fewer vehicles; in other words, frequent, reliable and well-connected bus and train services.

Without strong regulation, the pressure on public transport from investor-subsidised private alternatives will be intense – and it won’t be for the public good.

This article was first published in the Cambridge Independent on 8 January 2020.