That we SHOULD

legalise UberB Grade Round 1 Affirmative

2016

Food for thought…

In 1865, the British government passed a law called the Locomotive Act to protect pedestrians and horse-drawn traffic. It stated that any car must have a crew of three: a driver, a stoker and a man to walk ahead of the vehicle, waving a red flag.

The “Red Flag Law" also restricted cars from travelling at more than two miles an hour in urban areas. The groups lobbying for this act were the stagecoach and railroad companies, which were nervous about the threat automobiles posed to their businesses and argued “precautionary laws" were necessary for public safety

Where would we be today if we had continued to ‘protect’ the status quo and refused to embrace the automobile?

Sometimes we need to embrace new technology and new ideas, even if it fundamentally changes how we have always done things. Taxi regulations are the ‘red flag laws’ of today. Uber is the new automobile.

What is Uber?

Uber is a ride-sharing service. Using the Uber app on

their smartphone, people can submit a request for a

ride, which is then sent to an Uber driver. Uber drivers

are registered with the company, but do not receive

training and drive their own cars.

Uber sells itself as being cheaper, more convenient,

more reliable and a nicer service than traditional taxis.

Uber began in the USA in 2009nis a major international

corporation, valued at $US62.5 billion.

Uber is effectively banned in Victoria as it does not

abide by the regulations required by a taxi service.

However, it currently operates more-or-less unabated.

So what is a taxi?

Taxis are private businesses that offer rides to members

of the public.

To be a taxi you need to be licenced with a government

authority. You need to pass tests to be admitted as a

driver, pay an annual licence fee ($22,000) and abide by

various regulations including having appropriate

insurance and installing safety devices such as tamper-

proof security cameras and GPS locaters.

Taxi companies are also required to provide services to

vulnerable members of the public, such as people with

disabilities who require special vehicles (such as maxi-

taxis) in order to move around.

This debate is, at it’s core, a

battle between two ideas:

FREE MARKET (aff)

Allow Uber to compete

unfettered in the

taxi/ride sharing market

(i.e. they are legal and

don’t have to abide by

the same rules as taxis)

REGULATION (neg)

That Uber, if it wants to

exist, should abide by all

of the same regulations

and rules as the taxi

industry (i.e. don’t

change any of the laws

for Uber’s sake).

This debate is, at it’s core, a

battle between two ideas:

FREE MARKET (aff)

Allow the producers and

consumers to set

supply/demand

The government should

keep out (no or minimal

government

intervention)

REGULATION (neg)

The government should

step in to set minimum

standards, ensure a

level playing field and

make sure that all

aspects of the public are

catered for (even the

non-economically

profitable ones)

What is a free market?

In its purest form, a free market economy is when the allocation of resources is determined by supply and demand, without any government intervention.

Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price.

Supply represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price.

There will be a desire by suppliers to make the largest profit possible. There will be a desire by buyers to pay the lowest possible price.

In a pure free market, the nature of products and services and their costs will be determined by what consumers are willing to pay, and what suppliers are willing to sell for.

What are the advantages of a

free market?

It contributes to political and civil freedom.

It contributes to economic freedom and transparency.

It ensures competitive markets.

Consumers' voices are heard in that their decisions

determine what products or services are in demand.

Supply and demand create competition, which helps

ensure that the best goods or services are provided to

consumers at a lower price.

What are the disadvantages

of a free market?

A competitive environment creates an atmosphere of survival of the fittest. This causes many businesses to disregard the safety of the general public to increase the bottom line.

Wealth is not distributed equally - a small percentage of society has the wealth while the majority lives in poverty.

There is no economic stability because greed and overproduction cause the economy to have wild swings ranging from times of robust growth to cataclysmic recessions.

If something is not ‘profitable’, then it will not be supplied or catered for.

If a monopoly emerges (i.e. there is only one supplier), then there is no incentive for competition, prices will be driven up and customers lose any potential power.

What about the other option

(regulated economy)?

Advantages

It looks out for the

safety of consumers.

It protects the safety

and health of the

general public as well as

the environment.

It looks after the

stability of the economy.

Disadvantages It requires a government

bureaucracy to regulate, which drives up costs and takes time.

It can encourage monopolies to form if one company/sector is preferred over another.

It can prevent innovation by over-regulating.

Usually we try to strike a

balance between a free market

and a regulated economy.

The question here is:

Where should the balance lie

in relation to Uber and the

taxi industry?

KEY THING: Focus on what

needs to CHANGE in the law

Uber has a very useful app: it shows when the driver is

approach and is very intuitive. HOWEVER, using an app

like this is already legal (some taxi companies now use

something similar).

Uber is more than an app: it is a business structure.

Do you want to allow Uber as it is (i.e. with minimal

regulation)? This is a HARD LINE MODEL.

Question: Do you remove regulations for taxis as well?

Do you want to allow Uber with regulations attached

(i.e. making it closer to the taxi industry)? This is a

SOFT LINE MODEL.

Question: What regulations do you keep and how is this

really any different to the status quo?

Argument 1:

LOWER COSTS, BETTER SERVICE

Uber removes a lot of the costs from the taxi industry:

using people’s own cars removes purchasing costs, they

don’t pay licence of insurance costs, and as drivers are

casual workers, they don’t have to pay them benefits.

This means lower costs for consumers.

Research by Choice (a consumer lobby group) in 2015

found:

UberX was cheaper than taxis 90% of the time.

UberX was on average 40% cheaper than taxis.

Counter-Argument 1:

LOWER COSTS, BETTER SERVICE

Uber only operates at a lower cost because it acts

ILLEGALLY and IGNORES regulations designed to

PROTECT the public.

We could make electricity cheaper if we didn’t care

about keeping mine workers alive and completely

destroying the environment. Lower cost isn’t worth it if

it places the public at risk or leaves us unprotected.

This is a particular problem in relation to INSURANCE

COVER and SAFETY DEVICES (we will look at this next

week).

Argument 2:

MORE RESPONSIVE TO DEMAND

Because Uber drivers are private drivers, and not working set shifts they can respond to shifts in demand for services.

When there is more demand for drivers, the cost goes up (‘surge pricing’). This encourages more Uber drivers to go and take fares, as they can make more money. As more drivers become available, demand and supply equalise.

This means that there is an incentive to respond with very little delay to short term changes in demand.

This results in decreased waiting times for customers, less waste and a more efficient business.

This also makes it more likely for consumers to use the service, encouraging people to share and reducing the need for people to use their own vehicles.

Argument 2:

MORE RESPONSIVE TO DEMAND

Uber can also be more responsive because it is reducing

barriers for drivers entering the industry.

Drivers don’t have a real ‘boss’ in the company, and

don’t have their schedules dictated to them. This

provides flexibility and encourages more people to take

on this job.

There aren’t cost barriers associated with purchasing a

license, which can be extremely expensive (usually

around $22,000, but can cost as much as $400,000. This

again encourages more people to become drivers,

providing more supply and responding to demands more

efficiently.

Counter-Argument 2:

MORE RESPONSIVE TO DEMAND

This is an issue can be addressed through modifying

existing regulations and making more licences available.

In particular, lowering licence costs and making them

based on demand, not a set number (as has been the

case) would address this issue without removing other

regulatory safeguards.

Argument 3:

USER CHOICE / SAFETY

Uber has safety procedures in place: drivers need to be

over 21, have no driving infringements, need to supply a

police check and their vehicle can’t be older than 2004.

Uber says that the biggest safety/product control

feature is the ‘star rating’, where customers can see

who their driver is and if they have a bad rating. If a

driver drops below 4.5 stars, they can be dropped.

This is about giving information and choice back to the

consumer.

This is only possible because Uber works as a series of

independent, private drivers. With a taxi, all drivers are

part of a business, making it difficult to distinguish.

Counter-Argument 3:

USER CHOICE / SAFETY

In a well regulated taxi market, there would also be choice based upon the taxi company. In many ways this already happens.

Safety procedures with taxis are far superior to Uber: more detailed and ongoing background checks, driver testing, tamper-proof cameras and GPS.

An un-regulated industry (like Uber) means that ALL safety concerns are placed in the hands of a multi-national company based in another country who has demonstrated a particularly ruthless and caviller attitude towards national laws.

Safety should be enforced by the government as it is a public necessity.

Argument 4:

GOVERNMENT REGULATION HAS CREATED A

MONOPOLY IN THE INDUSTRY

Over-regulation risks creating a monopoly by providing too many barriers for new, competing ventures to enter a market.

Reducing regulation and returning to a truly ‘free’ market will help to fix this through allowing market forces to dictate supply and demand and the types of services wanted.

The 2012 Victorian Government Taxi Industry Inquiry found:

The taxi industry is focussed on maintaining their monopoly and the re-sale value of licences, not improving services.

It is run as a “closed shop”, with a small number of licence holders protected from the effects of competition.

Revenue goes to licence holders, not drivers (an Uber driver keeps 80% of the fare, resulting in an average $30/hour. Taxi drivers, in comparison, get $10-14/hour at certain times, well below the minimum wage of $17.49)

Argument 4:

GOVERNMENT REGULATION HAS CREATED A

MONOPOLY IN THE INDUSTRY

There are many common complaints about the taxi

industry:

Drivers are of a poor quality. In part this is because of low

wages, and barriers to employment mean that this needs to

be a full-time job, not something

Too many taxis aren’t occupied/used efficiently. Taxi drivers

will chase the biggest fare. This is why they congregate ate

airports (longer trips, bigger fares) and avoid short trips.

Drivers aren’t reliable. While it is easier to hail a cab if one’s

around, booking a taxi can result in the taxi not turning up, as

drivers can grab other fares on the way, particularly if they

think the customer may have left (e.g. if the wait would be

20mins or more).

Argument 4:

GOVERNMENT REGULATION HAS CREATED A

MONOPOLY IN THE INDUSTRY

There are many common complaints about the taxi

industry (continued):

There aren’t enough taxis at peak times. The rigid, inflexible

business model means that it isn’t possible to bring in more

drivers to respond to demands.

Issues of inaccessibility for people with disabilities. As there

isn’t much money in supplying these services, there often

aren’t enough to go around.

Counter-Argument 4:

GOVERNMENT REGULATION HAS CREATED A

MONOPOLY IN THE INDUSTRY

You would be replacing one monopoly with another.

This isn’t a case of competition: by creating an un-level

playing field, the government would effectively be

handing a monopoly over to Uber (the only ride sharing

service available). Uber’s business model is to buy out,

undercut or sue any competitors to ensure they remain

a monopoly.

In the short term Uber provides improvements, but long

term these problems would likely emerge. For example,

in America wages for drivers have decreased below

minimum wage levels.

Uber Makes the situation with disabled people worse:

these vehicles need to be specially made, and ordinary

people won’t have them.

Argument 5:

ENVIRONMENTAL BENEFITS

Uber encourages people to use their cars to drive others

when they don’t need to use them.

This means that less cars are needed by society as a

whole (people who only use a car infrequently now have

a low cost, convenient alternative).

Potentially less congestion on the roads.

Fewer parking spots are needed in dense urban areas.

Counter-Argument 5:

ENVIRONMENTAL BENEFITS

Environmental benefits are marginal: people are still

driving, and you have to factor in the time taken/petrol

burnt to get the car TO the customer too.

Taxis have strict environmental controls on the cars

they use. Uber only requires the car to be less than 10

years old: an SUV is no where near as environmentally

sustainable as a hybrid Camry.

In a city like Melbourne, the reduction in parking spaces

would be marginal as a service like Uber would never be

able to cater for a majority of the population.

Other things to consider:

It has been seemingly successfully legalised elsewhere: NSW, WA, ACT, and it operates in 69 countries (not all are happy, though, and several have banned…).

Compensation can be offered to taxi drivers to facilitate a shift in the industry over the short to medium term. This is what NSW is doing (see materials) (but it costs $250m+…).

Even with current attempts to ban Uber in Victoria, it is still operate fully. Perhaps it is better to embrace, manage and shape change than to constantly fight against it.(although stricter enforcement would probably work, and it is easy to catch Uber drivers…)

Current regulations never considered the possible existence of an on-demand ride-sharing service. The technology didn’t exist when they were created.

Remember that Uber sees itself as a technology company, not a taxi service. (but look at their practise, not what they say…)