Practically everywhere Uber has entered the market, the app-driven ride sharing service has been fiercely opposed by the local conventional taxi services. This is understandable, since any business would prefer less competition in their market, not more. In countries like Mexico and presumably others in Latin America, it is particularly common that service markets are controlled by dominant players, entrenched unions or industry organizations that effectively shut out competition through their deep political relationships. When Uber and its competitor Cabify arrived in Mexico City, organizations of taxi drivers responded as expected by calling upon the city government to block the new service from operating. As is the custom here, in some cases taxi drivers threatened and even attacked Uber drivers. Nonetheless, in a remarkable turn of events, the city government responded not by prohibiting Uber but by devising regulations to permit Uber and Cabify to operate by complying with a framework of requirements. According to media reports, this is the first case of so-called “Uber” regulation in Latin America.
The Mexico City government on July 15, 2015 published legislation creating “the Registry of Corporations that Operate, Utilize and/or Administer Applications for the Control, Scheduling and/or Geolocalization on Fixed or Mobile Devices, through which Individuals May Contract Public Taxi Service in the Federal District,” or in other words, for the moment, the rules Uber and Cabify will have to comply with to operate in the city. The regulations require companies to register with the city government and pay an annual registration fee, as well as to pay a levy of 1.5% on the cost of each ride to a to-be-created “Taxi, Mobility and Pedestrian Fund.” The rules also establish minimum characteristics for the vehicles used to provide the services.
The “Taxi, Mobility and Pedestrian Fund” is an eyebrow-archer. The fund has not been created yet, so its functions are not clear. The proposal to establish the fund, according to a report in the newspaper Reforma, includes objectives such as promoting modernization and improvements to conventional taxi service, developing training programs for taxi drivers and developing programs and policies for the protection of pedestrians and cyclists. In a city whose middle name is “Huge sums of money disappearing from public accounts without a trace,” this is about as fuzzy as it gets, but we’ll cross that bridge when we come to it.
Taxi drivers all over the world make a legitimate point if they argue that app-driven ride sharing services should be regulated and pay equivalent fees, insurance and other costs required of traditional taxi services. However, here in Mexico City at least, the other arguments are rank bullshit. Mexico City’s taxi unions and associations are not seeking level-playing-field regulation for Uber; they are seeking to block a superior service from entering the market, to the detriment of consumers. We are aware that there are honest, hard working taxi drivers doing a difficult and dangerous job in this city. Everyone who takes taxis regularly in this city, however, knows that the experience is way more often than not a nasty one, usually culminated by the driver claiming that he cannot make change for the passenger’s bill, or that he forgot to turn on the meter, or somesuch nonsense. Without even counting the other ways in which Uber service is easier and more pleasant than conventional taxi service here, the simple fact that you don’t have to argue with the driver about payment at the end of your ride is such a massive improvement in user experience as to be sufficient for many users to switch on that basis alone.
As we are in the early days of the app-driven “market disruption” in taxi service, it is important to keep in mind that when we speak of users we are largely speaking of upper middle class young people in the central zones of the city, particularly swell neighborhoods like Polanco, Condesa, Del Valle and others in which this demographic is concentrated. It will likely be a while before people coming out of parties in Chalco hail an Uber with the same frequency as those in Polanco, but it’s the thin end of the wedge. When consumers have the opportunity to choose, a great service will probably prevail over a horrendous service, and that is what we are looking at here.
Mexico City’s “Uber regulations” are scheduled to enter into effect on July 30, 2015, and we imagine that this development has not gone unnoticed in other large Latin American cities such as São Paulo and Buenos Aires. Uber operates in São Paulo but local taxi organizations recently prevailed upon the city council to vote to ban the company from operating in the city. Local opposition in Buenos Aires so far has succeeded in keeping Uber out. Local taxi organizations will probably continue to have some temporary successes in blocking the new service model in their cities. But even if it isn’t specifically Uber or Cabify, once consumers get a chance to experience how much less shitty a cab ride can be, the days of the old system are numbered. This genie’s not going back in the bottle.