Uber, the Game-Changer, not?

The Philippines has a way of messing things up not only for itself but for what should be a good thing.

Take Uber for example. While it faces its own troubles for failing to comply with legal regulations, its business model was supposed to be an improvement from the current arrangements followed by local taxi companies. In the Philippines, taxis are usually owned by a person who leases the cars to drivers. Compensation is set at a certain amount (the “boundary”) and anything earned by the driver above that boundary is his. It’s not that easy because the driver will have to pay for the gas and other minor expenses. Add to that the fact that taxi meters are based on distance traveled; so, if they get into heavy traffic, they lose big time.

Enter Uber. Now, drivers can own their cars and keep all the profits; well, after Uber gets its cut. The cut is less than a boundary and there are bonuses that Uber gives to allow the driver to earn more if he is willing to work more. All good, yes?

Enter the Philippines. When Uber first landed here, it was basically, well, illegal. There was no law or regulation covering their new “ride-sharing” model. They didn’t care, and when the government finally came up with a regulation for them, they didn’t follow it. Everyone knows that Uber delights in its “disruptor” label but operating illegally is putting that label on a whole new level. These days, Uber is facing multiple troubles in various countries where it operates. In some, it has decided to shut down, while in others, it is fighting in courts or regulators for its place in the sun.

To the riding public, especially in the Philippines, Uber has been a god-send. To drivers, however, things might not be that great. Aside from getting caught in the legal battle between Uber and its regulator, some have not made the transition to what should be a better life. While some have managed to get new cars under financing, and the earnings appear to be sufficient to make the monthly amortization, there are others who have been hired merely as drivers and, again, fall under the boundary system. There are those who have bought cars and hired drivers to drive them under the Uber brand, and while some drivers are used to that — they used to be taxi drivers — it has been harder. It appears that the “operators” make a cut on everything including the bonuses and other monetary incentives given by Uber to drivers.

So, in the end, even as Filipinos accuse local taxi companies of opposing Uber, and other ride-sharing companies, in order to protect their niche, it appears that “they” found a way to subvert Uber by making it like any other local taxi company. Sad. Of course, there will be those who will drive for Uber using their own cars and keep all the profits for themselves, how much I still have to figure out, but how many may soon change. I once had my car serviced in my casa and I found out they were partnered with Uber and there were drivers there applying to drive. Based on the interviews I overheard, Uber reps ask the drivers if they were driving for themselves or for another and there were some who said they were driving for the car owners. It seems that while the Philippines may not be good at start-ups, it does excel in innovation. Whether that’s good or bad is another matter altogether. In this case, it is definitely bad.

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Uber Problematic

It's the big concern of the day: whether or not Uber, which described itself as a "ride sharing" app, should be granted more franchises by the Land Transportation Franchising and Regulatory Board (LTFRB). I think Uber users, including me, would naturally say yes. Uber has provided a much needed service to the long suffering public that beats existing public transport facilities. The problem, however, is that Uber (and Grab) allowed new drivers to operate without a license making those drivers into what we in the Philippines call "colorum" or an illegal public transport. Not cool.

An argument has been made that Uber should not even be regulated by the LTFRB because it isn't a public utility or a company providing a public service. Uber's business model is a peer to peer ride sharing app, which would be a private contract between the driver and the passenger. A modern day carpool. "Hey, I'm going to this place, want to come along?" Had it remained true to being a purely ride sharing app, then I would agree that the LTFRB should not interfere with Uber; however, Uber is a business. When it collects payments from the passengers for specific trips, then it becomes a public utility for which it too must be regulated. Yes, you need the app in order to hail a ride but the app is available to the public. All you need is a smartphone. This is the source of all the objections from taxi operators: Uber is a ride hailing and not a ride sharing service. In other jurisdictions, Uber drivers were even deemed employees of Uber. As far as I can tell, there hasn't been a similar finding in the Philippines. For now, each driver gets his own franchise that is processed through Uber, which provides the network; so they are also called a Transportation Network Company (TNC) by the LTFRB. Essentially, Uber is providing public transport services.

When Uber first appeared in the Philippines, I did not use it because there was no law or regulation allowing it to operate in the Philippines. Back then, I would use Grab or Easy Taxi, cab hailing apps, instead. Grab didn't have sedans back then. Like Easy Taxi, it would just partner with existing taxi operators and share commissions when a passenger is picked up through the app. As a ride hailing service, participating taxis are still regulated by the LTFRB as any other taxi service. Uber gets around that. Naturally, taxi operators didn't like that.

The LTFRB later issued Memorandum Circular No. 2015-016, which finally legalized Uber operations. Among the requirements set out in the MC was that the TNC that now includes Grab, was supposed to screen drivers and ensure that they have professional driver's licenses. I have ridden a lot of Uber cars. Some Uber drivers were new to driving! I very much doubt that those newbies have professional driver's licenses. Grab sedans are better. Whether it's a car or cab, Grab at least appears to have kept its pool of drivers pretty professional as far as I can tell and for whatever that's worth. Still, I am generally happy using Uber or Grab.

Then there is the all important franchise. A driver must have a franchise to operate. Without it, he becomes a colorum. That's where it really gets dicey for the public.

I for one believe that the LTFRB acts for the interests of the public and not the taxi operators. We all have our complaints against regular taxis. How abusive some drivers are picking passengers, raising prices or haggling fares instead of relying on the meter; and how icky their cabs can be that sometimes reek of stale sweat because the drivers sometimes sleep in their cabs for siesta or power naps in hot humid days and nights, not to mention all the gunk you see inside. There have also been cases of robbery, kidnapping and rape perpetrated by cab drivers and their accomplices. When the LTFRB pushes back on a TNC, it is not saying be more like the taxis, which would be crazy given all what I just said, but the TNC should comply with the MC. That is where the protection of the public lies: in complying with the MC.

Is the LTFRB wrong in delaying the issuance of new franchises? Not necessarily. If they found that there were violations of the MC, then they are well within their rights to withhold the issuance of new franchises. Can the LTFRB do better in processing new applications and/or investigating complaints? That goes without saying. I'm sure they will say they have limited staff and/or resources to do it but that is really no excuse. They have to do what it takes for the public to be served. Hire, fire, automate and acquire. Just do it as Nike would say.

Uber prided itself as a game changer — a disruptor– and it is. It provides a valuable public service no public service utility provider can equal at the moment. However, it cannot operate outside the law. Operating illegally is not how you operate a legitimate business. This is not unique to the Philippines. Uber is facing a lot of pushback in other jurisdictions and I heard that they recently stopped operating in Macau. Air BnB is in the same boat.

The Philippines needs Uber but we cannot have Uber operating illegally. For now, the LTFRB has decided not to arrest illegally operating Uber, and Grab, drivers. We also heard how the LTFRB appears to have lost the accreditation papers submitted by Uber and Grab. I think we will all find our way through all this mess.

Keep calm and hail a ride.

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