How does London solve a problem like Uber?

This week’s news that Uber had lost its London license is significant for many reasons.

We’ve been hard on Uber’s business model, but that negative sentiment shouldn’t diminish how the maverick Travis Kalanick and now more dependable Dara Khosrowshahi have built a product that’s used by millions (including, I’d bet, many of you who read this note).

Transport for London (TFL) revoked Uber’s license back in 2017, citing, amongst a host of red flags, an operational approach that included serious criminal offences, such as the provision of medical certificates for drivers and the company’s use of its Greyball software. After the ruling, judges granted a 15-month extension but this has now come to an end.

This week, TFL identified a “pattern of failures” by Uber that placed passengers at risk. One issue identified was a bug in Uber’s system that allowed unauthorised drivers to upload a photo to another driver’s account, enabling them to pick up unsuspecting passengers. This occurred on 14,000 trips. A similar glitch let suspended drivers create an Uber account and drive.

London’s mayor, Sadiq Khan, backed TfL’s decision, saying, “this decision may be unpopular with Uber users but their safety is the paramount concern.” Uber is appealing, but the company’s UK outlook seems uncertain, with Manchester contemplating a ban on Uber, too.

Despite promises from Khosrowshahi to right the wrongs and a huge rebrand, Uber is not fixing the fundamentals fast enough. Ultimately, however, TFL’s decision is political. Passenger safety is a priority, but they also have London’s powerful black cab lobby putting them under pressure. Uber hasn’t helped itself by using regulatory arbitrage as a go-to-market strategy.

That being said, as a consumer who has taken thousands of Ubers all over the world, I find the service, generally, to be good. In London, Uber has found a price point that is compelling, often half the price of a black cab, which, given overcrowding on public transport, makes it popular.

London’s consumers are disappointed by TFL’s decision, as is Uber. About 25% of Uber’s total bookings occur in five cities: NY, LA, San Francisco, Sao Paulo and London. For a company that operates in over 700 cities, that concentration poses real vulnerability at a local level.

So what of Uber’s global prospects? Will the London shutdown slow down its progress? On our travels, we’ve visited many Uber hubs so here are a few ‘on the ground’ observations:

Madrid: Uber has warred with Spanish regulators for years. But the news that Uber had entered into an agreement to offer local, fixed-fee taxis via its app points to a future where the two may work side by side. On a recent trip, a taxi driver told us how Madrid cabbies can be fined if they don’t accept cards. This is in contrast to London, where many black cabs feign broken card machines to avoid reporting income. Spanish regulators clearly want to promote tech-led experiences. Integrating fixed-fee taxis onto its app seems a smart move by Uber and it should drive competition and collaboration.

Singapore: Uber sold its Singapore operations to Grab in 2018, but when we visit, we use local taxis. The government recruits older Singaporeans to drive cabs, making sure they speak English, and subsidises the sector so cabbies earn a living while offering cheap fares. Additionally, the heavy tax on car ownership ensures that there is plenty of local demand and little traffic. In a city as forward-thinking as Singapore, it’s interesting to see how traditional cabs are able to compete with Uber.

San Francisco: The heart of the tech world has two suppliers – Uber and Lyft – who form a duopoly. Competition between the two ensures a high-quality service, low prices, and choice. If a consumer resents Uber’s ills, they can choose the “nicer” competitor.

With the above observations in mind, and Uber’s London status in limbo, it’s interesting to ask, what should London do about Uber? And what should Uber do about London?

Of course, private cab operators must be held to a higher standard of safety. But competition within the global private taxi market is important, too. In San Francisco, competition between Uber and Lyft promotes user experience and drives down costs. In Madrid, collaboration between tech and tradition instils higher standards.

Rather than regulators shutting out companies that don’t behave, competition is a more sustainable solution. It may be a little utopian, but the private taxi market should govern itself, as trust and quality are promoted through competition and consumers vote with their loyalty. In London, black cabs should be a vital component of this puzzle, adhering to a common standard of best practice that governs app-based tech companies and old fashioned taxi firms alike. And Uber should be a part of it too, as competition, not contraction, pushes safety and user experience to higher levels and keeps us all moving around the great cities of the world.