Ubercab – How technology can be disruptive to existing business

In this article on Tech Crunch, the author MG Siegler makes the argument that getting a cease and desist letter can be a good thing for a startup company. He argues it means they are on to something and that people would not be complaining about the company’s actions if it was not impacting existing businesses. Ubercab (note: the company’s name has been changed to just Uber) provides a “app” for both the Android and iPhone platforms which allow you to request a sedan with a licensed driver to pick you up wherever you are in the San Francisco, CA. area.  Sedans are not allowed by law to pick up passengers by being “waved down”, but can only pick up customers who have pre-booked in advance.  The amount of time that must pass from booking to pickup is regulated by statute, additionally the cease and desist orders reference several alleged violations for operating as a taxi cab service. Two of them are: charging a calculated fee based on mileage vs. a flat or hourly fee, which requires prior approval and operating as a taxi service without the proper approved colors and markings to identify the cars as belonging to the taxi service.

It appears that Uber will argue they they do not in fact operate as a taxicab service but as a middleman, who is providing a referral service between the drivers and passengers, with the added convenience of a payment methodology through the app via the passengers credit card. I do not have an opinion on whether or not Uber’s business model is legal or not, or if it can be adjusted to be legal, but it is clearly having a disruptive effect on the industry.  User satisfaction and support seems to be high, and the company’s investors appeared poised to bankroll the legal battle.

It will be interesting to follow this story and see whether the existing taxi companies fight back with an “app” of their own or rely on the legal system to prevent this challenge to the way they do business. I am also intrigued that the original name of the company appears to have caused part of the legal issues because it is alleged they were advertising as a taxi cab company, without having the proper licenses to do so.


One Response to “Ubercab – How technology can be disruptive to existing business”

  1. Yu Feigel Says:

    Thank you for a neat site, can add my Digg account!

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