Aggregator services and the technology behind them have changed the cab market across the globe, and to the benefit of the consumer

Playing the Devils Advocate on surge-pricing The arguments for
Voices Taxi aggregators Wednesday, April 20, 2016 - 17:04

Surge-pricing for taxi aggregators has been widely debated since cab companies in India announced the move earlier this month. This has generated a hot debate about the claims of the companies, the market, consumer choice, consumer rights and workers’ rights. What follows is an argument for surge pricing and against government interference:

Click here for the flip side of the debate

My morning was what one could call a typical Uber-f**ked-morning.

I was leaving to the airport, running late and handling work calls. At the last-minute, not having booked a cab earlier, I called for an Uber.

At first, a surge-pricing of 2x was applicable. I forced myself to wait for ten minutes, and it came down to 1.3x, and I booked a trip.

The first driver asked me to cancel the trip, flatly refusing to come to the airport. I cancelled the trip, and now my app was getting hung. My blood pressure was rising.

The next driver, when he heard me mention the airport, said he was stuck with another customer who put in the wrong address, that he would be delayed, and advised me to take another cab. My heart rate shot up even higher. But by now, there was no surge pricing, and the rates had dropped back to normal.

The third driver came to the pick-up point, saw my back-pack, and locked the doors. He said he was just returning from the airport and could not afford another trip as airport trips in Bengaluru are simply not profitable.

At this point, I lost my cool.

I screamed at him that I was going to lose my flight. Why did he accept the trip if he did not want to go? He looked at me apologetically and repeated that he could not come. I shouted some more. Then another passer-by joined me, and I told the driver that I would pay him Rs. 100 more. He saw my desperation and finally said, “Come, I'll drop you.”

As we ride to the airport, without speaking to each other, I write this. In spite of the Uber-f**cked morning, I am going to make a case against government regulating Uber’s and Ola’s ‘surging’ hike.

First, let's agree on the fact that an Uber-Ola model of surge-pricing is indeed a problem, and it can be annoying at times. We are forced to pay even four times the normal fare at times, and it’s frustrating, and feels like a rip-off.

Second, corporatism and predatory-pricing are also genuine concerns. Huge businesses are out to rip us off to make mega-profits, and we need to be alert.

But here's the question: is government regulation the solution to these problems?

Let's take a step back to see what Uber or Ola has really done. You are drunk at a party late night, and you can't drive back home. In thirty seconds, you can book an Ola. In five minutes, the Ola has arrived and you are driving home, and at competitive rates. This service and technology has changed the cab-market across the globe, and to the benefit of the consumer. It is the consumer who has benefitted from all the billions being invested into the market — Uber and Ola are yet to make a rupee in profits.

This technology has to survive, and for that, drivers and the company have to make profits.

We have to understand that surge-pricing isn't random, it works on demand and supply. If the number of cabs available are less and demand is higher, prices go up. If it’s raining heavily and no one wants to drive, then prices go up, giving an incentive for the driver to step in and cater to stranded consumers.

No one is forcing you to take an Uber or an Ola for that matter. If you can't afford the surge, then don't take it. What would you have done if there were no smart cab services? Do that.

What will happen if government bans surge pricing? Drivers will lose money, and the two reigning taxi aggregators will be forced to jack up the rates for all rides always, not as rarely as it happens now. Worse, the business model might collapse and we could lose this service. The ultimate loser is the user.

It is being suggested that surge-pricing could be capped at say 3x. But in that case, there is no stopping the cab companies from always charging 3x, and are we cool with that?

And let's remember, it’s the middle-class and upper-middle-class which benefits from Uber and Ola, not the poor. The surge-pricing controversy is your typical middle-class complaining that they are being ripped off, while benefiting off the billions being invested in the cab market.

Let's also not forget the protectionism involved in it. For years, cab companies ripped customers off with high pricing and poor service, and now when the competition in the market is benefitting the customer, the trade unions are using the socialistic structures in place to arm-twist the government into saving their over-priced business, at the loss of the end-consumer.

So not only is any surge-pricing ban or control born out of a misplaced campaign, it will not work. When it comes to government policy, intentions don't matter, outcomes do.

So what should be done then?

Stop using Uber if you don't like it. Sign that Change.org petition. Exercise your rights as a consumer and make some noise. Hold Uber accountable. Show them that they will lose business and their image, and that's what will help.

For instance, Chennai and Hyderabad airports now have Uber terminals. Drivers are unwilling to take that long ride from the city. Uber realized they are losing the airport business and worked to put in a new system in place.

Further, government policy should work towards creating more players in the market and prevent monopoly. It is market competition that will control prices effectively.

And stop depending on Uber or Ola. Order the airport cab in advance, think about what you will do if surge pricing is at 10x when you are drunk. Be a responsible consumer. If you jump at the free rides, then you have to pay for it later. There is no free lunch, ever.

As I got down at the airport, I apologized to the driver, and he returned the gesture. I paid him Rs. 200 more, and even that was less than what I would have paid for an airport taxi. Both of us went away happy.  And next time, I am not taking the Uber to the airport.

 

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