Public Passenger Transport Market Inquiry - Title Speaker names - Competition Commission

 
Public Passenger Transport Market Inquiry - Title Speaker names - Competition Commission
Title           Public Passenger
                Transport Market
                Inquiry
Speaker names
                7 June 2018

                ATTORNEY-CLIENT PRIVILEGE
Public Passenger Transport Market Inquiry - Title Speaker names - Competition Commission
Agenda
1.Transformation and
 public interest benefits
2.Dynamic Pricing
3.Area Restrictions
4.Proposed NLTA
 amendments
5.Questions?
Public Passenger Transport Market Inquiry - Title Speaker names - Competition Commission
Punitive measures (Proposed solution)

    The provision should be deleted.
1. Transformation and
Public   Interest Benefits
   Alternatively:

    The provision should not be brought into force until an efficient and prompt operating licence

  The inquiry seeks to
    system is in place throughout the country. The proposed new section 93A of the NLTA which
    allows the Minister of Transport to delay bringing sections of the NLT Amendment Bill into force for a
 assess transformation
    period of up to 5 years.

   issues, including
ownership patterns in the
        industry.

                                                                                                             3
Public Passenger Transport Market Inquiry - Title Speaker names - Competition Commission
Transformation | Uber has created over 12,000 economic opportunities in South
Africa
                           Uber has created substantial self-employment opportunities since entering the
 Sustainable Economic
                           SA market. Currently there are over 12,000 active driver-partners across the 5
     opportunities
                           cities. Many of these operators have been using the app since 2013.
   Opportunities for       Uber drivers are drawn from a broad labour market. This includes many of the
  existing operators &     existing metered taxi industry, professional drivers as well as many individuals
 previous unemployed       who have previously been unemployed.

                           In SA, unlike a number of other countries in which Uber operates, the driver-
 Uber presents full-time
                           partners have tended to be predominantly full-time on the Uber platform and
    equivalent self-
                           hence these numbers reflect full-time equivalent self-employment opportunities,
     employment
                           and not just supplementary income options for many partners.

 Creating opportunities    Around 54% of drivers surveyed across the three major metropolitans were aged
        for youth          34 years and younger.

                           The flexibility of Uber provides an opportunity for people to cope with expense
                           shocks by working longer hours for a period in order to earn more. This is critical
       Flexibility
                           for lower income households who lack the insurance or support systems of
                           middle-income households.                                                       4
Public Passenger Transport Market Inquiry - Title Speaker names - Competition Commission
Transformation | Growth of Uber in Johannesburg

                   The maps below compare DEMAND 2014 v.s 2018

                2014                                             2018   5
Public Passenger Transport Market Inquiry - Title Speaker names - Competition Commission
Transformation | Growth of Uber in Cape Town

                   The maps below compare DEMAND 2014 v.s 2018

               2014                                              2018   6
Public Passenger Transport Market Inquiry - Title Speaker names - Competition Commission
Transformation | Growth of Uber in Durban

                       The maps below compare DEMAND 2014 v.s 2018

                2014                                             2018   7
Public Passenger Transport Market Inquiry - Title Speaker names - Competition Commission
Transformation | Inputs into the value chain
    Vehicle Finance    Uber has identified that many drivers did not have access to credit in order to
                       own or lease vehicles. As such, Uber has sought to facilitate the development of
                       the leasing and rental options for drivers in order to empower them in operating
                       their own business. Over R100m has been invested by vehicle finance / leasing
                       partners to support drivers in obtaining their own cars.

   Empowering black-   By reducing the risk for financial institutions, Uber has managed to encourage
   owned businesses    rental, leasing and ownership options to emerge in the market which can be
                       accessed by drivers who would not otherwise have had the means to access a
                       car. As Uber’s drivers are predominantly black, this initiative has mainly
                       benefited black business owners.

                       Uber has partnered with Zamlim Investments, the administrators of SA's leading
       Rewards
                       fuel rewards programme. Drivers can swipe their reward card at a Participating
                       Service Station and earn points to save. Zamlim is a BEE Level 1 enterprise.

                       This is one of the many examples of how Uber looks to create value for our
                       partners.

                                                                                                    8
Public Passenger Transport Market Inquiry - Title Speaker names - Competition Commission
Transformation | IFC Research, Driving Toward Equality, Women, ride-hailing and the
 sharing economy

           Benefits of Women as Drivers in South Africa                                                 Benefits of Women as Riders in South Africa

                            3.8% of the drivers who use the Uber                                    Why do               Women account for an est. 45% of
         Who                                                                                        women                Uber riders in South Africa. 51% of
                            app are women. 19% were
        Drives?                                                                                     choose               women cite knowing the driver’s
                            unemployed before using Uber.
                                                                                                     ride -              details as a major benefit. 38% cite
       What                 67% of women drivers surveyed cite                                      hailing?             share trip functionality.
      motivates             flexibility as a major initial attraction.
      women to              The “good money” comes second at                                       How does              56% of women riders strongly believe
       drive?               46%                                                                   ride-hailing           that trips with Uber are faster and
                                                                                                    compare              more convenient than public
                            Women in South Africa drive twice as                                      with
       When do                                                                                                           transportation. 35% say that Uber
                            many hours per week on average as                                     alternatives
       women                                                                                                             allows them to be more independent.
                            their peers across the markets
        drive?
                            studied.                                                                                     Women in South Africa take 2% more
                                                                                                    How do
                                                                                                                         trips per week on average vs men.
                            Women drivers who join Uber get an                                      women
      What do                                                                                                            Most popular is going out at 58%,
                            earnings boost of 14% on average                                       use ride -
     they earn?                                                                                                          followed by trips to transport hubs,
                            (additional $158 per month).                                            hailing
                                                                                                                         commuting to work and shopping.
SOURCE: https://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/gender+at+ifc/drivingtowardequality
Public Passenger Transport Market Inquiry - Title Speaker names - Competition Commission
Public Interest Benefit | Reduced transport costs                                      ●   Reduced transport
                                                                                           costs

Uber offers attractive pricing                                                         ●   Expanded options in
                                                                                           underserviced areas
                    Type of                    Distance     Time / Per
    City                        Base Fare                               Minimum fare
                 Vehicle Option             / Per km price minute price
   Gauteng          uberX          R5          R7.50         R0.75         R20
                                                                                       ●   Complements as well
                                                                                           as competes with
                   uberVan        R22           R16          R1.60         R75
                                                                                           existing transport
                  uberBlack       R15           R13          R1.30         R50
                                                                                           infrastructure
                  uberAssist       R5          R7.50         R0.75         R20

   Durban           uberX          R5            R7          R0.70         R20         ●   Improving mobility in
 Cape Town          uberX          R5            R7          R0.70         R20
                                                                                           our cities

                    uberXL        R20            R7          R0.70         R30         ●   Upskilling Drivers
                  uberBlack       R15           R12          R1.20         R50
                                                                                       ●   Secure transport for
                  uberAssist       R5            R7          R0.70         R50
                                                                                           tourists
Port Elizabeth      uberX          R5            R7          R0.70         R20
                                                                                       ●   Safety

                                                                                                                11
Public Interest Benefit | Expanded options in underserviced      ●   Reduced transport
areas                                                                costs

                                                                 ●   Expanded options in
         Cape Town                             Johannesburg          underserviced areas

                                                                 ●   Complements as well
                                                                     as competes with
                                                                     existing transport
                                                                     infrastructure
                 Guguletu
                           Guguletu
                                                                 ●   Improving mobility in
                                                                     our cities
         Mitchells Plain

                                      Soweto                     ●   Upskilling Drivers
                                                    Katlehong,
                                                    Vosloorus    ●   Secure transport for
                                                                     tourists

                                                                 ●   Safety

                                                                                          12
Public Interest Benefit | Complements existing transport                                                                        ●   Reduced transport
 infrastructure                                                                                                                      costs

                                                                                                                                 ●   Expanded options in
                                                                                                                                     underserviced areas

                                                                                                                                 ●   Complements as well
                                                                                                                                     as competes with
                                                                                                                                     existing transport
                                                                                                                                     infrastructure

                                                                                                                                 ●   Improving mobility in
                                                                                                                                     our cities

                                                                                                                                 ●   Upskilling Drivers

                                                                                                                                 ●   Secure transport for
                                                                                                                                     tourists

                                                                                                                                 ●   Safety

SOURCE: Data from February 2016. Completed trips only. Start- and endpoints away from stations have been jittered for privacy.
                                                                                                                                                          13
Public Interest Benefit | Improving mobility in our cities                    ●   Reduced transport
                                                                                   costs
      We launched uberMOVEMENT (a free and public website) in 2017 in
                                                                               ●   Expanded options in
  Johannesburg (in partnership with the CSIR) and we hope to be launching in
                           Cape Town during 2018                                   underserviced areas

                                                                               ●   Complements as well
                                                                                   as competes with
                                                                                   existing transport
                                                                                   infrastructure

                                                                               ●   Improving Mobility in
                                                                                   our cities

                                                                               ●   Upskilling Drivers

                                                                               ●   Secure transport for
                                                                                   tourists

                                                                               ●   Safety

SOURCE: https://movement.uber.com/
                                                                                                        14
Public Interest Benefit | Improving mobility in our cities                    ●   Reduced transport
                                                                                   costs
       We have launched uberASSIST in Cape Town and Johannesburg.
                                                                               ●   Expanded options in
    UberASSIST has been designed to provide additional assistance for senior
                    riders and riders with access needs.                           underserviced areas

                                                                               ●   Complements as well
                                                                                   as competes with
                                                                                   existing transport
                                                                                   infrastructure

                                                                               ●   Improving mobility in
                                                                                   our cities

                                                                               ●   Upskilling Drivers

                                                                               ●   Secure transport for
                                                                                   tourists

                                                                               ●   Safety

SOURCE: https://movement.uber.com/
                                                                                                     15
Public Interest Benefit | Improving mobility                                     ●   Reduced transport
                                                                                      costs
           Wait times continuously improve across the city with Uber being        ●   Expanded options in
         available 24/7 to the almost 700k active Uber riders across the cities
                                                                                      underserviced areas
                                   where we operate
                                                                                  ●   Complements as well
                                                                                      as competes with
                                                                                      existing transport
                                                                                      infrastructure

                                                                                  ●   Improving Mobility in
                                                                                      our cities

                                                                                  ●   Upskilling Drivers

                                                                                  ●   Secure transport for
                                                                                      tourists

                                                                                  ●   Safety

SOURCE: Uber data
                                                                                                        16
Public Interest Benefit | Secure transport for tourists                       ●   Reduced transport
                                                                                   costs
   Cape Town - 6X growth in trips from Foreign Tourism ~7% of Uber’s trips     ●   Expanded options in
                  [in Cape Town] were made by foreigners                           underserviced areas
                                                           Jan
                                                         Jan   ‘15--Jan
                                                             ‘15    Jan ‘17
                                                                         ‘17   ●   Complements as well
                                                                                   as competes with
                                                                                   existing transport
                                                                                   infrastructure

                                                                               ●   Improving Mobility in
                                                                                   our cities

                                                                               ●   Upskilling Drivers

                                                                               ●   Secure transport for
                                                                                   tourists

                                                                               ●   Safety

SOURCE: Uber data
                                                                                                        17
Public Interest Benefit | Safety                                                       ●   Reduced transport
                                                                                           costs

                                                                                       ●   Expanded options in
                                                                                           underserviced areas

                                                                                       ●   Complements as well
                                                                                           as competes with
       Before                     During                           After                   existing transport
                                                           ●   Two-way ratings &           infrastructure
 ●   Driver Screening       ●   Always on the map              feedback

 ●   Door-to-door service
                            ●   Share Trip (Rider and                                  ●   Improving mobility in
                                Driver) so friends &       ●   24/7 customer support
 ●   Driver / Vehicle           family can see the                                         our cities
     Information In-App         progress in real time on   ●   All rides insured
                                the map
                                                           ●   Law enforcement
                                                                                       ●   Upskilling Drivers
 ●   Phone anonymization                                       partnerships
                                                                                       ●   Secure transport for
                                                                                           tourists

                                                                                       ●   Safety

                                                                                                                18
Public Interest Benefit | Safety                                       ●   Reduced transport
                                                                           costs
  We have used technology to build functionality to help keep our      ●   Expanded options in
     partners in South Africa safer (based on their feedback)
                                                                           underserviced areas
                     Rider
 Cash Indicator                     Share My Trip    Driver Response   ●   Complements as well
                   Verification
                                                                           as competes with
                                                                           existing transport
                                                                           infrastructure

                                                                       ●   Improving mobility in
                                                                           our cities

                                                                       ●   Upskilling Drivers

                                                                       ●   Secure transport for
                                                                           tourists

                                                                       ●   Safety

                                                                                                19
Public Interest Benefit | Safety                                          ●   Reduced transport
                                                                              costs

                Using technology to make Uber even safer                  ●   Expanded options in
                                                                              underserviced areas
    Facial                                Speed
                     Phone Handling                        Driving Dash   ●   Complements as well
  Recognition                           Thresholds
                                                                              as competes with
                                                                              existing transport
                                                                              infrastructure

                                                                          ●   Improving mobility in
                                                                              our cities

                                                                          ●   Upskilling Drivers

                                                                          ●   Secure transport for
                                                                              tourists

                                                                          ●   Safety

                                                                                                   20
Public Interest Benefit | Safety                                          ●   Reduced transport
                                                                              costs
 Keeping riders and drivers safer by avoiding drowsy driving when using   ●   Expanded options in
                                 the app
                                                                              underserviced areas

                                                                          ●   Complements as well
                                                                              as competes with
                                                                              existing transport
                                                                              infrastructure

                                                                          ●   Improving mobility in
                                                                              our cities

                                                                          ●   Upskilling Drivers

                                                                          ●   Secure transport for
                                                                              tourists

                                                                          ●   Safety

                                                                                                   21
2. Dynamic Pricing

The Inquiry is considering
  the rationale for surge
(dynamic) pricing by app-
  based taxi (transport)
 services and the impact
  of dynamic pricing on
           riders
Dynamic Pricing | Dynamic pricing is the exception, not the rule
Dynamic Pricing | Complete transparency of pricing with no scope for a driver-partner
 to price-gouge.The

                                              Support:
Upfront Pricing:                              Riders can raise queries
Uber provides upfront                         through in-app support.
pricing to riders that is                     Drivers using Uber do not
agreed upon before the                        see the passenger before
journey begins and                            they accept a ride, nor do
automatically generates                       they know the
an electronic notice with                     passenger's destination.
the cost of the trip and a                    This helps to eliminate
map of the route taken.                       long-standing complaints
This applies equally to                       by the public of
periods of dynamic                            destination discrimination
pricing, where the                            by the traditional taxi
elevated nature fare is                       industry, including
disclosed to riders before                    refusing to do certain
they agree to the trip.                       trips unless higher fares
                                              are paid.

                                                                                     24
Dynamic Pricing | Higher fares in peak periods is also not unusual in transport

Airlines charge more to fly in peak periods - early morning and late afternoon - in order to manage high
demand with fixed supply, and provide price signals for less time sensitive travels to select off-peak flights25
Dynamic Pricing | Higher fares in peak periods is also not unusual in transport

                                                                                  26
Dynamic Pricing | Addresses challenges of variations in demand across time and space
    Demand varies in districts              Peak times                   Other transport options

Demand for transportation        For e-hailing, demand for such    This is in part because public
naturally varies in distinct,    services often peak               transport has shut down or is
 ● daily                           ● late at night                 operating at lower frequency at
 ● Weekly                          ● Weekends                      night or on weekends or holidays
 ● annual cycles                   ● stadium after a game          and ride sharing fills this gap
 ● different parts of a city       ● restaurant at night
                                   ● Holidays like new years eve
                                                                                                   27
Dynamic Pricing | Demand for Uber tends to vary not only daily, but also weekly.

                    Demand for Uber tends to peak in the evenings and on weekends.

SOURCE: Uber data
                                                                                         28
Dynamic Pricing | Consumer welfare is lower if the transport demand is unmet (Part 1)

If the supply of transport services does not
increase to meet the surge in demand at
particular times in specific areas, then many
consumers can’t get rides & are worse off

  1. long waiting time for transport on average;
  2. substantially increases consumer total
     travel time; and
  3. possibly not getting a ride at all

                                                                               Fixed Taxi
The result is that there are                                                     Supply

 1. periods where demand outstrips supply; or
 2. periods where supply outstrips demand to
      leave the taxi driver underutilised.

                                                                                        29
ECA

      30
31
Dynamic Pricing | Consumer welfare is lower if the transport demand is unmet (Part 2)

  Demand surge = shift in demand curve.

    Demand increases from Q1 to Q3 at
        prevailing fare level (P1)

  If price and supply remains unchanged,
      this represents excess (or unmet)
                  demand.

    In the transport context, this means
     consumers who do not get a ride.
                                             The demand for rides
                                              not met by supply
                                                                                    32
Dynamic Pricing | Uber riders’ reasons for valuing the service

          After safety aspects, the availability 24/7 and short waiting times (arrival within minutes) all rank as
         important reasons for using Uber, which demonstrates that consumers clearly value these attributes

                                                                                                     TOP 15 CLAIMS: ACTIVE RIDERS      MDiff

               Know your driver's details before you get in the car; name, image, rating and vehicle information appear when you
                                                                                                                                       233
               request a ride.

               Always get a ride when you need it; the app is available 24 hours a day, 7 days a week and 365 days a year              212

               Door-to-door service; you choose exactly where you want to be picked up and dropped off.                                 180

               Upfront pricing so you can easily see how much the ride will cost before taking it.                                      178

               Feel secure knowing you have set your exact destination in the app, and can automatically share your arrival time and
                                                                                                                                        163
               route with loved ones.

               Get a car within minutes, because there are thousands of drivers available.                                              151

               Affordable way to get you around your city                                                                               144

               Work around your schedule; as your car arrives in minutes.                                                               115

               Get charged an accurate fare, as the app calculates the price based on market demand.                                    101
SOURCE:
IPSOS Study
April 17       Know exactly when you will be at your destination, with the estimated arrival time in the app                            97     33
Dynamic Pricing | Costs to consumers of unmet demand
                         A natural experiment illustrating the need for dynamic pricing
        During New Year’s Eve demand in New York City in 2014-15, Uber dynamic pricing failed for 26 mins.

  During the period highlighted in      There was a substantial increase       < 25% of trip requests resulted in
  red there was a spike in demand       in the average estimated time of       an actual trip for riders, as the
  (number of trip requests in the       arrival (ETA) of a driver-partner      majority of riders did not find an
  first figure) which was not met by    for those trips that did occur, i.e.   available Uber nearby or gave up
  supply.                               longer waiting times for riders on     and used a different means of
                                        average before a driver arrived.       transport given the long waits
SOURCE: Uber data
                                                                                                                34
Dynamic Pricing | Uber deals with demand variations through flexibility (Part 1)

 The challenge for all transport services is to efficiently supply the various surges in demand at different
                       points in time (daily, weekly or annual) and geographic space.

         Mass public transport service                                    E-hailing services

                                                          This is particularly challenging as:
                                                           - don’t control when or where driver-
                                                                partners operate, but rely on driver-
Cities will typically plan to provide more services             partners to supply the service when it
at peak times, and less at non-peak periods.                    makes sense for them (re schedule &
This requires vehicles and infrastructure to cope               income considerations); and
with peak period demand, which then lies                   - the surges in demand are not always as
underutilised for the rest of the time.                         predictable or regular as the daily
                                                                commute that the mass public transport
                                                                system is geared around.

                                                                                                               35
Dynamic Pricing | Uber deals with demand variations through flexibility (Part 2)

 -   The more flexible e-hailing business model permits supply in general to be more responsive to
     demand fluctuations.
 -   Driver-partners are not confined to standard business hours and a continuous shift, but can switch
     on the app at times that are likely to provide greater earnings opportunities.
 -   Uber actively assists the driver-partners by providing driver-partners with information on:
      - which areas experience high demand at what times; and
      - events in the upcoming week in the city that might experience a surge in demand for Uber
           rides.

This results in supply already adjusting to less dramatic changes in demand without the need for surge
pricing. As a result, surge pricing only becomes necessary for larger and more pronounced spikes in
demand or when most drivers would still rather not be operating (such as late at night).

                                                                                                         36
Dynamic Pricing | Uber deals with demand variations through flexibility (Part 3)

   Illustrative of this information-sharing is the following screen grab from the Uber website which is shared with
                                   driver-partners to help them maximize their earnings

SOURCE: https://www.uber.com/en-ZA/drive/johannesburg/where-to-drive/
                                                                                                               37
Dynamic Pricing | Dynamic pricing is an efficient way to meet unusual demand surges

                  1. People who are not in a hurry wait until the price falls or
                     use an alternative form of transport, thus reducing
  Dynamic
                     demand; and
pricing has 2
                  2. Driver-partners who are nearby are incentivised to go to
   effects
                     that neighbourhood to get the higher fares, increasing
                     supply.

                  1. Creates a balance between the number of people wanting
 In this way,        a ride and the number of available drivers;
   dynamic        2. This restores waiting times to low levels; and
    pricing       3. Ensures that fares return to standard rates at a much
                     faster pace and riders can reliably get rides.
                                                                                      38
Dynamic Pricing | The effect and benefits of surge pricing in bringing supply and
  demand back into balance

Fare prices increase from P1 to P2 in response to
excess demand

Fare increase results in greater supply (movement
along the supply curve). For Uber, this incentivises
driver-partners to go to the place of high demand.

Fare increase also reduces some demand for rides
(from Q3 to Q2). For Uber, some people prefer to
wait or take alternative transport.

     Those who wait are not worse off, as in the absence of a price increase, they, and additional
                                people, would still be left waiting.
                                                                                                     39
Dynamic Pricing | Other dynamic pricing effects which promote economic welfare
                           Surge pricing sorts customers such that those with the strongest preference
  Sorts customers with
                           for an immediate ride (more time-sensitive/less price sensitive riders) are
  strongest preference
                           serviced first whilst those with weaker preferences for a ride (less time-
  for an immediate ride
                           sensitive/more price sensitive) are willing to wait until the surge pricing ends

  More driver-partners     Surge pricing brings more driver-partners on board at times of peak demand
  on board at times of     and can also encourage drivers to locate themselves more efficiently for
     peak demand           example, by drawing drivers to areas where there is excess demand

                           Driver utilisation levels in general improve as drivers locate close to greater
   Utilisation levels in
                           demand points, thereby increasing the time spent on fare-paying trips. This all
    general improve
                           contributes to ensuring adequate driver earnings whilst retaining low prices.

                           The consistent expected wait time for riders, despite variations in demand levels,
  Encourages greater
                           itself encourages greater usage and overall demand for the service which
   usage and overall
                           assists in building route density within a city which further enhances efficiency,
    demand for the
                           enabling lower prices and more employment creation without compromising on
       service
                           driver-partner earnings.
                                                                                                              40
Dynamic Pricing | Uber’s way of determining surge multiples (Part 1)
                           Uber’s systems monitor demand and supply in real time.

When Uber's systems detect a likely imbalance between the number of riders expected to request rides and
the number of drivers available to fulfil those requests in a specific area or neighbourhood, dynamic pricing
automatically kicks in.

To ensure that any fare change is accurate and effective, Uber divides cities into smaller hexagonal zones.

Each zone has its own dynamic price multiplier, based on
the real-time demand and supply in that zone, and those
of its contiguous zones. The system frequently updates
fares in light of the latest real-time conditions in each
geographic area

The implication of using small hexagonal areas is that
dynamic pricing is highly targeted to very small areas and
is not simply implemented city-wide.

                                                                                                              41
Dynamic Pricing | Uber’s way of determining surge multiples (Part 2)

 1. When drivers open their app when dynamic pricing is in
    effect, they see a heat map that indicates which parts of
    a city are busiest and where the fares are increasing
    dynamically. Light red shading over parts of the map
    indicates a lower surge multiplier in those blocks, and
    darker red shading indicates higher multipliers.

 1. During particularly high demand periods, an SMS
    notification may be sent to drivers, enabling those who
    are not currently driving to be notified when their
    services are most needed. This helps to give them
    information to choose where, and when, they want to
    position themselves in the city.

                                                                       42
Dynamic Pricing | Limited application of Surge Pricing

                     Dynamically increased pricing is the exception and not the rule!

 1. Uber has a strong incentive to try and limit the extent and duration of surge pricing to only those
    situations where demand surges occur and it is necessary to balance demand and supply.

 1. If surge pricing became the norm, then there would be reduced demand for the e-hailing service
    and a drop in overall system efficiency which is necessary to support low prices.

 1. This results in the behaviour described above as Uber tries to direct driver-partners to places and
    times of high demand. But it also results in Uber actively monitoring the extent and duration of
    dynamic pricing, and if pricing levels start to increase in a city then it is a signal to expand driver
    supply.

                                                                                                              43
Dynamic Pricing | The problem with price regulation
 ●   The problem with continuing to impose outdated price regulations is precisely that prices are unable to respond
     efficiently to demand resulting in consumers facing long waiting times and poor service due to limited supply
     that cannot meet the increased demand leading to many riders being unable to get rides.
 ●   This in turn meant that the industry does not develop into a dense & efficient network which is necessary for the
     effective operation of the e-hailing networks today.
 ●   E-hailing services are better able to respond to the fluctuations in demand by having a more flexible supply
     ultimately means that consumers are better off. This is because waiting times are low even in periods of high
     demand and also utilisation overall is higher as supply moves to periods of high demand.

                                                                                                                  44
3. Area Restrictions

Area restrictions and the
 effect of the proposed
  amendments to the
National Land Transport
            Act
Area restrictions | Current regulatory position on area restrictions

      Currently Uber and other e-hailing operators are granted metered taxi operating licences in terms of
      section 66 of the NLTA. This follows a decision of the Transport Appeal Tribunal which is binding on all
      Provincial Regulatory Entities ("PREs").
      In terms of the licences issued by the relevant PREs, no distinction is drawn between metered taxis and
      e-hailing taxis with regard to their area of operation.
              ● In each instance the licences provide for an area of operation within the municipal boundary
                  of the relevant municipality (or broader - e.g. province or even national), or, in the case of
                  Cape Town, within a radius of 35 kilometres (from a specific base).
              ● Metered taxi operators are permitted to roam within their designated areas, as well operating
                  through phone bookings and ranks, but tend to return to ranks.*
              ● Anecdotal evidence suggests that metered taxi associations may restrict access to certain
                  ranks, resulting in further self-imposed restrictions on movement. With the current
                  technology available, ranks are themselves outdated notions that are no longer required.
      These restrictions are self-imposed and we stress that neither the NLTA nor the PREs have imposed any
      differential area restriction between metered taxis and e-hailing services such as Uber.

SOURCE: * Mabuse and Browning. 2009. The Metered Taxi in South African Cities, pg. 472. Available online: -
https://repository.up.ac.za/bitstream/handle/2263/11882/Mabuse_Metered%282009%29.pdf?sequence=1                  46
Area restrictions | Area restrictions (and related supply caps) are detrimental to
   consumers (Part 1)
     The ability of e-hailing services such as Uber to price at much lower levels to the huge benefit of
     consumers is reflective of the enormous efficiencies and economies of density present in the Uber
     technology and business model. The model results in:

                                 1                                           2                                    3

     the achievement of high levels                           Higher utilisation is achieved by   It is also enhanced by reducing
     of driver and vehicle                                    increasing the number and           the distance between the last
     utilisation relative to traditional                      time spent on fare-paying           rider drop-off and the next rider
     metered taxis, making lower                              trips per hour relative to non-     pick-up, as both the time and
     prices sustainable whilst still                          fare activities such as waiting     vehicle costs are reduced and
     achieving decent income levels                           in-between rides and time spent     overall utilisation on fare-paying
     for driver-partners.                                     driving to a new fare.              rides is increased
     Uber’s tech & features which help achieve the higher utilisation rate, amongst others, are:

                                 1                                           2                                    3

     real-time matching technology                            dynamic pricing,                    achievement of the economies
     with other desirable features                                                                of density
     that reduce demand barriers,
SOURCE: *As outlined in the first submission (section F.2.)
                                                                                                                                       47
Area restrictions | Area restrictions (and related supply caps) are detrimental to
consumers (Part 2)
                  Area restrictions are bad for consumers and metered taxi operators

              Bad for consumers                                      Bad for metered taxis

                                                       The same restrictions also undermine greater
                                                       efficiency for metered taxis, pushing up their
                                                       costs and hence prices.
                                                         - If a fare-paying ride takes a driver-partner
 Area restrictions undermine these efficiencies               outside of their area of operation, area
 resulting in lower levels of utilisation and                 restrictions will typically prevent them from
 therefore higher prices to the detriment of                  picking up another fare-paying ride in
 consumers.                                                   close proximity to where they drop off the
                                                              passenger.
                                                         - Area restrictions would also preclude
                                                              certain driver-partners from responding to
                                                              a demand surge in a particular location if it
                                                              fell outside their area of operation.
                                                                                                          48
Area restrictions | Area restrictions (and related supply caps) are detrimental to
consumers (Part 3) US Example: San Diego, California Airport

San Diego airport restricts private hire
vehicles that do not comply with its
emissions standards (as measured in
mpgs) from entering the holding area
for picking up passengers. Such
vehicles have to return empty.

This emission standard therefore has
the same effect as a geographical
restriction on certain providers.

 ●   The proportion of non-compliant
     vehicles returning empty.
 ●   That those vehicles that do
     comply, the equivalent scenario
     to no geographical restriction,
     only return empty just over 60%
     of the time.
                                                                                     49
Supply Caps (Part 1) | Go hand-in-hand with area restrictions

  ●   Supply caps are closely related to area restrictions: The intent behind the area restrictions is
      often to limit supply in a particular area, and hence regulations that prevent supply coming from
      outside the area.
  ●   Supply caps operate to the detriment of consumers: Especially if the caps are informed by
      outdated metered taxi business models that operate on high prices, low efficiency and limited
      demand, which then in turn are used to justify supply limits.
  ●   Artificial supply caps undermine the ability of e-hailing services such as Uber to create the
      economies of density in cities that allow for greater efficiency and lower prices:

                1                                   2                                    3

The e-hailing business model is     In essence, as route density         Increased demand naturally
able to offer beneficial lower      improves waiting times reduce        results in higher utilisation per
prices to consumers and             for prospective riders (an           hour of the drivers and their
greater employment                  improvement in the reliability of    vehicles (more rides but also
opportunities for driver-partners   the service) which itself            reduced distances to the next
through achieving economies of      increases demand for the             ride), allowing lower costs and
density.                            service (to the benefit of           fares in the process, which
                                    drivers).                            again stimulates more demand.

                                                                                                             50
Supply Caps (Part 2) | Uber has expanded the market beyond the existing market of
 traditional metered taxis
                                                                                                                                       In contrast, 42% of Uber users use the service once per week or more.
 More than half of Uber users [52%] have never used a metered taxi   Even amongst the 48% of Uber users who have used metered taxis,
                                                                                                                                          Uber has created an estimated three fold increase in the market
                       prior to moving to Uber                                  very few [15%] were using it frequently
                                                                                                                                                                        size

                                                                                                                                       Estimate: Based on stated rider usage of metered taxi before
                                                                                                                                       becoming an Uber user v.s usage of Uber and Metered Taxi after
                                                                                                                                       becoming an Uber user

                                                                                                                                                                    3X
                                                                                                                                                                                        22%

                                                                                                                                                     7%

                                                                                                                                            Market Size BEFORE                  Market Size AFTER
                                                                                                                                                   Uber                               Uber

   ●       Uber has expanded the market beyond the existing market of traditional metered taxis is evidenced by
           the fact that more than half of the users surveyed in Cape Town had never used a metered taxi prior to
           using Uber.

   ●     This benefits new entrants who may seek to enter the public transport market. It is also self-evident from
         the fact that prices for Uber are substantially lower than what was previously charged by taxi’s, which
         would naturally expand demand.
SOURCE: Cape Town Uber Rider Survey Conducted by Victory Research [Link]. [Graphs]
                                                                                                                 51
Supply Caps | Conclusion of the OECD paper should give guidance to the Inquiry (Part 2)
      Numerous authorities from the following jurisdictions criticised the strict control of the number
               of taxis licences, as it constitutes a significant barrier to entry, such as:

                                       Finnish
       Canadian       Superintend
                                     Competition    Norwegian     Portuguese      Spanish
      Competition       encia de                                                               Federal Trade
                                         and        Competition   Competition    Competition
        Bureau         Industria y                                                              Commission
                                      Consumer       Authority     Authority      Authority
                        Comercio
                                      Authority

         Some authorities expressly recommended the elimination of restrictive quotas, such as:

                                            Federal
                        Canadian                              Australian         Spanish
                                          Competition
                       Competition                           Competition        Competition
                                          Commission
                         Bureau                             Policy Review        Authority
                                           of Mexico                                                           52
Supply Caps | Restrict competition by erecting regulatory barriers to entry for new
   drivers and services

    The OECD noted in respect of the taxi industry even before
    the advent of e-hailing:
                                                                                                                                         Riders
    “The restriction of taxi numbers is a welfare-reducing                                                                    constrained supply of for-hire
    regulatory intervention. Limiting the number of licences is                                                               vehicles means higher prices,
    not economically justified and is an undue restriction on                                                               lower availability, and longer wait
    competition… Where licence numbers are regulated, there                                                                               times.
    is a high probability that controls will be managed in ways
    that reduce supply far below free entry levels, leading to
    the development of very high licence values (as much as                                                                         Potential drivers
    €500,000), reflecting the existence of large monopoly rents.                                                            constraints on supply means that
    Consumers will experience reduced service levels and, in                                                                   they are not able to work as
    most cases, increased prices. Losses in economic                                                                         drivers, even if there is demand
    efficiency (“deadweight losses”) also arise due to these                                                                       for additional rides.
    market distortions.”

SOURCE: * OECD, Taxi Industry: Competition and Regulation, 2007, p. 17 http://www.oecd.org/regreform/sectors/41472612.pdf
                                                                                                                                                                  53
Supply Caps | Reasoning behind area restrictions is flawed and outdated (Overview)
          Traditional justifications for area restrictions                                      None of these reasons are valid

      Geographic area restrictions are aimed at                                         These justifications for such regulations are no
      providing an adequate level of service to each                                    longer relevant (if they ever were).
      part of the city by avoiding concentration of
      supply in more lucrative areas.                                                   In fact such regulations are both anti-competitive
                                                                                        and welfare reducing for both riders and drivers.
      Supply caps are historically motivated by the
      belief that they will:                                                            ECD. 2018. Taxi, ride-sourcing and ride-sharing
         1. Ensure that drivers earn a reasonable                                       services - Background Note by the OECD
            income whilst providing a quality service,                                  Secretariat, Working Group 2: Competition and
            given that there are low barriers to entry                                  Regulation.
            into the profession (other than regulatory
            barriers)
         2. Lead to a potential decrease in congestion
            and pollution
         3. Prevent decreased revenue and thereby
            support quality services

SOURCE: Available online at: https://one.oecd.org/document/DAF/COMP/WP2(2018)1/en/pdf
                                                                                                                                          54
Supply Caps | Reasoning behind area restrictions is flawed and outdated (Part 1)
        Traditional justifications for area restrictions                                               Counter argument

     Geographic area restrictions are aimed at                                    Area restrictions are “likely to restrict competition
     providing an adequate level of service to each                               by hindering entry into areas of high demand”
     part of the city by avoiding concentration of                                and “hinder efficient use of transportation
     supply in more lucrative areas.
                                                                                  capacity by generating empty return journeys”

                                                                                                       Evidence strongly indicates that such
                                                                                                       restrictions are not required to achieve this
                                                                                                       original purpose of ensuring supply across all
                                                                                                       areas. Given the highly variable nature of the
                                                                                                       demand cycles, E-hailing services are best able
                                                                                                       to balance supply and demand without area
                                                                                                       restrictions. This also allows them to provide
                                                                                                       greater level of service to poorer outlying areas
                                                                                                       than the traditional metered taxi players (which
                                                                                                       typically did operate there under area
                                                                                                       restrictions).*
SOURCE: *OECD. 2018. Taxi, ride-sourcing and ride-sharing services - Background Note by the Secretariat, Working Group 2: Competition and Regulation.
                                                                                                                                                       55
Supply Caps | Reasoning behind area restrictions is flawed and outdated (Part 2)
        Traditional justifications for area restrictions                                                              Contrary evidence per OECD

      Supply caps are historically motivated by the                                                   No evidence that drivers do better in supply restricted
      belief that they will ensure that drivers earn a                                                markets. Motivated by rent-seeking that ultimately only
                                                                                                      benefits the license owners & harming consumers.
      reasonable income whilst providing a quality
      service, given that there are low barriers to entry                                             By building route density and higher utilisation through
      into the profession (other than regulatory barriers)                                            higher driver numbers, the e-hailing services have
                                                                                                      enabled prices to decline and demand to expand
                                                                                                      dramatically, whilst still enabling driver-partners to earn a
                                                                                                      reasonable income.

                                                                                                      “Although entry restrictions are often justified on equity
                                                                                                      grounds there is no evidence that drivers fare better in
                                                                                                      restricted markets...Reform of the taxi industry has often
                                                                                                      been opposed on grounds that it is likely to reduce the
                                                                                                      incomes of drivers, which are frequently low where they
                                                                                                      are not themselves owners of cab licences...However,
                                                                                                      there is no evidence to suggest that taxi driver incomes
                                                                                                      are higher in markets with restrictive entry conditions.
                                                                                                      Rather, the monopoly rents that accrue due to these
                                                                                                      restrictions appear to be appropriated solely by licence
                                                                                                      owners.”

SOURCE: **OECD. 2018. Taxi, ride-sourcing and ride-sharing services - Background Note by the Secretariat, Working Group 2: Competition and Regulation.
                                                                                                                                                                 56
Supply Caps | Reasoning behind area restrictions is flawed and outdated (Part 3)
        Traditional justifications for area restrictions                                                               Counter argument per OECD

      Supply caps are historically motivated by the                                                   Each of these rationales is either unjustified, or in
      belief that they will ensure:                                                                   fact can be achieved by means other than supply
                                                                                                      caps, hence avoiding the negative effect whilst still
          1. a potential increase in congestion and
                                                                                                      achieving the objective.
             pollution
          2. excess supply increasing unit costs                                                          “…      the    justifications  behind   quantitative
          3. decreased revenue to support quality                                                         restrictions of taxi licences do not seem to serve
             services                                                                                     their stated objectives. Moreover, the emergence
                                                                                                          of ride-sourcing and ride-sharing services
                                                                                                          demonstrates how this aspect of the regulatory
                                                                                                          framework is outdated. In fact, quantitative
                                                                                                          restrictions hinder competition and prevent
                                                                                                          passengers from enjoying shorter waiting times,
                                                                                                          greater convenience and lower prices due to
                                                                                                          increased competition and supply. Thus, there
                                                                                                          would not appear to be a need for quantitative
                                                                                                          restrictions to be applied to taxis.” *

SOURCE: **OECD. 2018. Taxi, ride-sourcing and ride-sharing services - Background Note by the Secretariat, Working Group 2: Competition and Regulation.
                                                                                                                                                            57
Supply Caps | Conclusion of the OECD paper should give guidance to the Inquiry (Part 1)
  The Competition Commission should also adopt this view and use its inquiry to recommend that such outdated
        regulations be removed from the NLTA given the competition and consumer benefits of doing so.

“Traditional taxi operators have always been in favour of extending the current
regulation to companies providing ride-sourcing services as well. However, this
approach does not meet the favour of NCAs [National Competition Regulators] which
usually refer to the taxi services as an over-regulated industry. The emergence of new
market players is often seen as an opportunity for reform (Australian Competition
Policy Review, 2015, p. 135[26]) though not total deregulation.”

“With regards to specific points of the current regulation, the main issue raised by
NCAs concerns the quantitative restriction on number of taxi licences.”

                                                                                                               58
4. Proposed NLTA
    amendments

    The effect of the
proposed amendments
  to the National Land
Transport Act 5 of 2009
Proposed NLTA amendments | Status of the bill & opportunity for the inquiry to make
recommendations

                             The National Land Transport Amendment Bill, B7B-2016 was passed
                                        in late April 2018 by the National Assembly.
    There are still
   opportunities in
    the legislative
   process for the
      Inquiry to              Referred to the National Council of Provinces where it has been
                               considered by the Economic and Business Development Select
     recommend                                          Committee
   amendments to
       the NLT
   Amendment Bill.
                                      will be referred to the 9 provincial legislatures.

                                                                                                60
Proposed NLTA amendments | Proposed amendments to the NLTA Act 5 of 2009

     Uber has 2 main concerns with the proposed amendments:

         Area Restrictions                   Punitive Provisions

                                                                           61
Proposed NLTA amendments | Area Restrictions - Section 66A

                                           The Problem

       ●   Currently, Uber drivers apply for and ideally are granted operating licenses as metered
           taxis. This is in accordance with a decision of the Transport Appeal Tribunal.
       ●   The new section 66A of the NLT Amendment Bill substantially reproduces the provisions
           in section 66, which deals with metered taxis. The "cut and paste" exercise is
           inappropriate.
       ●   Area restrictions in section 66A of the NLT Amendment Bill are outdated, reduce
           competition and inhibit more efficient models which lower prices and increase
           employment.
       ●   Uber proposes a two-part solution which will allow Uber and other e-hailing operators to
           operate more freely.

                                                                                                      62
Proposed NLTA amendments | Area Restrictions - Section 66A

                        Solution 1- The bodies issuing licences

     The responsibility for issuing operating licences to e-hailing vehicles should remain with
     the PREs

     It is inappropriate for municipalities or Municipal Regulatory Entities ("MREs") to issue operating
     licences to e-hailing vehicles as e-hailing vehicles require the ability to move from one
     municipality to another.

     Even if the operating licence function is assigned to municipalities and/or MREs, the responsibility
     for issuing operating licences to e-hailing vehicles should remain with the PREs, so that those
     licences can be issued on a provincial-wide or multi-municipality basis.

     Proposed new section 18(1)A of the NLTA (clause 12 of the NLT Amendment Bill) provides for
     applications to be made to PREs where the "services cross the boundary of (a) municipality".

                                                                                                            63
Proposed NLTA amendments | Area Restrictions - Section 66A

                Solution 2 - Proposed amendment to section 66A(2)(b)

     Proposed amendment to section 66A(2)(b) of the NLTA

     Current section:
     Proposed new section 66A(2)(b) of the NLTA allows an e-hailing vehicle to pick up passengers
     outside of the area, "if the fare is pre-booked and the passengers will return to such area".

     Severely constrains e-hailing vehicles and need to be amended.

     Proposed amendments:
     "The vehicle may pick up passengers outside of that area, if the trip is pre-booked."
     "The vehicle may pick up passengers outside of that area, if the trip is pre-booked and the
     vehicle will return to such area, directly or indirectly."

                                                                                                     64
Proposed NLTA amendments | Punitive measures - difficulties obtaining licenses

      eThekwini             Nelson Mandela Bay              Johannesburg                Cape Town

     Moratorium on              Moratorium on           The time period for the   Applications from 2016
operating licences since   operating licences since      issuing of operating       awaiting the City of
      2010 with no                   2017                     licences is          Cape Town’s support
 justification or market    - no justification as to   approximately 9 months.    before the application
          study            why the moratoria are in                                 can go to the PRE.
                           place. No metered taxi
                             or e-hailing licenses
                           have been issued since
                                 these dates.

                                                                                                      65
Proposed NLTA amendments | Punitive measures
  ●   The NLT Amendment Bill creates a new criminal offence for e-hailing companies.
  ●   The proposed new section 66(7) requires e-hailing companies to disconnect driver partners that
      are operating without a valid operating licence.
  ●   Uber opposes this new provision on two grounds:

                  Discrimination                                          Rationality

                                                      The offence is arguably irrational, since it fails to
 The offence is arguably discriminatory since there   take account of the extremely slow and complex
 is no similar provision for entities which employ    process regarding the issue of operating
 or contract with metered taxi or minibus taxi        licences. Until the operating licence system
 operators.                                           works efficiently and speedily, it makes no sense
                                                      for the new punitive system to be
                                                      introduced.(continued on the next slide...)

                                                                                                              66
Proposed NLTA amendments | Punitive measures

                                The Proposal

   Uber therefore proposes the deletion of this provision; alternatively, given
  the bottlenecks which exist in the licensing process, the implementation of
     this provision should be delayed for up to 5 years in terms of the new
                            section 93A of the NLTA.

                                                                                  67
Uber provides a range of public interest benefits all of which benefit the broader public.

PUBLIC INTEREST BENEFITS
                                      A safe alternative to driving under the influence
  ●   Reduced transport costs          ● WHO estimates that drunk driving causes 30%-40% of all
                                           road deaths around the world.
  ●   Expanded options           in    ● in South Africa it is estimated that 6 of the 10 road fatalities
      underserviced areas                  are because of alcohol consumption.
                                       ● Police statistics on the number of detected incidents of
 5.  Questions?
 ● Complements as well as
    competes with existing
                                           driving under the influence of drugs or alcohol showed its
                                           first reductions following Uber’s entry into South Africa in
      transport infrastructure
                                           2013
  ●    Reduction in congestion         ● Similar results in California, Seattle and New York

  ●   Secure     transport   for
      tourists                        Driving hour limits imposed on drivers
                                      After the six hours, driving time resets and drivers can go back
  ●   Road safety
                                      online and start receiving trip requests

                                                                                                            68
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