Public Passenger Transport Market Inquiry - Title Speaker names - Competition Commission
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Title Public Passenger
Transport Market
Inquiry
Speaker names
7 June 2018
ATTORNEY-CLIENT PRIVILEGE
Agenda 1.Transformation and public interest benefits 2.Dynamic Pricing 3.Area Restrictions 4.Proposed NLTA amendments 5.Questions?
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
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
Transformation | Growth of Uber in Johannesburg
The maps below compare DEMAND 2014 v.s 2018
2014 2018 5
Transformation | Growth of Uber in Cape Town
The maps below compare DEMAND 2014 v.s 2018
2014 2018 6
Transformation | Growth of Uber in Durban
The maps below compare DEMAND 2014 v.s 2018
2014 2018 7
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
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 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
11Public 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
12Public 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.
13Public 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/
14Public 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/
15Public 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
16Public 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
17Public 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
18Public 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
19Public 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
20Public 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
212. 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
ridersDynamic 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.
24Dynamic 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
26Dynamic 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
27Dynamic 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
28Dynamic 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.
29ECA
3031
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
32Dynamic 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 33Dynamic 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
34Dynamic 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.
35Dynamic 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).
36Dynamic 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/
37Dynamic 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.
38Dynamic 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.
39Dynamic 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.
40Dynamic 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.
41Dynamic 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.
42Dynamic 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.
43Dynamic 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.
443. Area Restrictions
Area restrictions and the
effect of the proposed
amendments to the
National Land Transport
ActArea 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 46Area 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.)
47Area 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.
48Area 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.
49Supply 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.
50Supply 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]
51Supply 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 52Supply 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
53Supply 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
54Supply 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.
55Supply 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.
56Supply 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.
57Supply 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.”
584. Proposed NLTA
amendments
The effect of the
proposed amendments
to the National Land
Transport Act 5 of 2009Proposed 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.
60Proposed NLTA amendments | Proposed amendments to the NLTA Act 5 of 2009
Uber has 2 main concerns with the proposed amendments:
Area Restrictions Punitive Provisions
61Proposed 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.
62Proposed 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".
63Proposed 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."
64Proposed 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.
65Proposed 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...)
66Proposed 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.
67Uber 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
68You can also read
