Uber, Lyft and Sidecar, etc., are Disrupting Traditional Taxi Services

Smart phone applications are disrupting traditional taxi service. Traditional taxi cab service is generally provided by several companies in metropolitan areas, typically an oligopoly (a small number of supposedly competitors). Further the city governments are motivated through a system of "medallions" and government "standardized fares", resulting effectively in a somewhat distributed collusive business environment. The participants generally, support the larger taxi cab companies, reduce competition by restricting new entrants and supporting local and in some cases state politicians, to insure stability of the business environment.

One of the results has been the emergence of the traditional system in which the drivers lease or rent a taxi cab which has a city medallion, from one of the taxi cab companies, for a period of time. The driver then pays a "nut" an upfront payment to rent the taxi cab. This results in drivers working long hours for very low wages and minimizes the financial risk to the taxi cab company.

We find the taxi cab business world wide suffering from limited competition, generally high rates to consumers and in general over worked and low paid drivers. Efforts to change the basic business model have been resisted by the local governments and incumbent taxi cab companies. Which benefit from a good profit margin, stable business environment, barriers to the entry new traditional competitors (government limits to the number of medallions) and low labor costs.

Along came smart phone applications which are disrupting traditional taxi cab service. Companies like (Alternative Taxi Cab Services) Uber, Lyft , Sidecar, etc. are offering service using smart cell phones. Taxi cab passengers sign up on line at the service they wish to use and provide a credit card, to which the company will charge for taxi service plus a gratuity (tip). In certain cases an added charge is made to cover passenger pickups or drops at locations like airports.

Once the user has registered the alternate taxi application allows them to order a taxi cab and indicate the pickup location and destination.  The service provides, direct to your smart phone, an estimated quote of the service charge and an estimate of the time to your pickup. Some of the services also show the local area streets and taxi icons.

In general the service works well, but since it depends on GPS (Global Positioning System), it does require line of sight to several of the GPS satellites for an accurate location, high rise building can block the line of sight. It also can be difficult to signal your driver, of your location, as several other people may be waving. This becomes a more significant problem in crowds (train stations, airports, events), night time and bad weather (reducing visibility). 

This post reviews the business environment and we also identify the first of several problems, "finding your Passenger" or "Passenger Signaling", depending on your viewpoint.

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