Uber Is Destroying The Value Of Taxi Monopolies In A Bunch Of American Cities

Re/codeUber CEO Travis Kalanick.

Uber is destroying the value of taxi monopolies and cartels in various American cities, The New York Times’ Josh Barro reports.

This is a huge part of Uber’s entire business model: That cities have these artificial, rent-taking taxi commissions that licence a limited number of operators for taxis.

Because licensing creates a cartel or local monopoly, taxi company “medallions” (a badge that gives you the right to drive a taxi) can sell for astonishing sums of money. Up to $US1 million in some cases.

Uber — by allowing anyone to drive and pick up anyone who wants a ride — renders these medallions pointless. At least, that’s the long-running theory. CEO Travis Kalanick has repeatedly railed against the way taxi cartels end up in control of cities, fixing prices, reducing competition and not letting competing companies offer rides.

The theory is coming true, the Times says, giving these data:

  • Recently traded prices of taxi medallions in US cities:
  • New York City: $US872,000, down 17 per cent
  • Chicago: $US298,000, down 17 per cent.
  • Boston: $US561,000, down 20 per cent.
  • Philadelphia: medallion auction scrapped.

It’s anecdotal, sure.

But it underlines a key trend for Uber. Both its revenue and ridership are growing, and municipalities — and taxi lobbyists — are failing in their efforts to stop it. Plus, despite the company’s awful PR issues, the fact is that once people use Uber once, they tend to want to keep using it because taxis — especially in America where almost zero qualifications are required in order to become a taxi driver — are generally worse than Uber cars.

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