OPINION: Bye Bye Uber, Now What?

OPINION: Bye Bye Uber, Now What?
Photo Credit: AP / 達志影像
What you need to know

'The big picture is: is this law helping solve the problem? And what approach should the government and industry take towards disruptive innovation?'

Last December, the Legislative Yuan, Taiwan’s parliament, passed a new law to raise fines on Uber for US$700,000 per violation. Since its enactment on Jan. 1, 2017, Uber has been fined over US$10 million. With no clear resolution in sight, Uber announced its suspension of service and operation for the Taiwan market on Feb. 10.

It is clear that Uber violates laws in Taiwan on three accounts: sales tax evasion, no insurance for passengers and unlicensed drivers for passenger vehicles. However, the big picture is: is this law helping solve the problem? And what approach should the government and industry take towards disruptive innovation?

Uber has met challenges in several cities around the world. Uber disrupts the taxi industry by using an algorithm to match its drivers with passengers on cheaper and often more flexible rates. Over time, it creates a direct transaction model between drivers and consumers by cutting out the middleman, licensed taxi companies.

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In some cities and countries where Uber is legal, its platform incorporates taxi cars.

In Taiwan, Uber did not do that in the first place and therefore is seen as a threat to taxi companies. Taxi drivers feel their jobs are taken away with Uber’s technology. In an over-saturated market such as Taipei, passengers are tech savvy and opt for better riding experience by siding with Uber.

What is the implication of Uber’s temporary suspension in Taiwan? First, it sends a negative message to international community that the Taiwan government is unfriendly with innovation. With President Tsai Ing-wen's (蔡英文) vow to promote innovation, such a strong-handed measure seems inconsistent. This could discourage other innovative companies from entering into Taiwan. Secondly, the heavy fines do not help taxi drivers nor local ride-sharing app startups. Individual taxi drivers are mostly registered with licensed fleet companies. There are approximately 100,000 license plates issued by central government and yet only 80,000 are active. Clearly, supply is more than demand. Passengers choose Uber over taxis for its user-friendly experience and technological convenience.

What could Uber have done before the impasse was reached? Proactively negotiate with government by offering a concrete plan for improvement and how to deal with tax and insurance, open up its vast transportation data to help government devise better and computer-assisted traffic plan, provide constructive proposal in terms of how other cities work with Uber, and be a good corporate citizen by engaging in conversations with taxi companies.

Uber should not be seen a threat to the local industry and government should not use astronomical fines to kill off competition. The so-called platform technologies like Uber and Airbnb provide new territory for digital economy opportunities; disruptive businesses can be created and thrive by leveraging these platforms. Decentralized, individualized and platform-enabled businesses will only become more and more common. The artificial intelligence, big data and robotics behind these platforms will eventually replace many man-handled jobs.

As a technologist and legislator, I am sad to see Uber suspended. I believe consumers deserve freedom of choice and in a free market, decisions should be made by consumers, not by government’s interference. If a law enables freer competition and regulates bad practice, it is a good law; yet if a law only kills off competition and protects old industry regime, it is destructive for the long-term development of the economy.

Editor: Edward White