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Shaken by App-Based Taxis  
Wednesday, 05 April, 2017 | 09:00 WIB
Shaken by App-Based Taxis  

TEMPO.CO, Jakarta - The digital technology revolution has led to a flourish of practical and efficient application based taxi services. Government regulations should not smother this development. However, there must be a level playing field so that the conventional taxi business also thrives, which will ultimately benefit consumers.

The government has just issued a regulation on the operations of application based taxi services. An important point in this regulation is the imposition of a minimum tariff. Application based taxis, according to Transport Minister Budi Karya Sumadi, can be cheap because they use a subsidy system. This could be seen as predatory pricing, in which a wealthy business owner can prey on competitors by dropping prices.

There is a problem with this regulation: it does nothing to push conventional taxis to make their businesses more efficient. However, they have long enjoyed large profit margins from substandard services. The minimum tariff will serve as a disincentive for the owners of conventional taxis to improve their services for the benefit of consumers.

Application based taxis use a different business model. They seek added value, like other dotcom businesses. But the pricing formula for application based taxis can be monitored accurately. Technology makes it possible for the introduction of variables such as tariff per kilometer, time, level of congestion and the number of drivers. This means the government can monitor the fairness of the application based taxi companies. And for conventional taxis, the prices set by the government is largely influenced by the political lobbying of business owners.

The second problem lies with quotas. Local governments are given the authority to set limits on the number of application based taxis. This rule will create opportunities for deals to buy and sell quotas. There is discrimination here because at the same time, there are no limits on the number of conventional taxis allowed to operate.

Governments in many countries are still unsure on how to regulate app-based taxi services. There have been different responses to the emergence of Uber, which began in San Francisco in 2011. Japan, Canada, Brazil and India banned it. Germany and France disallowed discount tariffs because it would disadvantage conventional taxis. Denmark suspended operations of Uber vehicles until they were fitted with passenger sensors and meters.

The digital application based business has, for better or worse, shaken not only the transportation business, but also the retail and media sectors. The key in responding to this shockwave is the principle of a level playing field in doing business. There must be no discrimination.

It also needs to be made clear that taxis are not public mass transportation. They are an exclusive means of transport for passengers prepared to pay more for comfort. Some still prefer conventional taxis for a number of reasons.

To avoid friction with drivers of conventional taxis, the government should be fair, with the consumer remaining the top priority. The government should focus on quality. Safety and comfort standards, for example, should be applied. Protection for drivers, passengers and vehicle owners-for conventional and app-based taxis-need to be improved and drawn up transparently.

At the same time, the government must work hard to put things right with public mass transportation. Both application based and conventional taxis, as well as motorbike taxis, have flourished because the government has been unable to provide a cheap, safe and competitively priced public transportation system. The technology revolution cannot be stopped simply to cover up this failing. (*)

 

Read the full story in this week's edition of Tempo English Magazine

 



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