Uber

uber

Uber (formerly UberCab) is a venture-funded startup company based in San Francisco that makes a mobile application that connects passengers with drivers of luxury vehicles (e.g. Lincoln, Cadillac, BMW) for hire.

The company arranges pickups in the San Francisco Bay Area, New York City, Los Angeles, Seattle, Chicago, Boston, Washington, D.C., Vancouver, Toronto, Paris, and Philadelphia. Cars are reserved by sending a text message or by using a mobile app. Using the apps, customers can track their reserved car’s location.

Uber was founded by Garrett Camp, Travis Kalanick and Oscar Salazar in 2009. The original idea occurred to them at the 2008 LeWeb technology conference in Paris. The Uber product was officially launched in San Francisco in 2010. In late 2011, Uber raised $32 million in funding from several investors that include Goldman Sachs, Menlo Ventures, and Bezos Expeditions. In April 2012, Uber tested reservations for conventional taxis, at lower rates, in Chicago. In July 2012, in honor of National Ice Cream Month, Uber launched Uber Ice Cream, which added the ability in 7 cities to summon an ice cream truck for on-demand delivery, and bill the purchase to a user’s account.

Uber has been accused in several jurisdictions of illegal taxicab operation. In May 2011, Uber received a cease-and-desist letter from San Francisco’s Metro Transit Authority, claiming that it was operating an unlicensed taxi service, and another legal demand from the California Public Utilities Commission that it was operating an unlicensed limousine dispatch. Both claimed criminal violations and demanded that the company cease operations. In response the company, among other things, changed its name from UberCab to Uber. In January 2012, an Uber driver’s cab was impounded as part of a sting by the Washington D.C. taxicab commission. The commissioner said the company was operating an unlicensed taxicab service in the city. Following a social media campaign by Uber’s users, the D.C. City Council voted in July to formally legalize this type of service, with no minimum fare. In August 2012, the Massachusetts Division of Standards issued a cease and desist letter to Uber, on the grounds that the GPS-based smartphone app was not a certified measurement device. But the agency reversed its ruling after prodding by Governor Deval Patrick, saying that technique was satisfactory because it was under study by the National Institute of Standards and Technology.

Uber’s pricing is similar to metered taxis although all hiring and payment is handled exclusively through Uber and not with the driver personally. If the Uber car is travelling at a speed greater than 11 mph, the price is calculated on a distance basis. Otherwise, the price is calculated on a time basis. Prices are about 50% to 75% higher than prices charged by conventional taxicabs. At the end of a ride, the complete fare (which includes a tip) is automatically billed to the customer’s credit card. Uber has said that its high prices are the premium that the customers pay for a cab service that is not only reliable but also punctual and comfortable.

During holiday times, such as Halloween or New Year’s Eve, Uber increases its prices to ‘surge price’ levels. Customers receive notice when making a reservation that prices have multiplied by a factor of 2x or more. This is done to attract more drivers and to create equilibrium between supply and demand. During New Year’s Eve 2011, surge pricing reached levels as high as seven times the normal rates, causing outrage in response to charges such as $135 for a one-mile trip. Uber co-founder Travis Kalanick responded by explaining, ‘Because this is so new, it’s going to take some time for folks to accept it. There’s 70 years of conditioning around the fixed price of taxis.’

Web pioneer Marc Andreessen said that he would love to invest in Uber. He told CNET, ‘Uber is software eats [sic] taxis. It’s a killer experience. You watch the car on the map on your phone as it makes its way to you.’ ‘The New York Times’ has called Uber ‘clever but costly,’ noting that the cars are ‘particularly nice by livery standards’ and that pickup times were slow compared with traditional New York City taxis and black cars. Several drivers have credited Uber for increasing their potential earnings by 30%. The drivers and riders rate each other after each trip, improving the experience for both the driver and the rider.

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