Why consumers need to fight attempts to ban the Ubers and Airbnbs of the world

PUBLISHED : Wednesday, 02 November, 2016, 2:17pm
UPDATED : Wednesday, 02 November, 2016, 10:41pm

A long, long time ago, almost before the semiconductor was invented, the columns of this august newspaper would occasionally report the arrest of a “pak pai”, or white plate – a private car driver, who was using his own car to provide an unlicenced taxi service. Sound familiar?

It is exactly what Uber provides today – except that passengers are more easily and less visibly found through the use of the app. Uber is so useful that it is barely recognised that it is actually illegal in Hong Kong, with even off-duty police officers of my acquaintance being fans of the service.

Key industry disrupters, like Uber and Airbnb, are taking flak as the Empire Strikes back.

Large stakeholders in disrupted industries have significant capital bases invested in their old economy businesses and have a lot to lose. The vested interests are taking to the courts with any excuse to disrupt the disrupters.

Uber was recently the victim of a UK employment tribunal ruling that now requires its drivers to be entitled to statutory holiday pay, paid rest breaks and the minimum wage.

The unions hailed the decision as a “monumental victory” but drivers and customers are upset. The drivers like it as part of the “gig economy”; long-suffering customers like the cheapness and convenience.

However, some drivers now rely on Uber as a job – never mind that the original concept of using the Uber app was that it provided extra, marginal, flexible work.

Airbnb is already fighting pitched battles in its hometown San Francisco as well as in Amsterdam, Barcelona and Berlin. New York City passed a law last week to fine the company up to US$7,500 for illegal short-term listings. The city is the company’s largest market in the United States generating about US$1 billion in revenue last year.

The disrupters are unlikely to have their wings permanently clipped by powerful vested interests

The two sites are merely platform booking sites after all, combining buyer and seller in a way and at a price that the original industry was unable to match. The banning especially protects the fat cats; expensive taxi services and pricey hotels, and does nothing for the average consumer who has delighted in the cheaper alternative services that these sites provide.

The existing services are still a genuine alternative – just. I arrived at an Airbnb in Boston last month, accessed down a dark alley, to find that it was like a student bedsit, with dog hair everywhere, and furred toothbrushes in the bathroom. I couldn’t wait to get out of there until I realised that the rack-rate of every hotel within five miles was US$400 a night.

There will be skills that it will be a shame to lose – as were coopers and blacksmiths. Take a London taxi driver who has to study for three years to learn “The Knowledge”; or the location of every street, square and monument in the big city. Today, any old idiot with a some experience of Google Maps can offer a “good enough” service for much less cost. It is not surprising that the disrupters have many enemies, not only in Main Street but also in Town Hall.

The development of the mobile telephone and satellite television in the UK occurred at lightning speed not because providers profiteered off the early adopters of a new technology but because they heavily subsidised the early services.

In the US, mobile phones took much longer to take off, as the providers did not want to sponsor the customer – guess who did a better job in achieving mass-market adoption?

On the other hand, I recall IBM charging US$10 for a simple power cable for the early personal computer. It was only when the computer market was disrupted by machines assembled by enterprising entrepreneurs in the back streets that the manufacturers realised that they would do better by making quality branded products at a price the mass consumer could afford.

The disrupters are unlikely to have their wings permanently clipped by powerful vested interests taking advantage of obscure and arcane local laws and regulations. They will be fighting back – one reason Uber is actively experimenting with driverless cars is that it will dispense with the driver completely.

The battle is joined but it is not going to be a one-way street for either side and the successful ones will have to keep innovating to survive. The stratospheric stock market valuations for these dot-com darlings will come under scrutiny. But as consumers we had better watch out and start using some of our consumer power – or we could end up losing our favourite apps.

Richard Harris is an investment manager, writer and broadcaster – and has lived in Hong Kong for nearly half a century.