Voodoo Economics !

Spare a thought for the folk who live in Queanbeyan, Canberra's sister city that straddles the border with the Australian Capital Territory.  Canberra has decided to license Uber and that will come into force from the end of October, while at the same time New South Wales has started a crack-down by suspending the registration of Uber cars for three months for " using a private vehicle for business purposes " - as the legal jargon for plying as a Uber cab is termed.

So far the details are sketchy, but it looks like the taxi business will be divided into two distinct sectors.  Uber cars will only respond to phone bookings and will not be allowed to pickup customers hailing them from the streets, and the regular taxi fleet will serve both the streets and fares collected by availability from taxi ranks.

Regulations yet to be spelt out will come into force on insurance and the Uber cars will be required to submit to regular safety inspection regimes.  It is proposed that the fee for a taxi plate used by the regular taxi industry will be substantially reduced - in light of this new form of competition.

Now that the ACT is grasping the nettle and settling the Uber question it seems likely that this form of licensing will become universally adopted in other Australian states, but it  does deliver an ominous message to all the trades that have sheltered behind the security of a licensing system that has protected them from unfair competition.

Basically, Canberra is halving the taxi business and vastly reducing the former value of a taxi plate.  Because each state carefully limited the number of taxi plates on offer they became an item of trade - which many owners regarded as their form of superannuation.   In Sydney, a retiring owner of a taxi plate could sell for hundreds of thousands of dollars and usually the cab was working for the full twenty-four hours of each day.

It was common for an owner to hire out the cab for an eight hour shift on the basis of a fixed amount.  He delivered the cab with a full tank of petrol, and it returned in the same manner.  The hirer was entitled to whatever fares collected during the shift and the owner received the lucrative hiring fee.

The Uber intrusion sent taxi plate values tumbling and now the prospect of a reduced and shared market is going to put further pressure on the asking prices for those quitting the industry.  The holders of taxi plates purchased under the old regime will suffer a catastrophic loss and most will feel betrayed by the government.

In essence, Uber seems to be just a licensed version of the " Gypsy " cab fleets that operate in major cities.  Private citizens desperate for work install temporary taxi signs on their cars and cruise the streets looking for business.  They are a bane to legitimate taxi operators and suffer arrest and harassment from the police, and often they entirely lack insurance cover.

It was quickly evident that Uber was going to force it's way into the taxi market and it seems that few governments were prepared to use the full force of the law to stop them.   The fact that they have succeeded will have entrepreneurs looking closely at other guarded market categories and we may be about to see voodoo economics intrude into the entire spectrum of licensing.

This Uber cave-in may be start of a new business era !