Uber will now add a $2 surcharge to completed fares on its Uber Taxi service, which is the latest big blow to taxi operators.
Today, Uber announced a change to its pricing scheme in a bid to push users away from traditional taxi services and towards the company's own UberX option. According to an email from the company to Uber users in New York City, Uber will now add a $2 surcharge to completed fares on its Uber Taxi service.
Previously, the company's Uber Taxi service worked as a simple taxi hailing app: After dropping a pin and arranging a pickup from a regular yellow or borough (green) cab, riders pay their fare with cash or card like any other cab, skipping the Uber app altogether.
It's convenient and straightforward and makes you wonder what would have happened if NYC's Taxi and Limo Commission had figured this out years ago.
There's nothing wrong with Uber charging users to use its app, as it's got to make money somehow, and users can decide whether or not that service is worth it. But in its announcement, Uber said that it added the surcharge "on behalf of yellow and boro taxi drivers who utilize the Uber platform," despite the fact that the $2 is charged through Uber's app and goes to Uber directly.
This is some seriously smarmy language. Aside from the fact that Uber suggests drivers were clamoring to charge customers more, how is Uber collecting $2—a princely sum for a single-time use of an app, by the way—an action done on the behalf of drivers that aren't seeing a dime of that revenue?
Uber argues that by charging riders an app surcharge, the company can ensure it doesn't have to charge drivers for its service. In an emailed statement, an Uber representative said that "there is no fee associated with UberT for drivers, however to cover costs associated with provisioning the platform, riders are subject to a $2 booking fee that is passed through the driver to Uber."
The fee already exists in Washington, DC and Chicago, and Uber argues that the surcharge is worth it because of the value provided to drivers in terms of getting more fares through the app.
The thing is, Uber explains in the same statement why the taxi drivers it claims to be working for are going to get burned by the new policy. Emphasis Uber's:
We want to take this opportunity to introduce uberX, the low-cost Uber. Cars on uberX are hybrids or mid-range vehicles in a variety of colors, and with rates cheaper than an NYC taxi, there's no better way to get around!
So let's say the new surcharge saves taxi drivers money—the argument Uber makes—because Uber now charges riders directly to subsidize the service, instead of introducing fees directly to drivers. The problem is, since Uber just ensured that taxi rides are now even more expensive than UberX, a lot of riders will eschew UberT altogether.
A representative for NYC's Taxi and Limousine Commission said that Uber's language is misleading.
"Drivers will not receive any of the $2 charged to passengers, which will be retained in its entirety by Uber," TLC spokesperson Allan J. Fromberg said in an email. "Uber is not charging passengers $2 'on behalf of' drivers. We found their use of the term 'on behalf of drivers' to be disingenuous, and its characterization of the increase as being of benefit to this low-income group when it is not in fact was quite frankly jarring."
Uber and the TLC have tussled over ridesharing for the last two years, and one clear trend has emerged: the value of NYC taxi medallions, which are required to operate each of the city's yellow cabs, has been in decline. At the Times, Josh Barro reports that the price of an individual medallion in NYC fell to $840,000 in November, down from a peak of $1.05 million in June 2013.
This is of natural concern to taxi operators, who are seeing the value of their investment—which is no longer as big of a barrier to entering the taxi business—fall at the same time that ridesharing alternatives like UberX are pushing fares lower. Uber's standard response is that cheaper fares are better for riders, even if the company's claims about how much drivers can make are up for debate.
Now, Uber has made UberX even more attractive to riders, not by reducing prices through freer competition—a good thing for consumers—but by adding an excessive surcharge precisely to increase the price gap between a traditional service that it can't monetize well and its own service, which the company has far more more control over.
Editor's note: This post was updated to include comments from TLC's Fromberg and comments from Uber.
Update 2: A reader mentioned that Uber Black flat-rate airport services also got a rate hike today, from $85 to $100. Email below: