Surge Pricing: Is Transparency the Answer?
For all the ways that Uber benefits New Yorkers, from hailing rides online to finding drivers when no other taxis are nearby, the service has come increasingly under attack for its controversial surge pricing model.
A key feature of the app-based service is a fare system with rates that can rise during periods of high demand, such as during a major storm or blizzard. Company representatives argue that the flexibility to raise rates provides an incentive to drivers to be available to meet the heightened demand.
Uber's use of surge pricing has prompted outcry from New York City’s traditional taxi industry, which has fixed rates, but the city’s top taxi official suggests that the answer is not to regulate Uber exactly the same way it does yellow and green taxis but instead to mandate more transparency.
“Consumers should not get sticker shock at the end of the ride,” Meera Joshi, commissioner of the New York City Taxi & Limousine Commission, said after a panel discussion on technology and the "sharing economy” at City & State’s State of Our City conference. “We’re in the midst of proposing rules that would govern licensing apps, and a key part of that is going to be price transparency on the app for the consumer, so they know up front in dollars and cents exactly what that ride is going to be.”
Joshi said that the commission has heard concerns that riders didn’t understand how much more they would be paying until they arrived at the end of a trip. She suggested that simply informing customers more clearly of their options could help level the playing field.
Matt Wing, a spokesman for Uber, said that the company already goes out of its way to inform its customers of the fares they will pay.
“It's hard to find a business that more aggressively warns customers of pricing changes than Uber," Wing said in an email. "Uber users not only receive multiple notifications when dynamic pricing is in effect but can also easily get a fare estimate for any ride they take using Uber. We agree with the TLC that riders are entitled to advance fare estimates and we urge the them to apply this standard to the entire industry.”
Joshi also said it is important to have a cap on how high Uber can raise fares. State Attorney General Eric Schneiderman last year established a cap on Uber's surge pricing during states of emergency, such as major snowstorms or hurricanes.
But Michael Woloz, an adviser for the Metropolitan Taxicab Board of Trade, which represents large taxi fleets, insisted that more still needs to be done to ensure that traditional taxis are not at an unfair disadvantage when it comes to competing with Uber and similar online, app-based ride services.
"There used to be a clear line between yellow taxis and black cars, which offer prearranged pickups and did not compete for street hails," Woloz said during the panel discussion. Uber has entered the market under the regulatory framework for black cars, Woloz said, but he argued that they operate more like yellow taxis while taking advantage of less restrictive black car regulations—especially when it comes to surge pricing.
“Uber has the ability to hike their rates up or take the rates lower, at their whim, whenever they want,” Woloz said. “They have what’s called a virtual meter that is not regulated by anybody. You take their word for it that it’s doing what it’s supposed to be doing. Yellow taxis have no ability to do that. They have a metered fare. It is what it is. It’s a good thing that it’s a metered fare, because it protects passengers and consumers. But right now it’s not a sustainable model. You can’t have one sector that doesn’t have that kind of regulation, let’s just take pricing controls, and another one that does.”
City and state lawmakers have also been scrutinizing services like Uber. In Albany, Assemblyman Felix Ortiz has introduced legislation to ban surge pricing entirely. In New York City, Councilman David Greenfield has proposed limiting increases to double the base rate.