Phil Ammann
After a major expansion push, Uber Technologies is now in 277 cities around the world, at times eluding longstanding local regulations that hampers the smartphone-based ridesharing service.
Nevertheless, as resistance mounts, Uber is working overtime to negotiate agreements in a number of jurisdictions to meet existing laws, reports The Wall Street Journal, even though those compromises come with a high price tag.
Instead of a strategy of defiance, Uber executives are directing lawyers and lobbyists to try harder to negotiate settlements that bring it into compliance with laws already on the books, even at the expense of profit margins.
Places where new laws are drafted to permit Uber, the smartphone app-based service is more willing to go along with regulations such as the availability of wheelchair-accessible vehicles and limiting maximum fares in its “dynamic pricing” system.
Uber executives say the goal is to make it openly legal in all cities, not just the 22 cities and states they are legal now.
A number of cities have no explicit rules for ridesharing services like Uber, although the company insists it is exempt from traditional taxi regulations since they own no cars and drivers are not employees.
“We are trying to intensify our partnerships with cities, intensify discussions, intensify engagement,” says Uber senior vice president of policy and strategy David Plouffe, a former campaign strategist for Barack Obama ’s two successful campaigns. “We are looking for good ways to compromise.”
The new strategy is a departure for Uber, which is now in its sixth year. Previously, the firm would force its way into new markets, set up a network of enthusiastic drivers and users as a base for grassroots support to face the inevitable opposition from existing taxi services.
“Principled confrontation” was how Uber Chief Executive Travis Kalanick described it.
Uber is not wholly forsaking the old policy, as they continue to battle in a number of places worldwide that are resisting the company’s schedule for profitability in those cities.
The challenge is for Uber investors, a company valued at $41 billion in December, who are counting on the company to expand in international markets at the same rates as it has in the U.S.
Uber insiders tell the WSJ that it expects net annual revenue to approach $2 billion by the end of the year – not counting driver pay.
For example, Uber in San Francisco nets about $500 million annually, with $100 million for the company and the rest to drivers, Kalanick says.
“The stakes have gotten bigger,” says Bill Gurley, an Uber director and partner at Benchmark, the venture-capital firm that was one of Uber’s earliest investors.
As Uber becomes more familiar to residents in larger American cities, Plouffe says, regulators begin to see that the company stands by agreements and executives are less antagonistic if they believe the company can avoid laws that “want us to operate [just] like a taxi company with decades-old regulation.”
“We’re not going to do that,” Plouffe adds.
