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Did LTFRB drive Uber away?

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Don’t Drink And Write

If you have been a regular rider of Uber, you already know that the American ride-sharing company is pulling out of Southeast Asia (which, of course, includes the Philippines) and ceding its business in the region to rival Grab. In return, Uber receives a 27.5% stake in Grab. While the whole deal undergoes reviews in key markets like Singapore and Malaysia, the fact is that Uber has essentially thrown in the towel. It is no longer interested in competing with a formidable opponent and in designing programs that benefit the riding public it worked so hard to win over.

The scheduled shutdown of the Uber app in our market was supposed to be April 8, but the so-called Philippine Competition Commission (who knew something like this existed?) was protesting the development over the weekend, saying Uber should continue operating in the country while the newly formed government body conducted an assessment of whether the Grab/Uber transaction was fair or ultimately anticompetitive. Now, it is doubtful such a commission has a real say in the matter, but it’s interesting how the “merger” is creating ripples around the region.

The most impassioned reactions predictably come from Uber customers, who decry the unfortunate news and now accuse the Land Transportation Franchising and Regulatory Board (LTFRB) of being largely responsible for Uber’s retreat from our territory. You can read these sentiments on social media.

“If the LTFRB didn’t suspend Uber for a month and slap it with a P190-million fine, the company wouldn’t have decided to leave.”

“If the LTFRB didn’t make life difficult for Uber with its strict regulations, the app-based transport service provider would be here to stay.”

Guys, snap out of it.

This was a region-wide business decision, and its Philippine operation was but a fraction of Uber’s total asset in all of Southeast Asia. To say its fortune (or misfortune) in Metro Manila forced Uber to exit in haste is laughably inaccurate. The writing had been on the wall for quite some time. The company had been bleeding huge amounts of money in spite of its rosy valuation. In 2017, it lost a total of $4.5 billion, significantly worse than the $2.8-billion deficit it incurred in 2016.

All of this is the necessary price Uber has to pay for the gung-ho business approach it has adopted for itself. Providing ride subsidies and awarding bonuses to drivers are costly tools it uses to entice commuters (and drivers) into switching from regular taxicabs to Uber cars. This trick would work if there was no competition. But there is always competition. And always a strong one at that.

Uber’s surrender to Grab — which Uber’s CEO is trying to spin as a victory — follows similar paths the company had taken in China and Russia, where it had also agreed to pull out in exchange for stakes in its local rivals (18% in Didi Chuxing and 37% in a joint venture with Yandex).

The LTFRB is by no means unblemished in its track record of dealing with transport network companies. The agency could use a lot more urgency in its actions, for one. The fast-shifting and technology-driven transportation industry isn’t going to wait forever for slow-moving government officials to figure out how they want to regulate nontraditional transport service providers. And now that Uber is on its way out, the burden falls squarely on LTFRB’s shoulders to find a comparable alternative that will fill the massive void that Uber is expected to leave behind.

Still, whatever happened to Uber being dedicated to “unlocking” our cities and wanting to help solve our transport problems? The reality is that it has a history of fleeing at the first sign of trouble.

And what about the thousands of Uber operators who purchased service cars in hopes of doing this business for the long haul or at least until they recouped their investment? Whose fault was this? Who kept accepting drivers and activating cars in spite of the LTFRB’s unequivocal cease-and-desist order last year?

With its Southeast Asian pullout, it is said that Uber is merely cutting its losses in preparation for its initial public offering in 2019. I say it was delusional for actually believing its reckless business model could work — disrupting target cities, operating outside of the law, and praying public adulation could somehow exempt it from legal accountability. On the contrary, that’s the best formula for a spectacular fiasco.

Nobody drove Uber away but the contumacious company itself. It wanted a piece of cake but got served a giant slice of humble pie. And now we’re almost back to the dark ages of commuting.