Earlier today, on-demand car startup Uber struck a deal with the California Public Utilities Commission to waive some fines and remove a cease-and-desist order, giving it the go-ahead to continue operating in the state. The agreement gets the regulator off its back, which is big news. But the bigger news is that the deal opens the door for Uber to roll out a ride-sharing service of its own.
CEO Travis Kalanick previously had teased the idea of launching a ride-sharing option in a backstage interview at TechCrunch Disrupt. Now, however, with the regulatory risk associated with ride-sharing out of the way while the PUC reviews potential new regulation, Kalanick says the company is going to engage in competition directly with companies like Lyft and SideCar.
In its blog post on the subject, Uber said:
“Today, we reached an agreement with the CPUC confirming that Uber is legal in California and suspending the prior complaints and fines levied against the company. More than that, the agreement states that ride-sharing — or rides provided by drivers not specifically licensed to drive a limousine or taxi — is legal, too. This paves the way for Uber to begin offering ride-sharing services in California in the near future.”
But Kalanick was much less coy on the subject when I spoke to him by phone, telling me that there’s no question about it — his company will indeed be rolling out its own low-cost ride-sharing offering in California. According to Kalanick, that means the company will be able to bring down the cost of its UberX service even further, while still offering drivers more money than they could be making driving for those other services.
How will it manage that? It all comes down to data.
Uber already has a pretty extensive history in the markets where it potentially would be competitive against Lyft and SideCar — that is, in San Francisco and L.A. With all the data that it has collected during that time, Kalanick believes Uber will be able to more efficiently connect drivers with passengers. When it comes to ride-sharing, Kalanick says drivers have a choice about who they work with, and thinks they’ll choose to work with the company that will help them bring in more money.
“Obviously, Uber believes its system is far more efficient,” Kalanick told me. That means more rides per hour, and more cash in drivers’ pockets. All in all, he believes drivers will be able to collect 20-30 percent more per hour driving for Uber as opposed to one of the competing services. After gas, tolls, and whatever else, he estimates that could mean 40-60 percent more in take-home cash.
Uber also believes that it will have an operational advantage when it comes to getting drivers up and running on its system. While Lyft especially has had a difficult time recruiting qualified drivers, training them, and getting them on the road to keep up with demand for its service, Uber has spent the last several years learning how to efficiently bring on new drivers in cities around the world.
“We’ve on-boarded tens of thousands of drivers,” Kalanick told me.
For now, Lyft and SideCar have a running head start in San Francisco, and one could argue that they’re probably already eating into Uber’s business here. Uber, after all, recently lowered its fares and expanded UberX access in what seemed to be a defensive move aimed at retaining customers in the city. But now it appears that Uber is moving back to playing offense. How Lyft and SideCar will fare against the more established service pushing onto their turf is anyone’s guess at this point.