Commentary

Uber vs. Taxi – Budapest round

UPDATE: Uber has been banned in Budapest and the taxi situation is bad. Practical info in our updated post. 

The date is January 2016. Five young professionals are standing on the sidewalk in downtown Budapest. I am one of them. We are all on the phone, each trying to call a taxi company or two – but no one gets through. They aren’t busy – they just don’t pick up. We are also trying Uber but the only nearby car took off somewhere else. A few taxis drive by but they are all occupied or just ignore us. There is a serious shortage of taxis on Budapest’s street.

I am shocked because my experiences with Budapest taxis used to be generally positive. But that was before I first moved to London. Back then the taxi system in Budapest was vastly superior to that of London.

In 2007 London you couldn’t just call a taxi company and get a car. When I asked my friends to recommend me one they didn’t even understand my question.

– You don’t have taxi companies with a dispatcher who sends a car to your address anywhere in London?

– Erm… London is … too big for that?

– So you have taxi companies in every borough?

– No, that’s not it.

– What do you do then?

– Well… look, there’s this new service. You send a text to this number and they text you FIVE numbers of cabbies and minicab companies nearby. And you call them.

– One at a time, until someone agrees to come or sends a car?

– Exactly. But it’s easier to just wait and flag down a cab.

In Budapest, on the other hand, there were a dozen different companies to choose from. All with their own pricing and reputation.

You could call the pricey one and make sure that you and your clients get to the airport with a polite driver, who is wearing at least a shirt and tie. You could require a non-smoking car, a lady driver, or an English-speaking operator, and every car was equipped with a mobile card reader before it became the norm. Companies loved that option and so did I.

Or you could save money and call one of the competitively priced taxi companies – but you may have to put up with dog hair, revisionist music, and a rude driver. Definitely a rude driver.

Either way, you could always get a car, anywhere in town, and the dispatcher could tell you exactly how many minutes it would take.

In pre-bust London no one could just call their trusty taxi company. I am not a naturally born entrepreneur but that was crying out for being fixed. But before an old-fashioned taxi company could provide a London-wide taxi service, innovation leaped ahead and ride-sharing apps appeared on the stage.

Everyone is familiar with the long-standing battle between ride-sharing apps (mostly Uber) and established taxi monopolies. It is predictable, fraught with regulatory interference, and resembles the fight between horse carriages and automobiles for the right to ferry customers in the early 20th century.

Amusing, except that protesting carriage drivers managed to set innovation back by ten years in the case of Budapest.

When taxi companies asked for protection

Just recently, the taxi sector was heavily re-regulated in Hungary– on their own request. And no government would ever say no to such a request.

The regulation entailed what they called “guaranteed quality”, meaning a few tweaks on where the flyers can go and when the winter tyres must be installed – and painting every car a particular shade of yellow. It incurred extra costs on the taxi drivers but it also compensated them.

By accepting the new regulations, taxi drivers hoped to be shielded against the arrival of ride-sharing apps – and managed to set the fixed kilometre price approximately 20% above pre-regulation price.

Regulatory interventions of this magnitude never pass without massive unintended consequences.

So the prices went up by 20% – that can only be good for quality, right?

Wrong.

Not only had the regulatory expenses of taxi drivers risen, their incentives to provide quality service have also diminished.

Calling my trusty company for a car in 2015 I had to learn it the hard way. The driver was intimidating, drove straight past the destination address and tried to take a long detour despite my knowledge of the city. When I protested he left me by the side of a busy road, twice as far from my destination as I was before – only in the opposite direction. And I didn’t dare not to pay him for his troubles.

Another sore point for Budapest is the route to the airport. Not only does it lead through a derelict industrial area but there is no political intention for a direct public transport link to the city centre. It is to secure the livelihood of pushy taxi drivers who pay a heavy fee for the monopoly of serving the airport.

Before the price-fixing, airport transfers used to be at least cheap. They are now strictly kilometre-based, which tripled the fare. For EUR 40 it now costs more than a budget flight and drivers’ manners didn’t improve.

But surely, it is safer now

Wrong again.

Drivers who don’t belong to taxi companies, just cruise around for naïve foreigners are called “hyenas” in Budapest folklore. We therefore ask visitors not to wave down cars, just call a company. Not only is it safer, waving down a licensed car used to be more expensive than calling one. Before the price-fixing, that is.

Since uniform kilometre prices were introduced there is no economic reason to call a company. Except, the hyenas are still out there. It doesn’t matter to them exactly how many regulations they don’t follow.

So tourists are not a bit more safe. Quite the opposite. The cars of hyenas are now a comforting shade of bright, regulatory yellow.

But at least availability collapsed

With the set tariff taxi companies find less reason to operate a large dispatcher centre, so calls are often unanswered. We no longer have a reliable service that would send cars to the outskirts.

And we have arrived to the reason why five people could not get a single taxi company on the phone on a busy night in downtown Budapest.

Taxi strikes

In January 2016 taxi drivers have occupied a major traffic hub downtown Budapest in protest again Uber. The trigger was a 20% drop in business year-on-year in December – caused by the proliferation of Uber.

The arrival of Uber has shed light to the degree of regulatory overstretch in the taxi industry worldwide. Licensing became a byword for paying protection money to local authorities. Taxis are paying insane amounts for the privilege to work – from medallion prices in New York to taximeters in London. And they need a lifetime of protection to make their money back.

Safety regulation is also just a fig leaf for farcical regulatory leeching. Pockets of government-friendly companies are filled by providing the licencing and safety check services required by the new law. The only company that supplies the regulatory yellow for Budapest taxis had enjoyed a great year of business.

But in true authoritarian fashion taxi drivers have asked for more regulation on Uber instead of less regulation on themselves.

A customer’s point of view

As a customer I have my own interests and it doesn’t serve me to identify with either of the players in this farce.

I am not naïve about Uber. They are making their deals with national regulators – and they will ultimately make the customers pay for it. They would also seriously exploit their market leading position without challengers. And they would ask for monopoly from the governments if they could.

So as a customer my interest is to have taxis, Uber, and even rental bicycles coexist. I also want competitors for Uber, such as Lyft and other car sharing apps.

So while taxi drivers should fight for less regulation and the right to take Uber clients (currently forbidden by their companies), customers should stop applauding the so-called “safety” regulations and price-fixing by governments.

Pricing and safety checks could be done more efficiently by the companies themselves – as Uber has proven. Except, of course, price-fixing would be called a cartel and it would be illegal.

Photo and video by Drone Media Studio

Feature photo: 444.hu

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4 thoughts on “Uber vs. Taxi – Budapest round

  1. Pingback: Taxi in Budapest | Meanwhile in Budapest

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  3. Pingback: Voted for Fidesz – Impoverished by Fidesz | Meanwhile in Budapest

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