Internet Technology Explained Web Culture

What Is Uber and Why Is It Threatening Traditional Taxi Services?

Matthew Hughes 04-07-2014

The London taxi driver is an institution, with their distinctive, black LTI taxis, and the drivers who can take you to anywhere in the sprawling mass of England’s capital city without even glancing at a GPS system.


It’s hard to imagine London without its taxis. But last month, they went on strike, blockading the city and rendering some parts of central London utterly impassable in a move that was set to cost the London economy almost £125m ($212 USD).


Why? Because Uber has landed Hire A Car In Most Major Cities Worldwide With Uber And MyTaxi You'd expect by now that hiring taxis with an app on your fancy GPS-enabled device to tell the drive your location would be an everyday event, right? Wrong. Read More , and it’s fundamentally changing inner-city transit. And some might say, not entirely for the better.

But What’s That Uber Thing?

Let’s be very clear about something. Uber isn’t a taxi service. No, you wouldn’t catch Travis Kalanick – the founder of Uber – saying that. They would likely describe the service as one that connects passengers with willing drivers. Admittedly, the line between that and traditional taxi services is one that is incredibly blurred.

The way it works is pretty simple. A passenger calls for a car with a smartphone running the Uber app. An Uber driver then is called to the passenger’s location, who then takes the passenger to their destination. No cash is exchanged – payment is taken automatically from the passenger’s debit card – and no tip is required.



If demand starts to outstrip supply – such as after a sports event, or on New Years Day, or even after extreme weather – the price starts to spike precipitously. This is called ‘surge pricing’, with the cost of a ride often being multiplied by a factor of 9. This means that the affordability of Uber can vary greatly.

It’s also worth noting that Uber isn’t a novel or unique concept. Sino-British startup Texxi launched a similar service in 2006, prior to the launch of the iPhone. Recently, Uber has seen competition from the likes of Lyft and Sidecar, although these companies haven’t enjoyed anything like the same success of Uber.

What Does It Take To Become A Taxi Driver?

Firstly, a disclaimer. I’m going to talk about the Uber/Taxi conflict with an emphasis on London, and the UK taxi industry at large. However, what I write about the taxi industry will be mostly relevant across the developed world.


But first, have you ever thought about what it takes to become a taxi driver? It’s a long, laborious and expensive process. Before you even think of picking up a passenger, you’ll need a full, clean driving license. It’ll also help if you have no prior criminal convictions, although not essential.

The first step involves getting a roadworthy, reliable car. With a few minor exceptions, a majority of taxi drivers own their cars outright, whilst some hire the car from the taxi company they affiliate themselves with.


The second step involves getting insurance, which is ludicrously expensive. According to the 2013 Insuretaxi Taxi Driver Survey, the majority of taxi drivers spend more than £1000 per year on insurance, with 10% of those surveyed saying that they spend more than £3000 per year.


Finally, a taxi driver needs to be registered with a local authority. This alone can be quite expensive, with annual fees usually around the £200 mark. If a driver chooses to work with a taxi company, they will also have to pay a yearly rental for a taxi meter and radio, which often costs around £500.

All things considered, being a taxi driver is expensive. According to the previously mentioned Taxi Driver survey, the average take-home pay for a taxi driver is around £300 and £500 per week. This gives us an average monthly salary of between £15,600 and £26,000 per annum.

It’s not much better outside of the UK. In 2011, the New York Taxi and Limousine sold two taxi licenses at auction for $705,000 with the average price of becoming a licensed driver having tripled since 2002. By 2013, the costs of becoming a licensed taxi driver in New York had surged to $1,000,000.



Let’s compare that to Uber.

You don’t need special Taxi driver insurance. You don’t need to be registered with a local authority. The upfront costs are comparatively minimal.

Furthermore, the costs of operating as an Uber driver is entirely proportional to the amount of work you do. There are no monthly fees, nor are there any membership dues to be paid. Uber just take a small commission from the driver’s earnings.

This – perhaps rightfully – has irritated traditional taxi drivers, who see Uber as circumventing the regulation that ensures that only qualified, safe drivers carry passengers.

It also means that taxi drivers are directly competing for a limited pool of business with those who have circumvented the long, expensive and laborious process of becoming a taxi driver.

The Uber Experience

Perhaps the biggest threat to the traditional taxi doesn’t come from the massive surge in competition, but from the fact that the Uber experience is actually pretty good.

All you need is a smartphone and the Uber app. Press a button, and a car will pick you up. You don’t even need to go to an ATM – it just charges your credit card.

Compare that to a traditional taxi firm. Unless you hail a cab from the street, you need to call a dispatch office. If you’re in a foreign country where you don’t speak the language, this can be immeasurably challenging.


Then you need to be able to articulate where you are located. If you’re in an unfamiliar place, this can be difficult.

And let’s not forget that, you need to have cash to hand. Many taxis do not accept credit cards, and the ones that do generally charge a hefty surcharge.

Simply put, Uber has created an automated, consistent process for booking rides. This process works in every city served by the ride-sharing titan, is cash-free and requires no language skills. For consumers, this is an incredibly enticing proposition.

What Does Uber Mean For The Traditional Taxi Industry

Uber has already won the ridesharing race. The LED signs that identify cars operated by the company have spread to Europe, South Africa, Australia and even the industrial powerhouses of China. They’re everywhere, and they’re not going away.

For the drivers of taxis, Uber presents a great opportunity to break from the bureaucracy of taxi companies and local authorities, and to greatly reduce the cost of doing business. This means more money in the pockets of drivers.

For local authorities and the taxi firms that are entrenched in most cities, they present a very real and present threat. Uber is poaching both customers and drivers, and will continue to do so until Uber is stopped legislatively, or with the incumbents offering a service that rivals Uber in experience. In the defense of the Taxi industry, they’ve wised onto this and have collaborated to work on applications that compete with Uber, such as MyTaxi, which we have previously reviewed Hire A Car In Most Major Cities Worldwide With Uber And MyTaxi You'd expect by now that hiring taxis with an app on your fancy GPS-enabled device to tell the drive your location would be an everyday event, right? Wrong. Read More .

For the consumer, Uber offers a consistent and beautiful taxi service, although one not without its issues. Uber drivers have been implicated in a number of major scandals, including an attempted kidnapping, and a tragic hit-and-run incident that left a young girl dead. Despite the safeguards that Uber have put in place, they don’t quite compare to the checks that traditional taxi drivers have to go through. There are even mobile apps that make it easy to report unprofessional cab drivers.

For more, check out our look at whether Uber or Lyft is cheaper Is Uber or Lyft Cheaper? Let's Find Out! Is Uber or Lyft cheaper? Both Uber and Lyft have their pros and cons, but for most, it boils down to that one question. Read More .

Photo Credits: Angry businessman boxer Via Shutterstock, London anti-Uber taxi protest (David Holt), Uber Bogota (Alexander Torrenegra), Taxi? (Beverley Goodwin)Taxi, Taxi! (David Morys), Uber (acanyi)

Related topics: Travel, Uber.

Affiliate Disclosure: By buying the products we recommend, you help keep the site alive. Read more.

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  1. Ron Farkas
    February 2, 2018 at 8:56 pm

    Going to Honolulu in April, already have shuttle service booked and paid in advance. However after viewing the Uber service will be canceling and calling Uber. Only question, how much advance time is needed? Also are the rides scheduled on fixed rates?

  2. Lauren Hearn
    December 20, 2017 at 1:31 pm

    Would like to correct this article while some information is incorrect. As an uber / lyft driver in Philadelphia, Pa there was a full driver license report ran and a full background check done on me. As well as i had to pay for a different insurance to be added for ride sharing. I put the milage on my own car.Have to service my own car.Have to pay my own gas. Im sorry people feel it is a bad thing for taxi cabs that a company become competition for them. I am a single mom of 4 kids. This job helps pay for the roof over their head and the food in their mouth. It has opened oppurtunity for me to create my own hours and be there for my children while supporting my household.i also was able to lease a brand new car with uber. As many taxi cabs license a taxi and allow foreigners to rent their license and drive under their name without background checks these ride share companies do not play with a criminal history you are not driving for them. So lets discuss again how opening up jobs in your country for the people of your country for hardworking, non criminals with good driving records to better their lifestyles is a bad thing. If the taxi cab driver is working for a failing company then apply at a successful company ohhhh thats right most cant because they are not legal and cant pass what is needed to legally drive, they dont have cars to drive people in, and of course cant pass a background check. Many of legal taxi drivers have switch over to work for our company. This job changed my life , took me off welfare, gave me the ability to buy a house a new car. My kids have the first wonderful Christmas ever.Im paying taxes just like anyone else in every situation. This company made it possible to be mom and dad to my kids. Something i couldn't do on a teachers salary. One thing i do agree is that if ur a regular customer surge pricing is a little much. It snowed city was dangerous. People i pick up for a 10 ride was a 30 dollar ride. That can be hard when u budget ur usuage for the week. Something maybe they can worl on for customer's. As far as they city is concered parking garages are 300 a month for parking cheapest car insurance 250 a month full coverage plus car payment gas and agravation its half the cost in the city and easier to use rideshare. As well as out of city people in nj that can afford to get places where buses and taxis dont run. They take drunk drivers off the road a lot more than taxis ever did at affordable rates.these companies make for a better America its a shame people wanna take that away from us.

  3. tootsieburpee
    May 29, 2017 at 11:57 am

    The worst part about uber is the "surge pricing". That's when during periods of excessive demand, when there are more riders than drivers, Uber increases its normal prices.

    It has almost made using an Uber too expensive.  About 4-5 years ago when Uber was still new, I would pay $30 for a ride to the airport 10 miles away. The other day it cost me $130!?
    Sadly, here in the US, it seems that owning your own car is the way to go, especially since it's getting cheaper and cheaper while taxis like Uber and Lyft are getting more and more expensive. 

    Driving only costs me like $100/month total. Sometimes less than a single uber ride. I use GasBuddy to help me find the cheapest gas. I use Insurance Panda for $25/month car insurance. And I drive a used Honda Civic.  Doesn't get any cheaper than that!

    Next time I'm faced with the decision to hail a taxi or not, I'm seriously going to think twice.  Driving your own car is just so much cheaper!

  4. Patricia allen
    May 24, 2017 at 1:05 pm

    What does UBER stand for?

  5. Neil congson
    January 5, 2017 at 9:39 pm

    Hi i live in antioch and still waiting for my social security, is their any chance that i can work in uber even though i still dont have my social security?

  6. G F Sharpe
    December 10, 2016 at 7:48 pm

    I hope that these uber drivers pay full income tax and N/Insurance and have public liability insurance but i doubt it .

    • Beck
      October 11, 2017 at 2:04 pm

      Why do you hope that.
      Government def: Hierarchy of Aristocrats---
      Def: a group of people designated to rule by inherited wealth.
      An illusion of intelligence

  7. debbie
    September 12, 2016 at 8:09 pm

    when someone presses the "Button" for an uber driver how does that route to anyone person. How does the uber driver receive the calls? is there a dispatch center or does the request go to the closest uber registered user?

    • Steven
      November 8, 2016 at 11:42 am

      In case this hasn't been answered yet, the Uber Driver has a app open designed for drivers. When they are ready to work, they open the app, slide a bar saying they are online then the app waits to receive a request from someone using the Uber Rider app. If a rider requests a ride the app will find the closest "online" driver and notify each other as long as the driver accepts the request.

  8. 20-Cent
    August 30, 2016 at 10:26 am

    What are the insurance implications of an injured passenger in an Uber vehicle?
    If the driver is not insured for hire and reward but the driver is accepting reward are the vehicle and its passengers even insured?

    • Steven
      November 8, 2016 at 11:44 am

      In case this hasn't been answered already. Uber is paried with a third party insurance so if an Uber Driver is online they get a certain amount of insurance and if the driver has a rider in the car its another amount of insurance. Right now if I have someone in my car in my state (US) I have $1M insurance on the rider. No fee for the driver.

  9. ronald
    May 26, 2016 at 10:48 am

    Who is going to use cabs?Foreign drivers that don't even understand english,very dirty vehicles,and double prices. Was time to stand together and do something for our future and people. Hopefully taxi cab companies won't last longer ,this will be the end !! Go for Uber guys and help our communities to grow creating new jobs as well as our savings.

  10. Anonymous
    May 4, 2016 at 3:20 am

    this is basically an illegal cab service

  11. Ida
    March 17, 2016 at 3:11 am

    I first used Uber in NYC in early December where I couldn't hail a cab and after I finally did he acted like a jerk over my Christmas shopping packages. I then downloaded the Uber app and had a great experience. I then used it five more times during my stay in the big apple and I couldn't say enough. I have now been using it for months in my travels to LA, DC, NO and have had nothing but positive rides. Thanks for making the app and if the cabbies were a bit nicer perhaps they could become uber drivers. As for the Kalamazoo incident, there is always a bad apple. I'm sure there are horror stories involving cab drivers as well. It sucks that the world is like this but it is our new reality.

  12. Jimmy
    February 23, 2016 at 8:22 pm

    Kalamazoo Killer Uber Psycho probably sick of an iPHONE based No Tip Debit card No Tip society ......I wonder if they have their photo license displayed , or at least their Socialized Medical card on hand for their passenger feel-good biz .
    Ya Git What ya want when ya don't pay Full Boat , and go for Aces over Eights !

  13. Jimmy
    February 23, 2016 at 8:18 pm

    Keep your Euro-Trash out of America where a good TIPS is ToInsureProperService , and Not Serial killers , and rapists !

    • Anonymous
      April 28, 2016 at 2:49 pm

      All white Americans are (descendants of) Eurotrash.

      • Arnold
        July 24, 2016 at 11:31 am

        Here is a tip for you. Wind your neck in!

        • sam`
          October 27, 2016 at 11:49 pm

          what is wind in you'r neck?

  14. amanda
    February 23, 2016 at 8:43 am

    Uber the best thing since the internet arrived. Finally a real community app from the Internet that works for betterment of all. The consumer finally has choices in car transportation. Yellow Cab is finally being deregulated. 35 yrs after the airline deregulation. But it is finally here. Try uber! This is high tech finally for the little guy- whether you are already driver or the passenger(s)

  15. Vic Chieco
    February 23, 2016 at 7:10 am

    Uber is not so simple that people care to try it people would rather hail a cab then stand in the middle of the street trying to figure out what to do with it frankly they look like idiots.I drive a cab and.people are coming back so many say ubers service sucks.The drivers do what they want ..speed let people out dangerously in the middle of the street..

  16. Patricia Spring
    February 23, 2016 at 1:34 am

    I don't think that I would trust taking a ride from an unscreened taxi driver-I like the good old taxi drivers that have a clean driving record and have to go through screening to become a taxi driver!
    Look at what has happened in Michigan-it's not right! They should be outlawed!

  17. Sue
    February 22, 2016 at 7:50 pm

    Well definitely scary especially when someone can be murdering people between pickups and drop offs with out the riders even knowing. KALAMAZOO COUNTY, Mich. (NEWSCHANNEL 3) - Suspected gunman Jason Dalton was working as an Uber driver before, during and after he allegedly shot eight people across Kalamazoo County.

  18. christian
    February 22, 2016 at 6:33 am

    to save the original london taxi, get the outmoded mafia like costs down. first why dont the cab drivers start their own cooperative insurance co. all insurance co.are by definition akin to mafia like legalised exstortion,they still live in corporate fantasy world of huge wages and benefits for management.let the taxi drivers run their own insurance,why are local incompetent councils allowed to milk taxi drivers ? who does the licens fee benefit ? or is it cash for council trips to casinos and bordellos in the westindies. make it cheaper and more modern to be a taxidriver,skip the age old burocracy ,and london taxis will survive,or go on whith age old stupidity ,and they will surely go to that great scrap yard in the sky.

  19. hanginjudge
    January 27, 2016 at 9:30 pm

    Hmm! Uber in America? I wonder how long it will be before our wonderful politicians step in to make it illegal in order to protect the taxi drivers! Meddling politicians can not stand the sight of free enterprise unless there is something in it for them.

  20. Shahid
    December 18, 2015 at 6:51 pm

    can any body abbreviation of UBER please

    • Kamimyla
      February 22, 2016 at 9:17 pm

      So true.

    • Arnold
      July 24, 2016 at 11:43 am

      Utility Bearer of Expeditious Rides

  21. TK
    November 16, 2014 at 2:02 pm

    Beg to differ here ... the so called negatives that you are all commenting on are not worth mentioning. My experience with UBER and their app has now been multi-national and all my colleagues, friends and relatives will no longer go back to the TC industry for anything. From what I have seen so far the surge pricing only comes into effect when there isn't enough cars to cover the location you are in. I have only been in surge pricing situation once since February and at that time it was a minimal jump and to be honest I was glad to get out of the particular area at that time. It was a night that was so busy in the streets the TC's were not even stopping BUT I went around the corner from the crowds and have a UBER pick me up in 7 minutes. It was a comfortable ride and a witty driver that kept us in conversation all the way home .. and NOT like a traditional TC where they talk to their friends on the phone, in some other language, while driving you home.

    You have all our support UBER :-)

    • Kaitlin. C
      January 25, 2015 at 1:27 pm

      Hello TK,
      I was wondering if I was able to grab your name as I am doing an oral presentation for English on Uber (as we have to do something that has been in the Australian media in 2014 to current) . If its okay I was hoping to use your story as an anecdote as part of my section on individuals experiences with the company, this will help support my argument expressing how Uber should be legalised in Australia.


  22. A41202813GMAIL
    July 6, 2014 at 5:29 am

    Maybe I Need To Be "Educated" On This Subject, But These New Services ( NS ) Are Way More Expensive Than Traditional Cabs ( TC ).

    Most Customers Are Not Willing To Be Fleeced By ( NS ), So, I Do Not See Them As A Huge Threat To ( TC ) .

    Am I Wrong ?


    • Matthew H
      July 27, 2014 at 11:25 am

      Er, not necessarily. They can be more expensive. They can be cheaper. There are a lot of factors to consider (such as surge pricing).

      But Uber has never really been concerned about cost. Not really. The real way Uber will compete is with scale (beating the traditional taxi companies with sheer numbers of drivers and cars) and convenience (being able to get a ride with an app, and knowing the cost beforehand). You don't even need cash to use an Uber car. That's why it's going to beat traditional cabs.

    • A41202813GMAIL
      July 28, 2014 at 9:21 am

      Hugely Sharing Services, Like Minibuses, Are The Only Way I Can See ( TC ) Being Beaten.


  23. Eric Masaba
    July 5, 2014 at 11:25 am

    While Uber clearly are referred to as a "ridesharing" startup, they have not showed this yet.
    They are a "taxi hailing" business or more primly "A Transportation Network Company".
    Another company (probably with the same backers) called "Lyft" undertakes this function.

    Both companies are not pioneers in this space in anything but the sheer volume of cash brought to bear. They may be believing their own propaganda in the "novelty "stakes.

    • Matthew H
      July 27, 2014 at 11:22 am

      Although, is it possible that they only market themselves as a 'ridesharing' startup to avoid the fact that Uber is the world's largest unlicensed taxi company in the world? ;)

  24. Jim
    July 5, 2014 at 9:34 am

    Might be good to check the Uber website.

    Yes UBER provides liability, collision, and uninsured commercial insurance if your own policy does not cover you.

    • Matthew H
      July 27, 2014 at 11:21 am

      Good to know!

  25. dragonmouth
    July 4, 2014 at 7:54 pm

    "You don’t need special Taxi driver insurance."
    That only seems to be a big advantage. All that has to happen is the Uber driver has an accident while carrying a paying passenger. Said passenger with the help of a litgious personal injury lawter (AKA ambulance chaser) can own the driver for the rest of his natural life. Without specific taxi driver insurance, the driver's liability is unlimited. I don't know about the UK but in the US private auto insurance does not cover commercial use of a private vehicle. Any half-competent lawyer can prove that Uber is a commercial use of a private vehicle. So while "no special taxi driver insurance is needed", it is a VERY GOOD investment.

    While no taxi license is needed by Uber drivers at the present time, once Uber and similar services become more common place, municipal authorities will see Uber as a new revenue stream to tap and they will impose all kinds of fees and regulations on Uber drivers.

    New York City and other large US cities have had a service similar to Uber for many years. It is called Livery Taxi, also known as Gypsy Cabs. They provide service in neighborhoods which regular taxi drivers refuse to visit. The local taxi commisions allow the gypsy cabs to operate but constrain they with many restriction such as where they can and cannot operate, gypsy cabs cannot be hailed on the street, the ride has to be pre-arranged by phone, etc.

    • Matthew H
      July 27, 2014 at 11:27 am

      Oh, I agree that eventually municipal authorities will crack down on Uber. Give it time.

      Livery Taxis actually strike me as how cabs work in the UK, for the most part. They're affiliated with a local area (although, they can operate outside that), and mostly they can only be hailed by phone. They're cheaper than the (much rarer) hackney cabs which can be hailed off the street.