April 2018

With Uber, there’s always more bad news just around the corner

by Mike Beggs

At a price of no less than $245 million, Uber wrestled a big monkey off its back in February by settling its trade secrets case with Waymo over the alleged theft of autonomous vehicle technology.

But the controversy surrounding its self-driving cars didn’t die down for long, with the devastating news that one of these vehicles killed a female pedestrian in Tempe, Arizona, on March 18. Elaine Herzberg, 49, was struck while walking across the street outside of the crosswalk, around 10 p.m. According to a Tempe Police spokesman, it did not appear the vehicle – which was in autonomous mode, with an Uber operator in the passenger seat -- attempted to slow down and avoid hitting the woman.

Uber is pausing all such research and operations while the federal authorities investigate the incident, and in what could have huge implications for the future of this technology, Toyota followed suit – while Ford did not.

The Tempe fatality has heated up the debate on the safety and future of this technology, and could lead to a serious setback in the frantic race to be first out of the gate in this potentially massive consumer market.

Akshay Anand, an analyst at Kelley Blue Book told USA Today, “It is clear this has the potential to severely impact public perception of autonomous technology and should be handled with utmost prudence by regulators, authorities, and the industry alike.”

The group Consumer Watchdog suggests this technology is still far from safe for the masses, and is calling for a national moratorium on all robot car testing on public roads; while BMW’s top engineer told Forbes such a crash was “inevitable”, and that the Volvo in question never had enough technology to drive itself safely. However, proponents of the self-driving model say it has the potential to significantly reduce the U.S.’s 40,000 annual traffic deaths attributable to human error.

“This certainly supports the idea that driverless cars are a long way off before they enter the general public mainstream,” says Toronto taxi owner/operator Gerry Manley.

“This should make politicians, bureaucrats and insurance companies take a very close look at where driverless cars are at, before they legislate them to be allowed in numbers on the highways of the world.”

Mississauga plate-holder Peter Pellier observes, “There will be inevitable incidents of this nature in the development of autonomous vehicles, unfortunate though they may be. It really does cry out for much closer government regulation… the very thing cabbies begged their local regulators to do regarding Uber, to no avail.”

Even worse for Uber, the operator of the autonomous vehicle in question, 44-year-old Rafaela Vasquez, turned out to be a convicted felon with a criminal record in Arizona under a different legal name. According to USA Today, the Arizona Department of Corrections records indicate that he served three years and 10 months for Armed Robbery, before being released from prison in 2005.

Uber has repeatedly borne criticism for the alleged lack of thoroughness of its background checks -- most recently receiving an $8.9 million fine from the Colorado Public Utilities Commission, after it discovered that some 60 drivers with felony convictions had been hired by the company.

The hefty cost of the Waymo settlement reflects the financial bloodletting Uber has suffered over the past few years, which finds the world’s largest ridesharing company out looking for financing from Southeast Asia (SoftBank, Grab ridesharing company), and Wall Street.

But despite a hellacious 2017 in the press and in the courts, Uber somehow managed to grow its business. Bloomberg reports that adjusted net revenues for the last quarter of 2017 increased by 61 percent to $2.22 billion from the same period in 2016, and the total value of fares grew to $11 billion that quarter. Sales for 2017 were $7.5 billion, even though the company posted an historically high loss of $4.5 billion.

Toronto taxi industry scribe Rita Smith is among those who maintain the Uber business model is simply not sustainable, long-term. “I think in a lot of markets they’re practically running bankrupt. It happened in China,” she offers.

And with its ethics and business practices being called into question in many nations around the world, she suggests Uber is, “on a slide down a slippery slope.”

“Everybody was enchanted. Uber could say anything and people would believe it. Now the truth is finally coming out,” she says.

“I don’t think they’ll ever get to an IPO. I think they will sell their technology.”

Oakville owner/operator Al Prior suggests that, “If anybody thinks taxi companies aren’t operating right, the public should take a look at what Uber is. Rental companies feel it. Banks feel it.”

“I see this as a huge snowball that’s all soon going to reach the bottom and hit something hard. They don’t have the real insurance. (In many cases), it’s car rental insurance.”

But long-time Toronto independent Aldo Marchese suggests, “(This company) can go on forever. Money’s no object for these people. Uber is worth $40 billion.”

Meanwhile, in its annual Economic Impact Report, released in March, Lyft says it handled 375 million rides in 2017, a 130 percent increase over 2016.

And regarded as the most powerful woman in startups, Ann Muira-Ko (co-founder of the California-based venture capital firm Floodgate (and a Lyft shareholder) told Fortune she believes Lyft will pull ahead of Uber in time. Lyft claims its revenues are growing three times faster than Uber’s, while handling 10-million-plus runs per week across the platform.

Uber does appear to have found some closure to the troubling Travis Kalanick era, with the news that its former CEO has launched a venture fund. Kalanick’s capricious manner caught up with him last year, when Uber was embroiled in everything from harboring a toxic environment for female employees to business tactics that circumvented the law. According to Bloomberg, Kalanick sold 29 percent of his Uber shares earlier this year for a gain of $1.4 billion.

Meanwhile, there’s continued fallout from that monstrous Uber data breach, and cover-up from October of 2016.

On March 9, Uber announced it will inform all 815,000 Canadians whose personal data might have been compromised in the breach. This came after the privacy commissioner of Alberta ruled the company must contact impacted drivers and passengers across the province. In a February 28 decision, privacy commissioner Jill Clayton ruled that “there is a real risk of significant harm to those affected as a result of the breach”, which saw the theft of such information as names, email addresses and cellphone numbers.

While disagreeing with the decision, Uber management told Canadian Press it would e-mail affected drivers and riders in Alberta and across the country within two to three days.

On March 4, Pennsylvania’s Attorney General announced the state is suing Uber for up to $13.5 million for failing to notify 13,500-plus victims of a data breach “within reasonable time.” The data breach was only revealed more than a year after the company allegedly knew what happened. Washington State and Chicago have filed similar suits.

“Uber violated Pennsylvania law by failing to put our residents on timely notice of this massive data breach,” Attorney General Josh Shapiro said in a statement. “Instead of notifying impacted consumers of the breach within a reasonable amount of time, Uber hid the incident for over a year – and actually paid the hackers to delete the data and stay quiet. That’s just outrageous corporate misconduct, and I’m suing to hold them accountable.”

Meanwhile, Uber has implemented new safety measures in its London cars, the day after Transport for London announced plans for stricter controls on private hire vehicles. This includes a 24-hour hotline for customers to call, and a promise to proactively report any serious crimes to police.

This comes with Uber awaiting a pivotal June hearing, which will determine whether or not the TfL will renew its operating license for the gigantic London market, regarded as the gateway to all of Europe.

Its UK general manager Tom Elvidge issued a statement that while Uber has “led the way” with pioneering technology which enhances safety (like GPS tracking of every trip, and its two-way rating system), the company recognizes, “the need to go further.”

That said, on February 19 an Uber driver in London was jailed for 10 months for sexually assaulting a 16-year-old female exchange student from Japan, who he picked up on her arrival at Heathrow Airport.

Meanwhile, Lyft has opened its first European office in Munich, where it will develop advanced localization and geometric mapping technologies for its self-driving cars.

But back in the States, Lyft has been caught up in its own minor scandal surrounding the abuse of customer data. Its employees are alleged to have tracked Lyft rides made by their romantic partners, and to have accessed information about celebrities like Facebook CEO Mark Zuckerberg.

And in San Francisco, disability rights advocates have filed a class action suit against Lyft on behalf of two people who use wheelchairs, the plaintiffs alleging the ride-hailing company directly violated the law by not providing equal and accessible transportation for all within the Golden Bay Area.

Lyft says its “Access” service is designed to serve people with disabilities, but the plaintiffs allege this is, “a sham, and a completely inadequate substitute for actual accessible transportation.”

Meanwhile, both Uber and Lyft have been making their move into the lucrative health care sector, forging partnerships with doctors and hospitals who are looking for more efficient, cost-effective ways to transport patients to their appointments.

Lyft has struck up a deal with Allscripts (one of America’s leading electronic health care records companies), which will let doctors call for rides for their patients. With this service, Lyft will integrate itself into the daily routine of 7 million patients, 180,000 physicians, 45,000 physician practices, and 2,500 hospitals. A desktop app will enable doctors to summon multiple cars at once, and text details to the patients. Heath care providers will cover the cost unless otherwise stated.

Closer to home comes a new deal, which will find Lyft building self-driving cars in conjunction with Canada’s leading auto parts supplier, Magna. The Verge reports that Magna (valued at $19 billion) will be investing $200 million in Lyft, with the two parties to work together to build Level 4 autonomous vehicles, able to operate without any human intervention within the normal operating parameters.

Meanwhile, Uber and the Town of Innisfil will be expanding Canada’s first ridesharing-public transit partnership – with the addition of two new flat rate destinations, and an increased financial commitment.

This groundbreaking partnership was launched in May of 2017 and has been a “great success” according to Innisfil Transit – with over 3,400 residents completing more than 26,700 trips within the first eight months. The Town estimates it is saving more than $8 million per year, based on what an equivalent door-to-door bus system across all of Innisfil would cost. Residents pay $3 to $5 for subsidized runs to key locations across the town.

“Innisfil Transit has had a major impact on our community, providing residents with a safe, convenient and inexpensive door-to-door transit solution that a bus system could never provide ” states Innisfil Mayor Gord Wauchope, “whether it’s transporting a resident to a medical appointment, getting a family to that evening hockey practice, or providing a senior citizen with a means to pick up groceries.”

In a press release, Uber Canada GM Bob Khazzam says, “Innisfil Transit is seen around the world as an example of how out-of-the-box thinking mixed with an appetite for innovation can have a positive impact on people’s lives.”

However, Innisfil taxi companies worry about how much longer they can hang on, with their drivers paying high insurance rates and struggling to get by. And when this partnership was announced last April, Mississauga plate owner Peter Pellier was among those to wonder why the town would “play ball with this company”, which holds a dubious record for circumventing municipal regulations.


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