Digital transport network Uber: Could it cure Manila’s jeepney infestation?

What’s hot in the public transport innovation scene today? It’s Uber. The top (arguably) “digital transport network” in the world is looking at a possible USD12 billion valuation if efforts to raise a reported USD500 million in its most recent funding round bears fruit.

Why is Uber hot? Because it applies well the same simple principle behind many other über-successful Dot Com companies that came before it — cut out the middleman in the public transport industry.

Uber is an American venture-funded startup and transportation network company based in San Francisco, California that makes mobile application software that connects passengers with drivers of vehicles for hire and ridesharing services. Uber passengers and Uber drivers are equipped with the Uber mobile app. Passengers use it to summon drivers while drivers use it to respond to and locate passengers summoning them. While this may sound like any existing taxi cab networking system, the difference Uber brings to the table is it allows ordinary drivers to serve the network with minimal overhead. Trip metering, billing, and payment collection are all handled within Uber’s application system.

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Filipinos are allergic to obvious solutions.

Filipinos are allergic to obvious solutions.

If there is one city that Uber could make waves in, it is in the Philippines’ über-congested premier metropolis, Metro Manila. The southeast Asian mega-city ranks at the bottom of a list of global “smart cities” compiled by Spanish university IESE.

Part of what makes Metro Manila an unlivable city is its chronically gridlocked streets. Much of this road congestion is caused by its chaotic public transport system (or lack of system as the case may be). The city government has failed to systematically develop and properly regulate public transport since its American-built infrastructure was destroyed in World War II. As a result, public transport in Metro Manila is dominated by small private public utility vehicle operators running everything from fleets of smoke-belching 3-passenger tricycles, culturally-iconic jeepneys, and large killer buses.

There is great opportunity to break into this market and kill the hopelessly snarled system that Metro Manilans suffer. Uber potentially offers the only modern solution that could retain the spirit of free enterprise and free-agency style that the Philippines’ public transport industry is renowned for. And whilst the entry of such innovation possibly faces the resistance of deeply-entrenched and powerful stakeholders in the status quo, the experience of Uber and other transport networks companies elsewhere going up against government and politics has been promising.

In May 2011, Uber received a cease-and-desist letter from the San Francisco Municipal Transportation Agency, claiming that it was operating an unlicensed taxi service, and another legal demand from the California Public Utilities Commission that it was operating an unlicensed limousine dispatch. Both claimed criminal violations and demanded that the company cease operations. In response the company, among other things, changed its name from UberCab to Uber. In the fall of 2012, the California Public Utilities Commission issued a cease and desist letter to Uber (along with rideshare companies Lyft and SideCar) and fined each $20,000. However, in 2013 an interim agreement was reached reversing those actions. In September 2013, the CPUC unanimously voted to make the agreement permanent, creating a new category of service called “Transportation Network Companies” to cover Lyft, UberX, SideCar, and Summon and making California the first state to recognize such services.

In the on-going World Economic Forum conference being held in Manila this year, there is lots of lip service paid by southeast Asian politicians to using technology and being open-minded about “disruptive” solutions to address the region’s key challenges. Considering that southeast Asian cities are renowned for their gridlocked magalopolises, it remains to be seen whether the talk in those plenary sessions will be walked anytime soon, or even in the mid- to long-term.

The Philippines’ vast army of public utility vehicle drivers are a major source of votes, and the operators who own the capital and franchises to operate are often well-connected to powerful politicians and criminal syndicates. So go figure.

[NB: Parts of this article were lifted from the article “Uber (company)” in a manner compliant to the terms stipulated in the Creative Commons Attribution-ShareAlike 3.0 Unported License that governs usage of content made available in this site. Photo courtesy Boylit De Guzman.]

9 Replies to “Digital transport network Uber: Could it cure Manila’s jeepney infestation?”

  1. I feel bad for any international company that tries to set up in the Philippines though. Look at what happened to AirAsia – they set up in Manila, Davao and Cebu, proved it’s possible for flights to depart on time from the budget terminals (no more excuses, Cebu Pacific!), then abruptly vanished. I don’t know what went on, but I can imagine a boardroom scenario with some Malaysian execs pulling their hair out and deciding it just isn’t worth doing business here.

    1. AirAsia disappeared? When did that happen?

      Terminal 3 at NAIA handles AirAsia flights to/from Seoul and Jinjiang. Flights to/from other destinations are handled at Terminal 4.

      AirAsia still maintains flights to/from Cagayan de Oro, Cebu, Davao, Kalibo, Puerto Princesa, Tacloban and Tagbilaran in the Philippines.

      1. Fligh MLA – KL in Clark literally dissappeared. What is left is Zestair. Talk about taking care of the competition.

        1. Now, that one is correct. The AirAsia brand discontinued its operations at Clark.

      2. I used Air Asia to/from Davao and Cebu earlier this year, which was great, but when I tried recently for my next trip, their schedules were blank (and a friend had his booked flight from Kuala Lumpur to Cebu cancelled and refunded).

        I guess they’re still in Manila. I try to transfer at Cebu when possible, because it’s closer and… not Manila.

        Hopefully they’ll come back. They even finally got the self check-in counter set up in Cebu right before they closed.

  2. Dave,

    In the Philippines, a foreign company actually has it better than a local start-up if they were to set up shop in one of the special economic zones managed by PEZA. These are intended specifically to cater to FDIs and foreign companies looking for facilities in the region. The Philippine Economic Zone Authority is headed up by Lilia De Lima (the sister of current DOJ Secretary Leila De Lima) and contrary to the horror stories you hear about foreigners doing business in Metro Manila, Dr de Lima has developed somewhat of a ‘cult following’ among investors who simply adore the way she runs her turf. She has been able to consolidate a single-minded approach from all levels of government to attract investors and keep them here. Investors familiar with the Philippines say that entering a PEZA managed zone is like being in another country. Things actually work, believe it or not, even the usually glacial government agencies whose approvals are required in running a business. PEZA takes care of all the investors’ needs with other government agencies — national and local. Corruption has been greatly minimized if not eliminated. Compared to the rest of the Philippines, PEZA seems like another country.

    North of Manila, Clark Field and Subic Bay once used exclusively by the US military, are booming as economic zones. They have become models of the benefits of attracting foreign investment. Yokohama Tires and Texas Instruments have billion-plus dollar investments at Clark; Samsung also has an important semiconductor operation there. South Korea’s Hanjin has the world’s fourth-largest shipyard at Subic Bay. The former US bases employed around 40,000 Filipinos. Now, under Philippine management, the number of jobs in the Clark-Subic corridor has shot up more than fourfold — over 160,000.

    What is frustrating is that so much more can be done beyond PEZA’s realm. But the national government does not feel the urgency to replicate what is happening in the PEZA zones in the local economy. We are supposedly trying to attract foreign investors, but we are unable to keep the local investors within our borders. Penoy Aquino fails to understand that a favourable investment climate for foreigners is favorable as well for locals.

    1. I hadn’t heard about any of this before, thanks. That’s why I read this website mainly – to find the good amidst the bad!

  3. I don’t know, if it will work here…the “share a ride” idea would be good. Only, people will think twice, before sharing a ride with strangers…unless, you want to end up like Bong Navarro…

    If peace and order is not a problem in our country…it would have worked. Overcharging of “share-a-ride” passengers will also be an issue here…”pagsamantalahang ka pa, ang mga tarantado”…so, I don’t know what to tell people on this idea…it may work in the U.S.; but it may not work here…

    1. The primary reason ‘share a ride’ would not work is the likely resistance by transport groups. It could severely cut into the income of the more traditional mass transit companies such as the bus and jeepney organisations. You can expect them to wield their considerable political clout to prevent a more convenient service from starting up to preserve their hegemony.

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