Uber's invasion of Canada snarled by municipal red tape

When Uber entered Canada, it was like a force of nature, poised to blow through the taxi industry. But the app-based ride-hailing service has run head on into the wall of municipal bureaucracy, stalling its plans to set up shop across the country.

'They're moving from the Wild West to semi-regulated,' analyst says

Uber drivers demonstrate in April against proposed legislation restricting their ride-hailing service in Montreal. (Ryan Remiorz/Canadian Press)

When Uber entered Canada, it was like a force of nature, poised to blow through the taxi industry. 

But the app-based ride-hailing service has run head on into the wall of municipal bureaucracy, stalling its plans to set up shop across the country.

"In the early days, there was this sort of philosophy … which basically went: dream it, believe it, achieve it. And they missed one step," said John-Kurt Pliniussen, an associate professor in innovation, sales management and e-marketing at Queen's University. "You have to sell it or negotiate it. And that's what's happening."

Because there are no national standards when it comes to regulating the industry, Uber has been struggling to cut deals, municipality by municipality.

Uber has run head on into the wall of municipal bureaucracy, stalling its plans to set up shop across the country. (Ryan Remiorz/Canadian Press)

"They have to fight every single battle at every single locality one at a time. And just because they win one locality doesn't necessarily help them next door," said Joshua Gans, a professor of strategic management at the Rotman School of Management.

This week, Quebec laid out its set of regulations, which would require anyone offering paid passenger transportation to have a taxi permit.

Rocky reception

Vancouver has still not welcomed Uber and Mississauga, Ont., city council recently voted to ban the service, although it did agree to create a committee to look into a one-year pilot project to regulate transport network companies. 

Edmonton and Calgary have passed bylaws aimed at legalizing private vehicles for hire, although Uber has temporarily suspended operations there after the Alberta government announced it would not make insurance available to drivers until the summer. The province says it will also require drivers to have at least a Class 4 driver's licence, which is a commercial licence.

There have been some victories, however. In April, Ottawa voted to approve the service. Meanwhile, Toronto city council voted earlier this year to give Uber the green light to operate legally in the city, provided drivers purchase $2-million liability insurance and get their cars inspected twice a year.

"It's a political fight," said Markus Giesler, a York University marketing professor who has studied Uber.

"Uber has become more of a political party in a way, trying to influence its constituents. It has gotten extremely effective and efficient at pursuing political decision makers," Giesler said.

Taxi drivers protesting Uber gather in the Toronto City Hall chambers in anticipation of a vote to determine the fate of the Uber ride-hailing service on May 3. (Aaron Vincent Elkaim/Canadian Press)

The fear from Uber supporters is that regulation will diminish what made the service so well-loved in the first place. But Alan Middleton, York University assistant marketing professor, said Uber should still have an edge in technology and pricing to keep it competitive.

'From the Wild West to semi-regulated'

Middleton said Uber's mistake is that it saw in Canada a clear advantage in transportation and rushed in, loosely aware of how regulated the field is but deeply underestimating it.

"They're moving from the Wild West to semi-regulated," he said.

Giesler said that for the first couple of years, the company was naive, believing that, like any aggressive startup company, it had invented a great product that was widely loved and would be quickly approved.

"That's not always the case," said Giesler. "Because as innovators, you're not really just designing a product, you're also redesigning society and expectations people have and how we go about our everyday life and how industries are structured."

You might think politicians would be eager to help usher in a service so popular with voters. But some jurisdictions have weighed the benefit of the taxi licensing fees they recoup against the anger some people feel over not having access to Uber.

"I think in Toronto they added up there was enough people who liked Uber that it was a trade-off they wanted to make," Gans said. "In Mississauga, it's clearly a little bit different."

Inevitably, the fight Uber is waging with the municipalities to open up their markets will help make it easier for other competitors to drive in.

"Uber around the world have taken the charge of breaking down these regulations, which is great," Gans said. "Which is also like a gift, because as soon as they do it, [the competition] are able to walk in and get all the benefits. All of that is great for consumers."

While Uber may be doing the legwork, it also has the big advantage of being there first and establishing a brand that automatically comes to the mind of the consumer. 

"Uber has an insane amount of brand recognition right now," Giesler said. "Uber is what Kleenex is to paper tissue — it became this symbolic brand."

With files from The Canadian Press