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Uberization and the law on a collision course

The main obstacle to Uber and its rival companies in other jurisdictions and in Ethiopia is regulation. While regulation is necessary to manage the transport sector and ensure the smooth running of the services, it is often not responsive to technological changes, write Hailemichael Teshome Demissie, Mersha Chanie and Solomon Mesfin.

The rate of technological advancement in our time is so rapid that technology is almost always outpacing law. Policy and lawmakers around the world are finding it increasingly difficult to keep pace with and fully understand the ramifications of technological change. The case of ride-sharing car-hailing apps is a typical case of the law falling behind technological advances. Uber and its rival companies have hit a brick wall in many jurisdictions and their experience in Ethiopia is no different. Existing laws and regulations cannot accommodate the services that companies like Uber are trying to introduce.

The story of Uber across the world raises a wider issue concerning the interaction between law and technology. Laws are made to last while technology and innovation is pursued in order to disrupt. Disruptive technologies aim at changing the status quo while laws are made to maintain the status quo. How to reconcile the tension between law and technology is a challenge for law and policymakers everywhere. It is more so in emerging countries like Ethiopia. The legal profession, lawmakers and regulators are faced with the challenge of reconciling this tension between technology and law.

Uber has created a buzz around the world and it has become a very popular service in many jurisdictions. The Uber app enables passengers to call the Uber taxi using the app. Passengers have the choice to call a taxi that is close to where they want to be picked up. Information about the car and the driver is provided on the app including the real-time tracking tool that spares passengers the wait and anxiety that their taxi is not where they expect it to be. Passengers themselves, or their friends and families at home can track the routes the taxi takes and will have control of their journey and the meter so that they can see for themselves that they are taking the shortest, and hence, the cheapest, route. Passengers will not be overcharged by unscrupulous drivers. This has benefitted millions of passengers in cities around the world and has been a boon to consumer choice. In Ethiopia, it will not be the luxury of consumer choice but the exigency of filling the gaping void in the provision of public transport that is severely underserved by the current inefficient system. Licensing Uber and similar companies to operate in Ethiopia is not going to solve the problem overnight but it will be a bold start to revamping the system so that Ethiopia can benefit from available and easily accessible technology. 

There is more to Uber than a taxi-hailing app. It has become the harbinger of an emerging economy known as the ‘platform economy’. The business model is now used in the hospitality sector, education, finance, even legal services. There is now a verb derived from the word Uber: uberize and ‘uberization’. The neologism refers to the emerging phenomenon of app-based business models that match suppliers and consumers with unprecedented ease and efficiency at an unprecedented scale to exploit underutilized yet available resources. It is the traditional service of ‘dilela’ radically overhauled by technology and expanded to include services and items beyond house rentals and used car sales. ‘Dilela’ has been digitized to some extent as it is sometimes done through the medium of the smartphone. A similar platform is used as a dating service – a trend that shows uberization is here to stay despite the unfavorable laws that may inhibit its expansion. The traditional ‘dilela’ - not yet fully recognized as a reputable profession in Ethiopia despite the critical role it plays in the economy – will get a much-needed facelift if Uber-like technology is introduced and takes root in the country.

Legal and regulatory reform is needed to enable the Ethiopian public benefit from the technology in tackling problems in the provision of transport service. Public discussions should start in earnest to explain the technology and its benefits and to set up the required policy, legal and regulatory framework conducive for the beneficial operation of providers of the service like Uber.

The word Uber has entered the daily vocabulary of people in urban areas in both developed and developing countries. This is not quite true in Ethiopia and the idea and technology that Uber and its rival firms use has not taken off in Ethiopia. Uber, which swept the world with its ride-sharing, car-hailing apps, has apparently tested the waters in Ethiopia. The legal advice they seem to have received has put them off as the legal and regulatory environment is far from conducive and incredibly inhibitive. The laws in Ethiopia as they stand do not allow the Uber model to be applied in Ethiopia if not prohibit it outright.

While Uber and foreign companies like it could not find space in the Ethiopian taxi business, their ideas and technologies are being picked up by homegrown start-ups like Zay Ride and Selam Taxi that have come up with their own version of Uber-like platforms. These start-ups, certainly inspired by Uber are developing their bespoke services that can fit into the Ethiopian legal and regulatory mould. Given the experience of Uber with regulators around the world, such home grown initiatives are likely to be faced with enormous challenges-legal, regulatory and practical. For now start-ups such as Zay Ride and Selam Taxi have launched their services despite the challenges they encounter.

These initiatives are, however, unlikely to impact the sector in any significant way compared to what Uber has brought to public transport in other countries. Their services are nowhere near the achievements of Uber around the world or even in neighboring Kenya. Many people in Ethiopia have hardly heard of them let alone have an impact changing the transport sector. What is more worrying is that these initiatives, due to the limited resources they have, seem to have ruled out the possibility of lobbying the government to change the rules so that the law can conform to the technology rather than the technology conform to the law. The only option they seem to accept is trying to fit into the regulatory straitjacket that is evidently inhibitive and technology-agnostic.

Uber is now a tremendously successful global company but it did not have an easy ride and still is mired in legal suits mainly instigated by the incumbent taxi industry in the various countries that it is operating. Polarized interests have emerged around its model. Vested interests in the incumbent taxi industry that cling to their old and inefficient ways are doing all they can to see Uber fail. However, the business model of Uber and the many other companies that it has inspired has clear net benefits to passengers, taxi drivers, public transport and the public in general.

The taxi industry in Ethiopia, particularly in the capital Addis Ababa is currently undergoing continual changes. We have seen changes from the 1950s versions of Fiat to Lada, from Wuyiyit (pick-ups converted to passenger cars) to minibuses and recently from Lada to Lifan, Toyota Vitz, and Toyota Yaris. The Addis Ababa City Administration is also planning to replace the minibuses to higher capacity coaches. These changes did not require fundamental changes in regulation and the switch over for the taxi owners was more or less smooth. All these changes, while necessitated by the ever-increasing high demand for public transport, have fallen short of keeping up with the demand. This has also led to informal and illegal taxi services claiming a slice of the market share.  Taxi operators complain that private vehicles not registered as taxis are often seen ferrying people for a fee through middlemen that match passengers with the owners of these private vehicles. It is no secret that unlicensed vehicles are seen picking up passengers from taxi ranks in Addis.

Demand for taxi services is still unmet even with the addition of new modes of transport like the light train in Addis. The number of cars on the streets is relatively high and the streets are set to be even more crowded with even more cars that are either imported or assembled here in Ethiopia. The problems of public transport in Ethiopia especially in the capital are complicated and the suggested solutions for them do not seem to be right mainly because the suggestions fail to take into account the huge potential technology can offer. Ethiopian policymakers, regional as well as federal, have failed to explore and appreciate the various technologies that can be employed to alleviate or totally solve the public transport problems faced by the Ethiopian public. The recent regulator’s spat between the Addis Ababa Administration and an Uber-like app developer (as reported by The Reporter) is a clear demonstration of the disconnect between policy and technology. Policymakers are oblivious to the technology while the technology developers are consciously ignorant of the law and policy currently in force. This is one of a series of incidents that has shown the need for research on the policy, legal and regulatory issues arising from the adoption of the technology in Ethiopia including the thorough review of existing laws and regulations.

The University of Gondar is currently funding a research project that aims to address this disconnect between policy and technology. The wider issue of the interface between law and technology is an overarching theme for the project. The specific case of the technology used by Uber and its rivals and the law’s receptiveness to the changes brought about by these technologies is a major point that the project is addressing as its main overarching central theme.

With this project, the University of Gondar is set to play the pioneering role in this particular field of research. The project will review the regulatory framework in which the system is operating and seeks to develop recommendations for an accelerated deployment of technology in creating additional capacity for public transport mainly by creating a system whereby idle resources (empty seats in moving cars or cars parked away for hours or days on end) can be used efficiently adding to existing capacity. The Uber model and the other models used by its rivals and the attempts made by Ethiopian developers to use the model without the requisite regulatory framework will be reviewed and analyzed. The project aims at proposing suggestions for a regulatory environment that will enable the smooth introduction and functioning of the technology. It seeks to provide recommendations for changes in the law that ensure the laws in place will not become obstructions to the advance of the beneficial technology. 

The research is not limited to the specific sector of the taxi industry and its regulation.  The Uber model is also used for other kinds of business in what is now called the ‘platform economy’. Uber-like apps are used for the delivery of items such as food (deliveroo), a professional service or any other service that involves the matching of the supplier with the user (legalstart for legal services, Pager for health services, Khanacademy in education). The research will look into the regulation of the emerging ‘platform economy’ where platforms like Uber are the main actors.

Towards an accelerated uptake of technology:

The main obstacle to Uber and its rival companies in other jurisdictions and in Ethiopia is regulation. While regulation is necessary to manage the transport sector and ensure the smooth running of the services, it is often not responsive to technological changes. Public transport is one of the areas that are undergoing fast changes across the globe. In the not so distant future, autonomous self-driving cars will be on the roads eliminating driving jobs. An important decision has to be taken in choosing between protecting the jobs or deploying the driverless cars. Authorities in India have come up with their unambiguous response on the issue of autonomous vehicles in India – they will not allow them on Indian roads.  India has also blocked Uber from operating in India albeit for a different reason. (BBC, 25 July 2017, India says no to driverless cars to protect jobs available at http://www.bbc.co.uk/news/technology-40716296) Whether this is the right response to technological change is yet to be seen and it will not be long before the issue confronts us here in Ethiopia. For now, we are faced with the no less significant issue of using apps that offer the benefit of facilitating public transport.  Whatever decisions are taken on this issue will also be impacting other decisions that have to be taken with the uptake of other emerging technologies.

The accelerated uptake of technology is what gives economies their competitive edge and the decisions on the issues surrounding the adoption of technologies and the difficulties associated with the adoption will impact the entire economy beyond the particular sector that a certain technology is associated with.

Ed.’s Note: Hailemichael Teshome Demissie (PhD) is Associate Professor and Editor-in-Chief, The International Journal of Ethiopian Legal Studies (IJELS), School of Law, University of Gondar. Professor Mersha Chanie is Vice-President for Research and Community Service, University of Gondar. Solomon Mesfin is Director of Technology Transfer and University and Industry Linkage, University of Gondar. The contributors are members of the research project team funded by the University of Gondar. The views expressed in this articled do not necessarily reflect the views of The Reporter.

Contributed by Hailemichael Teshome Demissie, Mersha Chanie and Solomon Mesfin