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Comfort's surge pricing may come at a cost

The firm's move will make it more competitive, but means a less transparent fare structure and blurs the lines between taxis and private-hire cars.

Singapore's largest taxi operator, ComfortDelGro, has joined the private-hire fray with its implementation of dynamic fares yesterday, and is opening its app to Grab and Gojek drivers soon.

Dynamic pricing, also called surge pricing, is pegged to demand and can be a multiple of normal rates during peak periods.

Even as ComfortDelGro says the new pricing is offered alongside metered fares, it is still a stark departure from its previous stance.

Just two years ago, the company launched a flat fare pricing option, with its cabs emblazoned with the tagline "no surge pricing".

Reasons for the U-turn are clear. First, it wants to stem the exodus of cabbies who have been defecting to the private-hire camp. Since private-hire operators arrived six years ago, Singapore's taxi fleet has fallen from a peak of 28,000 to 20,000. ComfortDelGro's own fleet has dwindled from 17,000 to 12,000.

Second, it wants to take the fight to the private-hire firms, and to provide its drivers with an alternative to taxis.

In all likelihood, ComfortDelGro will win back some lost ground. But to the commuting public, it means the blurring of a fast-fading line that separates taxis and private-hire cars.

ST ILLUSTRATION: MANNY FRANCISCO

On one side, there is a business governed by rules and regulations pertaining to everything from driver profiles to call-booking cater rates to fleet sizes - all designed to serve commuters well and to optimise resources.

On the other, there is a largely laissez-faire system practically unfettered by licensing.

But it also means competition. On the surface, competition is usually good for consumers. The fiercer the competition, the better it is.

There was ample demonstration of this when Uber and Grab fought tooth and nail for passengers - and drivers. But since Uber pulled out last year, promotional fares and drivers' incentives have been dialled down a notch.

Will ComfortDelGro's move heat up competition again? Perhaps. The taxi operator says its dynamic pricing will be done in a more measured way. Presumably, this means fares will not increase by several times when it rains on a Saturday night or when there is a major rail breakdown - as was the case in July 2015 when the North-South and East-West MRT lines failed, and Uber fares went from $20 to more than $100.

If so, this will steer more customers towards its fleet, driving up business for its drivers.

The company will most definitely increase competition in other ways. Already, its ride-booking app has the look and feel of private-hire apps.

THE DOWNSIDES

But competition often comes at a cost. In this case, that cost is pricing opaqueness. Instead of a transparent fare structure, which cannot be altered without regulatory oversight, and which is spelt out clearly on taxi windows, consumers must accept whatever an algorithm churns out.

And there is no way to verify if a surge in demand is at whatever multiple the algorithm claims it is. The system is not auditable, which also means there is little that end users can do, even if they suspect the algorithm is wired to be predatory.

During off-peak periods, this would not matter much. But when one is on the receiving end of surge pricing, the frustration sets in. Only the very well-off or the very desperate will be willing to pay a fare that is three or more times the normal rate. For the rest, the feeling of powerlessness only gives way to distrust.

Indeed, much ink has been spilt on how surge pricing is the top peeve among ride-hailing customers in the United States and Australia.

While dynamic pricing has been practised by airlines and hotels for decades, it still does not go down well in public transport here, where fares have long been fixed and transparent.

This egalitarian principle is sound because public transport is not consumed discretionarily. People do not take a bus, train or taxi ride for fun.

In Singapore, the Land Transport Authority (LTA) has always been against taxi touts who, in many cases, promise a ride if you pay a bit more. These touts tarnish Singapore's reputation as a safe and trustworthy place to visit.

Dynamic pricing, stripped of its technological veneer, is a form of touting. It is an auction where consumers willing to pay the most are served.

The consolation is that ComfortDelGro says dynamic fares will be offered alongside traditional metered fares. No one knows for how long, though.

BLURRING THE LINE

As the industry's biggest player, ComfortDelGro is always the first mover. As such, its move to offer dynamic pricing will no doubt be followed by the other taxi firms.

When that happens, the faint line separating taxis and private-hire cars may disappear altogether.

This is why a wide review by the LTA is timely. The review was announced early this year and changes are expected to be made known in the next two months.

The regulator is proposing to license all street-hail and ride-hail operators "as they provide the same fundamental service of transporting commuters from point to point".

This is a dramatic shift from its previous position. When private-hire players arrived in 2013, the LTA viewed them as "tech companies" and not transport providers.

It noted that the new regime will be "different from today's regulatory framework, where one set of regulations applies to taxi operators which provide both street-hail and ride-hail services, and there are no uniform regulations that apply to operators that purely provide ride-hail services".

Taxi operators welcome what they feel is a long overdue move to level the playing field. But will the review lead to private-hire operators having to level up to standards set for the taxi firms? Or will the taxi industry be allowed to level down to the relatively lax regime in which the private-hire sector has been operating?

Commuters can only hope it will be the former. Already, the vocational licence format for taxi drivers was drastically pared down when the Government announced a 10-hour training programme for private-hire drivers three years ago. Course time for cabbies was then slashed by more than half, from the previous 60 hours to 25 hours now.

The results are showing. Anecdotal evidence suggests more cabbies are not as conversant with routes, destinations and alternatives as before. One may argue why there is still a need to imbue drivers with wayfinding skills when satellite navigation is so pervasive.

But motorists will be the first to admit that navigation systems do not always lay out the best routes. And regular taxi commuters will tell you that experienced cabbies are able to make detours around jams with dexterity - and without looking at a screen.

On this front alone, the LTA's proposal to have two licences may further dumb down the industry.

The LTA intends to have a Street-Hail Service Operator Licence for taxis and a Ride-Hail Service Operator Licence for the likes of Grab and Gojek.

As such, what is there to stop a taxi operator like ComfortDelGro from migrating, even entirely, to the less onerous licence? If this happens, commuters will be the poorer for it.

The right thing to do would be to have one licensing regime and to have private-hire practitioners level up to taxi standards.

Meanwhile, smaller private-hire firms are exempt from licensing. And ride-sharing platforms that are, in most instances, commercial in nature - like GrabHitch - are likely to continue without licensing. This is also unwise for the same reasons.

Mr Ang Hin Kee, adviser to the National Taxi Association and the National Private Hire Vehicles Association, has called for a cap on the taxi and private-hire car population.

He pointed out that there are about 130,000 taxi and private-hire vocational licence holders, and too many drivers vying for commuters.

Mr Ang, who is also deputy chairman of the Government Parliamentary Committee for Transport, said the age requirement for new taxi and private-hire drivers could also be raised to prevent an oversupply of drivers.

This is a sound recommendation, for bigger reasons than those that Mr Ang has voiced. Private-hire firms, with no quotas to rein them in, have been expanding their fleets aggressively - only to dump vehicles when they cannot find hirers. More than a year after Uber quit the scene, over 2,000 of its cars are gathering dust in carparks across the island.

Now, Grab and Gojek are adding to their fleets, too.

According to LTA figures, private-hire cars outnumbered licensed drivers by 5,500 as of February.

Clearly, this practice is not only a drain on resources, but it also drives up car prices, displacing families that genuinely need a car from the market.

Mr Ang's call to raise the age limit for drivers makes good sense, too. Today, private-hire drivers are as young as 21, versus the minimum age of 30 for cabbies.

Besides the safety consideration, the minimum age of 30 for cabbies was set because Singapore wanted its younger citizens to find more productive work if they could.

It was the same philosophy that led to the Government capping the number of hawker licences back in the 1980s, in order to encourage able-bodied Singaporeans to find work in the many growing industries within manufacturing and electronics.

How many private-hire drivers are below the age of 30? According to the LTA, 16 per cent of the 41,025 licensed private-hire drivers, as of February.

That's more than 6,500 young people who could have been more economically productive.

As a nation, Singapore needs to ask itself if the need for a ride justifies the current allocation of labour, capital and road space.