Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Uber Will Never Be the Next Taxi

Tickers in this article: AMZN

PORTLAND, Ore. (TheStreet) -- In towns where cabs are not only sparse but awful, Uber is the mythical savior that riders have been waiting for.

Emphasis on the mythical portion.

Back in 2011, WBUR-FM confirmed what most of its listeners in Boston already knew: It was more expensive to take a cab in Boston than in any other city in the country. The hundreds of thousands of dollars cab drivers pay for medallions to operate their vehicles in the city of Boston and their inability to pick up passengers in Brookline, Newton, Cambridge, Somerville or any of the other Massachusetts towns that are de facto boroughs of the city jack up per-mile rates to make up for lost return trips.

Uber made its debut in the Boston area that year with a few key distinctions from other cab companies. On top of its namesake app that lets users request a swanky private ride through their smartphones, Uber came in cheaper than its competitors and shrugged off regulation to expand its reach into all portions of the Boston metro area. A year later, it launched the UberX low-cost taxi service to compete directly with cab companies.

However, Uber spent 2013 being sued by cab companies that alleged the service dodged city cab ordinances and state law. The company was also threatened with a strike by UberX drivers upset over a drop in fares, though such labor action never materialized.

To riders, none of that mattered. As long as the service saved them time, money and the hassles associated with Boston and Massachusetts' antiquated restrictions on regular cabs, there wouldn't be a problem.

In mid-December, UberX eliminated all of those positives by initiating a fare hike that jolted regular users across the Northeast. Using a "surge" pricing model that increases fares when demand is at its peak -- like during rush hour -- and lowering fares when demand slips, UberX jacked up prices seven to eight times the normal price during a winter storm. The company argued that demand far outstripped supply and that it was well within its rights to charge as the company saw fit. Uber also argued that the higher prices offered drivers incentives to get on the road during a brutal winter storm.