The taxi app developers' recent refusal to turn over driver information to the local government suggests that they want to avoid ending up under the thumb of the State-owned taxi monopoly, which might stifle innovation in their products and undermine their popularity with passengers.

 

The two taxi app start-ups, Didi and Kuaidi, refused last month to comply with the Shanghai Municipal Transport and Port Authority's request for their databases of registered drivers, citing the loss of "commercial secrets." 

 

The transportation authority said it wanted the data to help it crack down on unlicensed taxi drivers, who have been using the apps to solicit passengers.

 

In response to the refusal, the authority said it will take legal action against the uncooperative developers, though it didn't specify how.

 

The apps make use of the global positioning system in many smart phones to allow a user to summon a taxi to his or her specific location. They also put passengers in direct contact with drivers, circumventing taxi dispatch centers that charge passengers an extra fee.

 

Last August, Beijing became the first city in China to require taxi apps to connect with a "united" booking platform operated by a taxi dispatch center under the government's supervision. Under this system, passengers will be connected to the same pool of drivers regardless of the app they use. On the other side, the drivers will use the terminals installed in their taxis, rather than the apps, to accept bookings.

 

The government said one of the goals of the united platform is to prevent unlicensed taxi drivers from making use of the apps.

 

But experts have pointed out that the platform discourages competition between apps. Furthermore, the terminals cannot be upgraded as easily as mobile apps and are resistant to technological advances.

 

In February, local media revealed that Shanghai's transportation authority wants to do the same. Transportation officials met with representatives of the two taxi apps to convince them to copy the Beijing model and join a united platform.

 

A united booking platform may eventually undermine the chaotic but lively taxi market. Without competition, the taxi apps will likely lose their ability to innovate. Furthermore, requiring taxi drivers to use terminals instead of the apps is like forcing technology to go backwards.

 

The central government should leave the united platform requirement out of the regulation to ensure a free market for taxi bookings. Give the industry some time to carve out a way out of its current chaos.

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