SEOUL, April 5 (UPI) -- South Korean taxi drivers and authorities are challenging Internet giant Kakao's decision to introduce paid options on its tax-hailing app, KakaoT, which is used by some 18 million people.
Earlier this month, Kakao's transport service subsidiary, Kakao Mobility announced it would launch a "priority call" feature to fast-track requests to nearby drivers, and an "on-demand ride" option to secure a taxi instantly.
The company said the "platform usage fees" would help even out the mismatch of supply and demand, as passengers struggle to flag a cab during specific times and certain districts.
"Our big data analysis shows, on Dec. 20, there were 230,000 taxi requests in an hour but only 30,000 cabs were available. This means more than 80 percent of the requests went unfulfilled," Sung Jae-yoon, PR manager of Kakao Mobility, told UPI.
By setting up a reward system for drivers who accept paid requests, Kakao claims cabbies would become more motivated to operate during off-peak hours or in districts where there aren't enough taxis on the road.
Observers expect the paid options to cost between $1.90 and $4.70, with drivers earning points that they could later convert into cash.
However, the launch of the new services have been delayed for almost a week, after the announcement caused a strong backlash, from taxi drivers and passengers to government authorities.
Suh Jun-young, an office worker in his early 30s, said he was willing to pay the extra fees, but wasn't convinced it would help him get a taxi.
"When I go out on the weekend, most taxis just drive past me because they're already all reserved," he said.
Some worry that options to pay for hailing a taxi may even exacerbate difficulties for passengers.
"It's hard enough getting taxi near where I work and I use the app to find a taxi but if I don't pay extra [once the service launches], drivers probably won't come," said Lee Hae-sung, a 28-year-old office worker in Seoul.
Taxi drivers also appear unconvinced, especially as Kakao has kept mum on how the reward system would function.
"They'll probably give us calls that are profitable for them, but not necessarily for us. If they tell me to go on an on-demand call, I won't be able to reject it, even if it's a short-distance call which isn't profitable for me," Yoon Seung-taek, a 56-year-old taxi driver, said.
"We used to receive taxi booking fees but that disappeared because of KakaoT. Now, I don't know what kind of problems will arise with the extra fares."
Four major taxi driver unions in the country signed a petition opposing Kakao's move. Some 96 percent of the countries' certified taxi drivers are registered with the app.
"They didn't consult us at all. They simply came into inform us that they would adopt the new pay-for-use options. They still haven't told us how much the options are and how the reward system for taxi drivers would work," Korea National Joint Conference of Taxi Association Director Lee Yang-duk told UPI.
Taxi unions complain that the company is capitalizing on the consumers, after monopolizing the market with initially free services and pushing out taxi-booking firms.
Given its dominance of the market, critics say paying for premium services could soon become the norm, as users inevitably take the paid option to secure a cab.
This, Lee says, would be no different to a price hike, or at the very least, a taxi-booking fare -- both of which could breach transportation laws.
As cabs are regarded as a form of public transportation, the basic taxi rate is adjusted by local governments every five years.
"Those of us in the industry would conduct an assessment then make a recommendation to the local government, which holds its own evaluation and a council meeting to adjust the rate," Lee said. "It's a sensitive, multi-step process, and after all that deliberation, it's only about a $.50 hike at the most."
Fares for booking a cab are also restricted by law. Seoul City enforces a cap of $1.90 for each booking.
Seoul Metropolitan Government and the Ministry of Land, Infrastructure and Transport have both voiced opposition to the move, claiming Kakao Mobility did not consult them beforehand and still hasn't shared information on how the paid services would function.
The land ministry said it will conduct a review on the service once it acquires sufficient information.
Observers have noted that, in 2015, e-commerce firm SK Planet launched a paid taxi-hailing feature for its T Map Taxi app.
However, the option was scrapped after local authorities ruled it was a breach of transport laws.
"It is difficult for the government to agree to a plan that could possibly raise taxi rates," Transport Minister Kim Hyun-mi said last month, regarding KakaoT services.
From a business perspective, however, experts say it would make sense to charge for premium options, as long as there is demand.
Investors are anticipating huge profit from the new services. Market analysts predict the paid options will add 50 billion to 130 billion won in annual revenue.
"Assuming about 10 percent of all KakaoT's taxi request are paid for, revenue is estimated to hit around 98.6 billion won," Sung Jong-hwa, an analyst at E-Best Securities said.
That amounts to roughly half of Kakao's net profit forecast for this year.
"Paying a platform fee in return for a service is a given, in a capitalist society, which would motivate companies to further improve their services and innovate to remain competitive," Oh Moon-sung, a professor of tax and accounting at Hanyang Women's University, told UPI.
He noted that in countries like the United States and China, taxi apps like Uber and various car-sharing platforms charge their users.
The expert recommended that local authorities ensure there is an appropriate regulatory framework.
"Laws or policies should rather aim to prevent adverse effects, rather than stop Kakao from charging service fees when there is demand for it," he said. "If the paid options are unfair or excessive then very few people would use the services which would cause them to wane gradually. It's a matter for the market to decide."