With the recent PR implosion surrounding Uber, it is worth taking stock of just what plan, if any, Australia has with regards to transport reform and ridesharing. Since Uber, Ingogo and goCatch have arrived they have raised the ire of taxi companies, flouted existing transport regulations (with regards to licensing in Uber’s case) and yet are filling a void for on-demand transport.

The response of regulators to these businesses thus far has been timid: spotty enforcement of licensing for hire cars and taxis – allowing Uber’s “screw you” strategy with regulators to go well enough – while doing very little to fundamentally rethink or reframe the regulatory landscape.

There are broadly two narratives regarding ridesharing services like Uber. Both of them are wrong. The first is from reactionary taxi industry forces likes Cabcharge: ridesharing is illegal, should stay illegal, and taxi drivers should strike and stamp their feet until a wormhole opens up which magically transports us back to an era before the smartphone. Needless to say, that’s a hopeless task. It doesn’t engage with the core issue that technology has quite radically changed what is possible (and profitable) in private and shared transportation.

The second story, a similarly absurd proposition from Uber, is that due to the smartphone all is permitted and the existing rules no longer apply. But just because something new comes along doesn’t mean corporates can decide what parts of the law they want to obey.

So how should regulators and the government think about these services and transport regulation?

Regulators first need to decide why they regulate transport at all. In my discussions with regulators there is a profound reluctance to take a root and branch approach to rethinking transport legislation, despite the acknowledgement that a lot has changed fundamentally around these businesses.

What is a completely unregulated market unable to provide reliably or with certainty? First and foremost would be baseline levels of driver competence, safety, vehicle quality and other typical occupational health and safety requirements that are standard across businesses – particularly ones with minimal red tape like coffee shops.

Beyond these basic requirements to license and ensure the safety of drivers and passengers, what else is required? Not much. However for reasons of historical precedent there are quotes on taxis, restrictions on how drivers can get jobs and even requirements that drivers wear uniforms. How does any of this serve the public interest?

Enter Uber, whose key differentiating feature is not caring much at all for regulators. Based on figures from this Ipart report, I’ve put together the breakdown of who gets paid what for an UberX driver versus a taxi is shown below:

The driver is better off under UberX – but would be better still if they didn’t have to pay an operator like Cabcharge and lease a plate. Uber’s value-add is in telling regulators where to go and getting away with it. Uber exposes the obscene rentseeking of entities like Cabcharge and the Raj of taxi licenses.

Instead of doing something about it, governments are playing around at the margins and not, say, offering an unlimited number of licenses at lower rates which would raise state government revenues, drop taxi fares, provide more jobs and give drivers higher earnings.

What happens when state governments are captured by the vested interests and are yet too weak to enforce regulations against Uber? Two outcomes are likely: the government will continue to engineer a massive transfer of income from consumers and drivers to Cabcharge and owners of plates; and Uber will probably end up the dominant service in Australia because of its cost advantage – telling regulators to take a hike in the full knowledge that they’ll get away with it.

That will leave Australia with a large US corporate that cares nothing for privacy, a free press, competition or, if other technology companies in Australia are a guide, paying Australian corporate income tax. Ever.

Regulators need to harden up and understand that hiding under the desk and hoping it all sorts itself out is not an option. Taxi drivers should be regulated more like coffee shops and less like utilities. Similarly, those existing regulations should be enforced; with the number of ex-Goldman Sachs employees at Uber I can only hazard a guess that serious fines levelled at the corporate, and not the drivers, are likely to do the trick.

These businesses become more like communications networks and less like transport businesses, Australia will be left with a large, vicious foreign player as a monopolist with a disregard for the law in its DNA.

Alex Turnbull is an investor in goCatch.