I think you're right. But you probably shouldn't call your disruptor a "taxi" and you certainly can't just pick up random people off the street without the license to do so.
Uber is in NY and they cost more than a cab, but I haven't heard how they're doing in that market. I think I'd pay the premium to hire an Uber driver over a random smelly cab any day.
My understanding is that Uber does 2 things at once:
(1) they create a legal business to compete with the current taxi one, which is corrupt beyond repair;
(2) they secure the high-end segment of that market to themselves.
Point #1 is quite brilliant, but could be expected from many groups of hackers at ease with statistics and software. Point #2 is pure genius, though: they cannot keep the whole market they create to themselves, because as soon as all legal challenges will have been removed and the business model will have been polished, there will be no way to prevent copycats from stealing their lunch. Instead of preparing to fight a lost battle, they firmly anchor themselves in the upper segment of the market, hoping that copycats will fight for the low margin entry level market.
Therefore, Uber's market share is much lower than it could be: they're after the patrons they'll be able to keep for the long term, not after every taxi patrons. I believe that copycats preying on the whole taxi industry's patronship will soon come and storm the market, though, unless lobbyists manage to kill the legal loopholes fast enough.
I think point 2 is the key. There likely will be increased competition once some of the initial regulatory battles have been fought. Having a lock on that premium market segment should allow them to be very competitive in a taxi-like market as well (They can afford to have really low margins on much of that market, where as their competitors won't).
There's really two parts to the business model. It's a balance between making sure drivers are making enough money for it to be worth their time/effort and ensuring that it's a pleasant experience for riders.
Uber is also in Chicago, offering both a black car and cab service. So there's definitely movement there to bring lower cost options. They're working through regulatory issues in a number of other cities. The taxi business is extremely over regulated. It will be interesting to see how companies like Uber start to disrupt it.
