I believed this point too when we first started our company, and were more Uber-clone-y than we are now. However, after spending a year working in the industry, I've learned that it's more "catchy idea" than reality.
It turns out that the taxi industry is a little different: the fleets have wanted to innovate for years now, but have little idea how. The regulations clearly permit innovation. In cities where taxis aren't run by the municipal government (i.e. "in cities that aren't New York"), there is healthy competition between taxi providers, in spite of their commoditization (regulated pricing, supply, etc.).
IMO, the existing taxi technology players are the ones who are stifling innovation (and/or "protecting a group of entrenched companies at the expense of consumers"). 2 of the big 3 dispatch technology providers charge hefty fees just to open access to their APIs for new entrants, if they'll even grant you access in the first place. And, due to the long-term, hardware-heavy, dispatch-focused nature of their contracts, they rarely have any incentive to innovate for the passengers; one of them once told me that they have nobody on staff who understands the web or web technologies!
Working with the existing dispatch companies, while not a necessary evil (take Hailo or GetTaxi, for example), is the best way to ensure scale and distribution -- the amount of cash consumer-focused players must spend in this industry in the hopes of curbing cab booking behaviours is enormous. Our research showed that, when calling for a pre-arranged cab, 95% of taxi passengers chose their fleet because it was first to mind, or the fleet they always called. In other words: only 5% of consumers chose what TaxiCo to call for any rational reason. Having an existing brand identity, and a number of cars on the street constantly hocking your wares, goes a long way in this industry.
But even before Uber came along, a wave of new dispatch companies had started cropping up, most of which are relying on a healthy partner ecosystem in order to make it in the first place. But, since dispatch technology contracts have typically been signed as 10-year license agreements, evolution naturally trends to a slow change: a lot of forward-thinking fleets I've met with renewed their contracts in the last year or two, since they didn't feel the new technology was mature enough yet (and, in most cases/for their needs, rightly so).
All this to say: I'm not yet sure what the best way to spark the necessary change is (FWIW: currently leaning towards "open standards", but I'm not 100% sure how that would look yet...
); figuring it out will likely be a huge benefit to my company. But I firmly believe, based on facts and experience, that it's not a regulatory issue.
(edit: formatting)