Yes network effects are real - the question is there much of a network effect with the taxi industry. History suggests there isn’t, but the current valuation of Uber suggests that a lot of smart money thinks there is such an effect.
Actually there is a lot of history for this - go to any third world country and this is how most of the taxis for locals run. It is actually one of the outcomes of a lack of enforced regulation since competition drives unregulated drivers down this path.
