>>However, that is how regular taxi services work... and they're profitable.

That really depends on the location, and many are not profitable and in some area many only service some parts of the town / city.

Sure if you are in a large city like NYC, LA, Chicago etc, then it would be different but if you start getting out of the top 50 cities the profitability starts to drop

Also clearly taxi's are not providing the service at the value demanded of users or Uber would not exist