Management & Operations

The 'Uber Effect': Will New Ride Services Reinvent Transit

Posted on October 5, 2015 by Cliff Henke

It’s possible services like Uber could help solve the last-mile/first-mile issue.
Uber
It’s possible services like Uber could help solve the last-mile/first-mile issue.
Uber

Disintermediation.

dis•in•ter•me•di•a•tion (noun): change in the use of intermediaries between producers and consumers. Until recently, the most common disintermediation has been to cut out the middle man, such as what travel booking sites and Amazon have done.

Disintermediation has now taken on another meaning, however: when an industry adds new intermediaries, such as AirBnB in the hotel industry, or the growing number of real-time ride-hiring companies wreaking havoc with the business models of the taxi and limousine industries. Now, they are entering aspects of public transportation.

Some have suggested these new companies could destroy public transportation; others say they will force providers to become more efficient and effective. Or, as we look more closely, something else may ensue.

Competitive with transit?
For more than a century now, public transportation’s fundamental challenge has been to match the travel time of an automobile trip at less cost. The average travel speed today is roughly twice that of a car making the same journey. While many public transportation commutes that are competitive with those by car over the same route because of record investments in recent decades, too many journeys remain at the perennial disadvantage. Much of that can be traced to the wait time for a bus or train.

This is where ride-hailing services may complement public transportation. Uber, for example, recently analyzed its Los Angeles trip data and found that 22% of trips taken near rail stations took place during peak periods on weekdays, meaning that some of their customers could be using them as last-mile/first-mile connections to their transit trips.

On the other hand, another analysis in Los Angeles found that Uber was not only much faster than the bus or train, but also price competitive with the car when the trip was less than 22 miles. Moreover, with new, more transit-like offerings of these companies such as Lyft Line and UberPool, cost and travel time may become even more optimized as additional riders are included per trip. These newer services resemble the deviated-route bus services that an increasing number of public transportation agencies have introduced, and thus, could catalyze further transformation of bus networks toward this direction.

In a recent small study of ride-hiring companies in San Francisco conducted by University of California transportation Professor Susan Shaheen and her colleagues, these services had both good and bad effects on traditional public transportation. Almost all of these companies’ customers (92%) would have used other modes, and of those choice customers, 45% would have made the trip either by transit, walking, biking or a combination of the three. Shaheen and her colleagues then calculated the environmental effects of these patterns and determined that because the share of drivers and non-drivers was roughly split in the small study, any aggregate difference in environmental impact was probably minimal. But again, this survey was conducted in San Francisco, where transit use is relatively high.

Similar complementary results have also been found in New York City. In an analysis of 93 million trips taken on Uber, 22% originated in one of the outer boroughs (i.e., outside of Manhattan), where transit is less frequent and where taxi companies only picked 14% of their fares.

Real-time ride-hiring companies are wreaking havoc with the business models of the taxi and limousine industries, and now, they are entering aspects of public transportation.
Real-time ride-hiring companies are wreaking havoc with the business models of the taxi and limousine industries, and now, they are entering aspects of public transportation.

If you can’t beat ‘em…
While some cities like New York have seen acrimony between traditional passenger services and Uber, others have reached out to cooperate with traditional transit. In Washington, D.C., for example, the business model of a new ride-sharing service launched in 2014 called Bridj focuses on passengers who lack sufficient public transportation options either to their work or homes. For fares between $3 and $5, Bridj will serve customers between two direct points in the region if enough people indicate a willingness to share the ride. Bridj says that the trips it provides are approximately 20% slower on average than the automobile, but as much as 40% faster than traditional transit, and it prices the services to be less than the combined cost of operating and parking a car at local rates.

A similar service has begun in San Francisco called Chariot. Unlike Bridj, however, Chariot operates routes on schedules; Bridj’s routing is dynamic, based on the destinations of riders at any given time. Both Chariot and Bridj offer more comfortable seats, wireless Internet and ports to recharge electronic devices. Both also insist that their business models are cooperative with traditional public transit services and at least Bridj actively seeks cooperative agreements.

However, Chariot takes the Bridj and UberPool (a similar service of Uber) concepts a step further and is fostering what it says are the first “crowd-sourced transit routes.” Users input their desired commute route, and if enough people want to go the same way, Chariot will begin the service. Until then, it will attempt to attract interested riders into an existing route.

A new cooperative agreement has been reached with Uber and the Metropolitan Atlanta Rapid Transit Authority (MARTA). The agency did so to improve first/last mile links, particularly for guaranteed-ride home programs and late-night services. MARTA passengers can link directly to Uber’s site from the MARTA app while they are using the MARTA system.

In turn, Uber drivers have information about when the bus or train will arrive so that the car will be waiting. This takes the idea of taxi-hailing services pioneered in Germany a step further.

MARTA signed a cooperative agreement with Uber to improve first-mile/last-mile links, particularly for guaranteed-ride home programs and late-night services.
MARTA signed a cooperative agreement with Uber to improve first-mile/last-mile links, particularly for guaranteed-ride home programs and late-night services.

This is the kind of service and technology strategy that transit will need to stay competitive, particularly as the industry seeks to attract the next generation of riders, MARTA CEO Keith Parker says.

Transforming transit?
As with MARTA, the real-time vehicle tracking and passenger information technologies that make ride-hiring services viable are also enabling traditional public transportation agencies to transform themselves in other ways. In Helsinki, Finland, the transportation agency has launched an Uber-like smart phone application for public transportation which pools riders on a public minibus, which like Bridj, customizes the route of each bus in real-time. In the U.S. some transit agencies are looking to subsidize ride-hailing fares as part of their transportation demand management programs.

Thus, the competition against — or cooperation with — these new, rapidly evolving services, is on multiple fronts, and fares are often not a major consideration. Wait times, on-time performance, inviting vehicles, and amenities to make travel more convenient are the usual battlegrounds.

Two other cooperative ways that transportation policy makers are exploring include charging these companies as a new revenue source and obtaining their data for traffic congestion management policies. Many airport authorities have already made such agreements.

These ideas can thus form the basis for a “can’t beat ‘em then join ‘em” strategy: You want in our city, then wet our beak and keep us posted. The latter stipulation does not have to include personal information to be useful.

These steps may also help public transportation agencies overcome their governance and funding challenges, particularly those of older agencies that lack the ability to access dedicated sources of state or local funding. Despite rising funding at state and local levels and continued record funding at the federal level, investment has fallen in real terms during the past decade, and by half since the 1960s as a percentage of the economy, according to the Brookings Institution.

Chariot fosters “crowd-sourced transit routes” where users input their desired commute route, and if enough people want to go the same way, Chariot will begin the service.
Chariot fosters “crowd-sourced transit routes” where users input their desired commute route, and if enough people want to go the same way, Chariot will begin the service.

A road to the future?
To exploit these avenues more fully, however, public transportation agencies themselves must be much more nimble. Transport for London (TfL) in the United Kingdom is perhaps the world’s role model of such an organization. TfL is more of a strategic planner — a facilitator, even — than an operator. The London Underground remains wholly owned and run by TfL, but the rest of the rail and bus network is run on a concession system, including the highly successful Overground commuter rail network.

To illustrate, TfL will stipulate a bus services’ route, frequency and service hours in a tender for a concession to operate the service. The successful private company will then operate and maintain the buses and employ the staff for a fee. TfL does assume the revenue risk (the risk that fare income will not cover the service cost), which reduces the cost of the concessions. However, the tender also stipulates all outsourced services are part of TfL’s brand family, in order to convey an integrated, seamless network to passengers.

TfL also uses real-time data thoroughly, and not only for great passenger information through its very good website and mobile applications. It also uses the data to monitor performance on the concession contracts, which also contain both incentives for exceptional performance, new vehicles and other aspects of quality, and penalties for  poor performance. Finally, long-term investment decisions are more accurately made because the data is dynamically collected, collated and monitored in much the same way as ride-hailing services do. The idea is continuous improvement and nimble response to the latest changes in conditions.

New Orleans is the first city in the U.S. to try some of these concepts, but with a single private operator. In 2009, the region’s public transportation system became the first in the U.S. to adopt a “delegated management” and investment model. It selected the French-based conglomerate Transdev to assume almost all of the functions and operations that were previously the purview of New Orleans’ Regional Transit Authority (RTA), including all of the commercial risks — even the legal, financial, insurance ones.

All, that is, except the ultimate responsibility: Oversight of the system remains with the RTA’s Board of Commissioners, which monitors Transdev’s service performance, compliance with the authority’s policies and budget progress.

Both approaches represent a new paradigm of public transportation service planning, delivery and operation, aided by much richer, real-time data collection and analysis. In this paradigm, public transportation infrastructure is seen as a dynamically provided public utility, but managed with big data in real time, the kind of data use and management that make the new ride-hailing services work.

Whither government in all this?
Despite calls for greater private involvement, there has always been a role for government in public transport, whether it was the royally chartered horse-drawn coaches in London or Paris during the 17th Century, the city licenses and franchises for electric street railways that were common in the 19th and 20th Centuries in this country, or the gamut of current public-private arrangements we have today all around the world.

Uber, Lyft, Bridj and the like are writing another chapter in that history. They offer new services that can both fill the gaps between and often compete with traditional public transportation services, but in ways current policy never envisioned. Can public transportation learn to live, cooperate and even learn a thing or two from these new ways of doing business? Thus far, the answer appears to be yes, but as these services spread — and they will — what they and public transportation do next will shape cities not only in the near future but beyond.   

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