Can Uber Help Save Public Transit?

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More than a decade after the emergence of ride-hailing, the transit community still can’t quite decide what it thinks about Uber. Is the company an ally that can ferry new passengers to and from transit stations, solving the so-called “first mile-last mile problem”? Or is it a competitor, luring away more affluent riders and forcing remaining ones to endure worsening congestion? The debate continues, in transit board meetings as well as in academia.

Uber, for its part, would like to be seen as transit’s friend. In 2018, the company set up a team called Uber Transit to manage its relationships with public transportation agencies. The team’snew report, “Towards a New Model of Public Transportation,” arrives at a moment of profound crisis for U.S. public transportation systems, which have seen their ridership and revenue hammered by the coronavirus crisis. The Uber paper is the clearest articulation yet of ride-hailing’s pitch to transit agencies. The company presents itself as part of transit’s recovery; the report’s cover page promises to explain “how Uber is offering public transportation agencies new tools to operate more efficient, connected, and equitable mobility networks.”

Well, maybe. But I have some questions.

To start, let’s walk through Uber’s three transit products. First, an agency can pay Uber to provide on-demand Uber ride-hail or microtransit trips to people traveling to or from transit stations, or to replace lightly used bus service (as in a sparsely populated suburb, or late at night). Transit agencies in Miami, Florida, and Dayton, Ohio, are among those that have signed on so far. Second, an agency can purchase Uber’s routing software to guide itsparatransit ormicrotransit service,  a product strengthened by Uber’s 2020 acquisition of Routematch. Last year Marin Transit became the first transit agency to use this routing service. Finally, a transit agency can let passengers book and pay for transit trips as well as Uber trips directly on the Uber app, which is now possible in cities like Cincinnati and Las Vegas. (In Denver, shared Lime e-scooters and bikes are also available.) The company calls this product “Uber MaaS Solutions,” in a nod to the trendy Mobility-as-a-Service concept.

The report doesn’t include pricing, but it does say that “while our products can be deployed individually, they work best as a holistic and integrated offering.” All three reflect Uber’s central claim that transit will be cheaper and more passenger-friendly if agencies embrace the flexibility that ride-hailing and shuttles can bring to their service. “The addition of new modes with a variable cost structure like ridesharing and the proliferation of on-demand services will unlock new optimums of efficiency and lower cost structures for public transportation agencies,” the report states. That’s a mouthful, but you get the idea.

Some of Uber’s assertions make good sense. Few would disagree that ride-hailing services have led many commuters to expect real-time trip information when riding transit as well. And Uber’s routing product offers exciting potential to improve paratransit, which mobility-limited users often complain is abysmal (the company is currently running a paratransit pilot in Boston).

But Uber’s report raises several critical questions about the extent to which its products are likely to benefit — or harm — transit service. Here are a few that an agency should consider carefully before signing on the dotted line:

When does switching from bus service to Uber save money?

Much of Uber’s report focuses on lightly used fixed-bus routes that are heavily subsidized on a per-passenger basis (since there are relatively few riders to absorb the fixed costs of the vehicle driver, and gas). “When demand is low and during off-peak hours, conventional modes often face very high costs per trip while riders suffer from longer access time and reduced frequencies,” the report states.

By contrast, variable costs — not fixed ones — dominate ride-hailing and microtransit, because the number of vehicles in service will rise and fall along with passenger counts. In an environment such as the current one, where ridership on many bus routes has dropped dramatically due to coronavirus-related commuting shifts, this sounds like a particularly attractive feature. “If [on-demand] ridership drops, then the agency’s operating budget declines accordingly while cost per trip remains the same,” the report reads. 

That’s true, but there is a problem: It’s likely that ridership will rise, not drop, if an agency switches from infrequent bus service to more convenient, on-demand ride-hail or microtransit. If so, subsidies for those new passenger trips could strain transit budgets, because the variable costs of ride hail and microtransit mean that trips will not become cheaper to provide as more people opt for them — unlike fixed-route bus service, which has extra capacity in the form of empty seats.

That is an issue that confronted Innisfil, Ontario, after the city began subsidizing UberX trips in lieu of fixed-route bus service a few years ago. Higher-than-expected usage led the city to blow through its initial budget, forcing it to raise fares and limit the number of monthly trips that a resident can take. (A city official says that any resident can now take up to 30 trips per month, and request a waiver for an additional 20.) A comparable problem emerged in St. Petersburg, Florida: The TD Late Shift program offering subsidized ride-hail trips to late-night, low-income commuters proved so popular that the transit agency had to temporarily close it to new applicants.

Can you imagine a transit system telling riders, “Sorry, we can’t sell any more transit passes for a few weeks,” or, “Unfortunately, you can only take 20 bus rides per month”? It sounds absurd. But with a fixed budget for subsidized on-demand transit, those scenarios could become real. Uber itself acknowledges this risk in its report: “The absolute cost-reductions for agencies could be at least partially offset by more trips. Agencies should take this induced demand effect into account if they are looking to purely lower operating costs.”

Good advice.

Where are Uber’s other projected cost savings coming from?

There’s another reason a transit agency should examine Uber’s cost saving projections carefully: It’s not obvious what’s driving those cost savings.

It’s one thing if Uber’s routing software improves efficiency — that’s all well and good. A heavy bus will also require more fuel than a smaller Uber vehicle. But agencies may want to think twice if they’re cutting costs by substituting Uber’s contractor labor for their own (often unionized) employees. “If the savings are accumulated by paying the workers a substandard wage, then it’s not really a good bargain for the community,” says David Bragdon, executive director of the nonprofitTransitCenter. 

Keep an eye out for Congress to weigh in here. Last year a proposed transportation bill in the House of Representatives included language to prevent transit agencies from replacing their own service with contracted, on-demand vehicles.

What about Uber trips downtown?

For all its focus on low-demand transit routes, Uber’s report has little to say about transit trips taken downtown during daytime hours, where demand is much higher. That’s a notable omission. Even if Uber Transit’s products aren’t directed there, the company’s other business arms certainly are.

“Uber and Lyft have high demand where there is a lot of activity — it’s where restaurants and movies are. That’s often downtown,” says Anne Brown, a planning professor at the University of Oregon. Brown was a coauthor of a study that examined ride-hail trips in pre-Covid Chicago, concluding that they were concentrated in transit-rich areas like the Loop, not in the “transit deserts” found in more distant neighborhoods.

Downtown Uber trips are more likely to depress transit ridership, both by luring transit passengers and by adding congestion that slows bus service. University of Kentucky civil engineering professor Greg Erhardt found that the presence of ride-hailing services in a city reduces transit ridership 1.3% to 1.7% per year on average, compounded annually. In a prepublished article, Erhardt and his coauthors reached a similar conclusion after they examined trip data from San Francisco. “We found that ride-hail reduced bus ridership by around 10%,” he says.

Both Uber and transit agencies seem to agree that ride-hail trips in low-density suburbs or at night are preferable to those during daytime hours downtown. That being the case, a sensible policy solution would be to tax downtown ride-hail trips more highly. That’s what Chicago began doing a year ago, when the city implemented a new tax that imposes a surcharge of up to $3 on downtown trips (after Brown’s study was already complete, notably).

Would Uber support other states and cities imposing similar taxes that reinforce transit’s role in central neighborhoods? Chris Pangilinan, Uber’s head of global policy, doesn’t address that question directly, but he does say that the company is “all for congestion pricing that would apply to all automobiles, including Uber.”

What about “Mobility as a Service”?

Uber MaaS Solutions is built around making the Uber app the “Amazon for transportation,” as CEO Dara Khosrowshahi memorably put it, with micromobility rides and public transportation tickets available alongside Uber trips. The report doesn’t mention a reverse arrangement — with Uber rides available on a transit agency’s own app — but Uber representatives say they are open to it.

If a transit leader is interested in selling tickets on the Uber app, she would be wise to ask what kinds of data her agency can receive in return. Will the company share origin and destination data with the transit agency, which could improve routes and schedules? Or will Uber treat the data as a black box? When asked, an Uber representative said that the company would provide “aggregated and anonymized” data when requested, but it’s unclear how useful that would be.

Transit representatives might also ask for guarantees about how Uber will feature their agency’s tickets within its app. Since Uber makes more money when a customer opts for ride-hailing instead of transit, the company has an incentive to nudge riders into one of their cars. Uber can effectively do what it likes within the walled garden of its customer-facing multimodal app, and transit agencies may want to constrain how the company wields that power.

So: Friend or foe?

I don’t want to imply that Uber’s interests are always opposed to transit. The company’s lobbying effort to support congestion pricing in New York City shows that isn’t the case. (Uber’s Pangilinan is currently serving on a committee exploring a similar approach in San Francisco.) And both transit and Uber could benefit from curbside pickup/dropoff points, which reduce congestion caused by idling vehicles.

But Uber is a public company (whose stock recently hit anall-time high), responsible to shareholders whose motivations differ from public transportation executives. Asked how a transit leader should view the company, University of Kentucky’s Erhardt answers bluntly: “It is in Uber’s interest to make my service worse, to steal my customers, to effectively put me out of business — though that doesn’t mean there can’t be a complementary role in certain places.”

If a transit executive wants to consider doing a deal with Uber, she will be wise to look past warm words about aligned visions and carefully examine contract terms. It’s safe to assume that Uber will pursue its own goals in any agreement. Transit agencies should do the same.

David Zipper is a Visiting Fellow at the Harvard Kennedy School’s Taubman Center for State and Local Government, where he examines the interplay between urban policy and new mobility technologies. 

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