You may never have to stand on a street corner again.
Not with the way the public transportation industry has been transforming over the last several years thanks to technological advances that make hailing a cab or catching a bus as simple as tapping your phone screen. This new wave of on-demand transportation services puts passengers in the driver’s seat (sometimes literally) as to where and when they’ll get picked up and dropped off.
While each service uses different vehicles and procedures, they all function essentially the same way: Users download a free app to their smartphone or other mobile device that directly connects them with someone who can give them a ride from Point A to Point B—whether it’s a cab driver, bus driver or a civilian driver looking to make some extra cash.
It’s a revolutionary idea—the general populace taking back control of their own conveyances—but it’s not out of some deep-seated discontent with public transportation. In many ways, it’s simply because we can.
“I think in this case the technology is driving the demand,” said Dr. Joshua Schank, president and CEO of the Eno Center for Transportation in Washington, D.C. “Before everybody had smartphones with a GPS locator in their pockets, having an on-demand taxi service was a little bit cumbersome and never really worked that well.
“It has enabled a way better version of something that’s always existed, but now has become very, very easy.”
Others see an additional driving force: “The No. 1 reason ridesharing is becoming so popular is that it’s cheaper than traditional transportation,” said Justin Raymond, co-president of Hailo North America.
And their popularity seems to be growing exponentially, if the number of cities they’re popping up in around the globe is any indication. Uber, for example—one of the more well-known ridesharing companies—was operating in 128 cities worldwide at press time, with a company valuation of $18 billion. Hailo is currently operating in 14 cities internationally.
E-hailing: The new norm?
Ridesharing and on-demand taxi service is a particularly interesting facet of the new on-demand transportation industry because it is so similar to existing services, while at the same time being a completely different animal.
Companies like Uber and Hailo largely operate within a city’s existing infrastructure, hiring already-licensed cab drivers that are looking to make a little extra money. With both services, riders are shown a picture of their cab driver once a ride has been hailed, with a GPS tracker following the vehicle as it heads toward them. Payment is charged to the credit card users listed when they downloaded the app (with tip included), and riders are encouraged to rate their driver upon completion of the trip.
“I think one of the reasons that it’s becoming so popular is because it’s completely transparent,” Uber spokeswoman Lauren Altmin told TM&E. “And it’s available at the tap of a button.”
And the experience isn’t just limited to taxi service. Uber, Hailo and other such companies offer different products like livery service and SUV/van service. As technology continues to develop, those offerings are expanding—Uber, for example, is experimenting with on-demand water taxis in Boston.
Pricing is obviously a moving target as these services continue to refine and expand. Altmin said that the average Uber ride to date costs approximately $7.25
Ultimately, efficiency seems to be the central tenet of the e-hail movement. “It allows drivers to get more passengers and passengers to get to drivers more easily,” said Raymond. “We’re seeing explosive growth in the industry, and it’s really taking off because of the efficiency that it creates.”
Stranger danger?
The services that have gotten the most attention though—from consumers, lawmakers and the media—are the ones that are true ridesharing services, allowing average citizens to register as drivers with their own personal vehicles. Armed with nothing more than a smartphone and a personal driver’s license, these average citizens are taking to the streets, picking up passengers in their spare time.
Services like UberX and Lyft are spearheading the new ridesharing efforts, but not everyone is happy with the results—particularly the taxi industry. Cabbies in cities where Uber and others are operating complain that they’re losing business to ridesharing. Even more seriously, they allege that the ridesharing companies do not operate with proper insurance policies and driver background checks in place.
It appears that there’s little consensus among municipal governments on what to do about ridesharing. For every city that has given it the green light, others have cautioned to put on the brakes or forbidden service altogether. At the same time that Austin, Texas, is piloting its own ridesharing program, for example, city police have conducted sting operations and impounded vehicles of ridesharing drivers operating illegally.
Altmin explained that all Uber driver applicants are subjected to a rigorous three-step screening process at the local, state and federal levels, reaching as far back as seven years (the maximum amount allowed by California law). “We go well and far above what is required of a traditional taxi driver,” she said.
As for insurance, Uber has a ridesharing-specific policy covering its driver partners. “From the moment a driver accepts a trip to the trip’s conclusion, primary liability coverage is in place,” Altmin explained, which runs up to $1 million per incident. And Uber’s policy operates in excess of any personal insurance the driver has on their own vehicle.
Hailo’s model is a bit different, according to Raymond, since it’s not officially in the ridesharing space. “Every single vehicle Hailo puts on the road has a licensed driver or chauffeur in a licensed vehicle with the proper primary commercial insurance,” he said, indicating that the company doesn’t take out any additional insurance above and beyond the legal minimum.
Reason Foundation transportation analyst Thomas Rubin has conducted some preliminary research into the insurance issue, looking specifically at Lyft in comparison with traditional taxi services. And what has he found?
“Lyft’s insurance compares favorably with taxicab coverage in most cities,” he said, “and in fact it’s superior in many cases.”
Raymond said that while Hailo isn’t currently in the ridesharing business, it hopes to be in the future. “We will enter the market, but we don’t want to rush it,” he said. “We want to make sure all the rules and regulations are in place first.”
Checks and balances
Who should take charge of those rules and regulations, and what form they should take, is another matter still up for debate. At present, most of the oversight has come from the municipal level as ridesharing companies work with individual cities to iron out the details of legal operation.
A few state legislatures have thrown their hats in the ring as well. California became the first state to regulate ridesharing in September 2013 when the California Public Utilities Commission (CPUC) unanimously approved legislation classifying ridesharing and similar endeavors as “transportation network companies [TNCs].” Under the new rules, TNCs are required to obtain a license from CPUC and meet the following criteria:
- Carry a minimum of $1 million in driver insurance;
- Carry out their own vehicle inspections, driver training programs and criminal background checks; and
- Establish a zero-tolerance policy on drugs and alcohol.
Colorado enacted a similar policy in June of this year.
“Policymakers have to think about this carefully,” warned Schank. “Normally the inclination is to protect the established interests [but] the more strategic approach is to start doing outreach early on rather than letting it escalate into a battle.”
To date, the majority of governmental involvement appears to be at the municipal level, and both scholars think that’s the most logical place for it to stay—though Rubin can foresee difficulties there as well, as there are a greater number of entities to deal with than at the state level.
To his mind, however, regardless of what level of government is involved, the theoretical extent of their influence is clear: “Government should certainly not have a say in fares, but it should be able to get involved in fare disputes.”
Ultimately, the solution could be a case of less is more. “I think we’re finding out that taxicabs are over-regulated in the first place,” Schank told TM&E.
Transit pioneers
Ridesharing isn’t the only venture where transportation and technology are merging to create a new beast. While it hasn’t taken off quite as sharply yet, public transit is seeing its first attempts at a reordering of the system.
Cambridge, Mass.-based “pop-up” bus service Bridj is leading the charge in this category, and has already drawn considerable buzz in the Boston metro area. Launched in beta testing in June, Bridj is like a traditional bus service in that it has established routes and stops along the way.
But the routes aren’t necessarily the same everyday.
“We are totally demand-driven and user-responsive,” said David Block-Schachter, lead scientist at Bridj, whose job it is to track user demand and plan those routes accordingly. He and his team monitor “big data” to find popular origin-destination pairings and create routes around them. A proprietary algorithm aggregates social media data to figure out on the whole where people are and where they’re going.
When planning out a route, Bridj focuses on keeping buses on a straightforward path and trying to eliminate the need for riders to transfer to another vehicle.
“We’re not going through the traditional constraints that public agencies go through,” said Block-Schachter, a former Massachusetts Bay Transportation Authority employee. “We’re simply looking at where there’s a gap in the market—where traditional service is over capacity, where there are lines, where you could get more people directly from one place to another more quickly than they’re accustomed to.”
As an example, he referenced the popular Coolidge Corner to Kendall Square route. “By traditional mass transit, it takes two transfers; on your best day that could take 40 minutes, on your worst day it could take upwards of an hour,” he said. Bridj’s direct route makes the same trip in 15 to 20 minutes.
There aren’t many public-transit services like Bridj out there right now—and Schank believes there’s a reason for that. Comparing public transit with the taxi industry, he noted that ridesharing was such a radical departure from what the taxi industry was offering that it was able to get off the ground quickly, “and they’re able to provide the service at the same or lower cost than taxis and it’s a better service.” Transit fares, on the other hand, are kept artificially low by subsidies and public policy, a trait that will be difficult for transit startups to match or better.
The other significant barrier for on-demand transit is the need to invest in the buses and/or vans required to compete with traditional public transportation agencies. “And those are very expensive, capital-intensive investments that pose a greater risk,” he said.
Bridj contracts with local private bus companies for its shuttles, and only uses vehicles certified by the Massachusetts Department of Public Utilities. During beta testing, the company was charging $6 to $8 per ride.
Big enough for two?
The pace of advancing technology makes it difficult to predict how on-demand transportation will continue to evolve, but experts don’t seem to think it will eliminate traditional public transportation—unless the old guard does it to themselves.
“All of the concerns can be worked out,” said Schank, “and the taxicab industry needs to adjust its business model or it will go out of business.”
Rubin agreed, noting that, “These are two competing models that are hard to reconcile.”
Either way, on-demand transportation looks to be a real game-changer in the way people get around. TM&E
