Uber’s Mobility Dream Might Be a Consumer Nightmare
In the face of rising criticism over the congestion impacts of rideshare services, Uber has begun rebranding itself as an “urban mobility platform.” They acquired Jump Bikes, invested in bike and scooter company Lime, integrated peer-to-peer car sharing from Getaround, and partnered with transit ticketing app Masabi. Uber’s vision is a future where consumers use the Uber app as their one-stop multimodal transportation tool.
For cities and consumers looking for a way out of car dependency, this sounds like a dream. In essence, Uber is promising people everything they need to avoid owning a car in a city. All with the convenience of a single app, integrated payments, and a streamlined user experience.
There is much to like about this vision for the future – who doesn’t want to save money, help the planet, and reduce transportation headaches? But there are big risks for consumers in this promise.
If Uber and its similarly ambitious competitor Lyft, succeed in becoming the preferred alternative to car ownership, consumers will increasingly be dependent on private companies for their daily mobility needs. The network effects and market power of a company like Uber could be used to shut out competition, and without strong regulations, the most vulnerable and least profitable citizens could see themselves unable to access critical mobility services.
Three key areas of risk emerge in a world of large, integrated mobility providers: competition, consumer protection, and equity.
Competitive Market or Mobility Monopoly?
Uber seems to be positioning itself to offer what’s referred to as “mobility-as-a-service (MaaS)” subscription package. Imagine a monthly fee of a few hundred dollars that would buy you a bundle of services: rideshare trips, bike rentals, scooters, car rentals, and perhaps even a public transit pass. For many, an offer like this would be a compelling alternative to a car payment. Once they begin paying into the service, consumers are naturally incentivized to stay within the confines of their monthly subscription fee. A better bike share option might emerge, but it will have a hard time convincing people to pay for an additional a la carte service.
Just as the Amazon’s frictionless Prime subscription creates tremendous customer loyalty, mobility subscriptions would have a powerful “walled garden” effect and could lead to a de facto mobility monopoly by the company with the most compelling offering.
An integrated mobility company could also engage in anticompetitive or predatory pricing. When the City of Santa Monica solicited bids from e-scooter companies, Uber subsidiary Jump initially proposed pricing substantially below the other companies in the space. Uber has always used its deep-pockets to subsidize service and build market share. Long term, a company with many services on offer can cross-subsidize — undercutting prices where they face competition, while inflating the cost of services they have successfully monopolized. This practice undermines competition and ultimately results in higher consumer prices as new monopolies are established.
Full-stack mobility companies will have another competitive advantage: data. Today, most scooter and bike companies share vehicle location with aggregators like Transit and CityMapper. Consumers can use these apps to find the closest vehicle from any provider. But a dominant player could choose to cut off aggregators. Convenience minded consumers would likely default to the apps from the biggest mobility companies rather than searching across many providers. And by mining their massive dataset of travel patterns, these companies can optimize and target their services to further lock-in their market advantage.
Lack of Consumer Protection
Imagine you wake up one morning to discover your Uber account suspended. In one stroke, you have lost access to all the transportation options you rely on to get to work, school, or the doctor. Whether for good reason or as the result of a mistake, how quickly could you get the issue addressed? How do you get around in the meantime? The internet abounds with tales of people kicked off of platforms like AirBnb and Etsy unable to get a hearing or sometimes even an explanation.
Many industries have adopted a “customer bill of rights” either voluntarily or through regulation. These types of documents can cover issues like pricing transparency, dispute resolution, loss of service, billing rules, data privacy, and minimum service quality standards. They may also provide for an ombudsman or independent oversight to address unresolved issues.
Without a similar framework for mobility services, customers will be wholly dependant on the accuracy of digital reputation systems, the fairness of account policies, and the responsiveness of customer support organizations if something goes wrong.
Equity and Universal Access
Private companies, accountable to their shareholders, have a fiduciary duty to avoid money-losing or low-profit lines of business. The rideshare industry continues to have a well-documented undersupply of wheelchair accessible vehicles. Renting a dockless bike or scooter may depend on access to a smartphone and a credit card. While Lime recently established a model program for low-income, unbanked, and smartphone-less riders, there is not yet a clear, industry-wide path to address gaps in equity and access.
Mobility is a universal need, but companies freely pick and choose the places where they offer their services and the types of customers they cater to. If private services begin to replace more universally available options such as public transit and private vehicle ownership, the risk increases that some people will be left out of access to essential services.
In addressing these risks, regulators face a fundamental tension. Move too fast and risk choking off investment, innovation, and the development of new business models. Move too slowly and risk consumer harm and the rise of mobility giants with too much market and political power to reign in.
Cities are becoming more active in setting policy for emerging services like bikes and scooters, and can incorporate thoughtful requirements in their license schemes. There are steps that government can take today to avoid some of the worst long-term risks:
1. Mandate Open Data
Requiring companies to publish real-time vehicle availability in open formats can preserve the role of 3rd party aggregators and improve the ease with which consumers can find competitive options. Los Angeles’s Mobility Data Specification offers an excellent model for real-time data exchange between regulators and operators.
2. Protect Vulnerable Consumers
Low-income discounts, support for the unbanked, and inclusive service geography can help make new mobility services useful to more people — and cities can require them as a condition of license.
3. License Multiple Companies
Limiting the number of companies that can enter a market runs the risk of large, deep-pocketed players squeezing out competition by offering the most favorable terms to cities. Regulators can avoid this by creating enough licenses to include smaller competitors.
4. Make Platform Rules Transparent
Just as we expect companies to tell us what they do with our data, we should expect companies to tell us the rules of their platform: what would cause me to lose access? To whom do I appeal if I have a problem? How quickly will that appeal be heard? Consumers deserve strong protections. Cities can start by requiring transparency on policies from the companies they license.
In the long run, even the largest, most powerful cities will struggle to rein in sophisticated global mobility companies. Thoughtful regulation at the state and federal level will eventually be necessary. Private operators of railroads, airlines, electric utilities, and telecommunications systems are regulated as essential public utilities, often with common carrier or universal service requirements. As scooter, bike, and rideshare services evolve from being a novelty to a daily necessity, we must look to these other industries for effective strategies to support competitive markets and protect consumers.
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