Uber’s Mobility Dream Might Be a Consumer Nightmare

By Jascha Franklin-Hodge

Jascha Franklin-Hodge is a Visiting Fellow at the Harvard Kennedy School and is the former Chief Information Officer of the City of Boston.

Nov 7, 2018 | Governance, Mobility | 7 comments

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.

Discussion

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7 Comments

  1. The monopolies of Google and Amazon partly come about because of the fiduciary requirements of public corporations. Might this problem be avoided for mobility platforms if they are required to be B-corporations or Benefit- corporations?

    Reply
    • Great Q, Tom! I was wondering something similar. It felt like that assumption – that a company has a fiduciary responsibility to its shareholders which usurps all other responsibilities is a false assumption (though once a company is public, I’m not sure how you reconcile that). Perhaps by signalling to investors that there are returns to their investment beyond monetary? I’m not sure – but I don’t think incentives can be so quickly aligned and therefore regulation feels like one less than ideal but viable path.

      Reply
      • Andrew, the cities can *require* the mobility platforms be Benefit Corporations and the cities can broadly specify required benefits. For example, handicapped riders shall be accommodated, average ridership in autos shall be at least two, vehicles must be zero emission, etc. etc. The city has the power to deny operating licenses to the mobility platforms if they don’t comply.

        Ultimately it is politics. Will the city fold and give the platforms and riders whatever they want, or will the city listen to the environmental lobby, the city’s own transit machinery, the city’s own citizens tired of congestion. It should be a partnership with the city guiding, regulating and helping the platforms to do what’s best for the city, residents and workers.

        Reply
  2. How can mobility platforms and their customers be encouraged to emphasize public transit for long rides and individual and pool rides for short routes – especially routes that couple to transit. This can reduce congestion and improve public transit.

    Reply
  3. This, with the “Heaven or Hell” video, is evidence that we should think beyond the “3 Revolutions” that Daniel Sperling has so well described, beyond our post-WWII mistake in designing cities for cars, instead of for people. Now, motivated by the looming need to accommodate millions of internally displaced persons (IDP’s) fleeing accelerating sea level rise, within a few decades, we need to ask:
    > What can these IDP’s afford, having lost all equity in their homes and businesses, packing their belongings in SUV’s and driving uphill, inland ?
    > Where will we put them ? Shall we sprawl Des Moines, Indianapolis, and St. Louis, burying the world’s best farmland under propagation of the infrastructure of the most inefficient and wasteful transportation system imaginable ?
    > What shall we build for them, and for us who are suddenly required to host them ? What can they, we, future generations, and Earth afford ?
    > Shall we consider “carfree” urbanity helicoptered down upon the low-density regions within our extant city boundaries, to avoid the expense and resource waste of rampant automobility ? Consider J.H. Crawford’s “Carfree Cities” : http://www.carfree.com/
    > What topology and what public transport systems would allow that ? I’ve concluded that the loop, torus, “donut” is the most efficient and humane module for modules of ~ 100,000 persons. Communities, neighborhoods, centers would be closely-strung pearls on a necklace of two concentric, adjacent, contra-rotating fixed-guideway transit systems, each centered upon and blooming outward from the transit station, which handles people, packages, mail, some freight.

    These could be high-density; the necklace accommodating many thousands, depending on “donut” and “pearl” diameters, in this emergency response to the next costly consequence of unrestrained fossil fuel burning. Try it on a printed map of your inland or upland potential host community: construct a necklace of adjacent or overlapping or closely-spaced pearls, of pennies or poker chips. Where would you place them; what property would be “taken”; how many would you contain and host; at what cost ? What tangential connections would you make ?
    Remember: no private “cars, vans, SUV’s, pickups” as we know them in the urbanized area. No parking lots, no garages. Paving, for walking, biking, service and emergency vehicles, probably TNC’s, yes.

    We’re anticipating an emergency response to extraordinary danger, in a few decades, perhaps justifying “carfree”.
    Or, are we already there; have been for decades ?

    Reply
  4. Under “Equity and Universal Access” we find, “Mobility is a universal need … ”
    This is true because our cities have been designed and built assuming that everyone has a “car” and is willing to travel a long way in it, if necessary, to access their needed destinations. People want access, “accessibility”, not “mobility”. The latter “need” is a symptom of poor urban design, failing to deliver “access” because too much car-based infrastructure gets in the way. Think beyond Mobility.

    That fundamental problem, plus the need to accommodate millions of IDP’s fleeing sea level rise in a few decades, should motivate us all to seriously consider improving the quality of human life, while reducing our footprint on Earth, by advancing to Carfree Cities, where TAAS is achieved with a minimum number of, and minimum dependence upon subscriptions to profitable aggregations of, light duty vehicles (LDV’s).
    We’d probably walk and bike more, be healthier, and pay for the whole system with cumulative health care cost savings. Forced to encounter each other frequently at pavement and platform, we might be more civil and empathetic, less vulnerable to a demagogue. “Eyes on the street”, Jane Jacobs said. Less crime and drug use, saving more lives and money ?

    Reply
  5. A good public transportation service, that will motivate drivers to use public transportation service instead of the personal care, MUST implement 4 fundamentals:
    1- Availability – the service should be available any time and everywhere
    2- Reliability – time is time. Minimal delays or cancellations
    3- Affordability – low and attractive prices for every passenger
    4- Safety and Convenience – as much as closed to the private car

    To achieve these four fundamentals the public transportation service must be under the public authorities’ responsibility, and the authorities should subsidize the service.

    The private new mobility companies, like Uber, Lyft or VIA, that offer today different type of new transportation services are not real public transportation operators, and the services don’t implement the four fundamentals. Actually, the third fundamental, Affordability, is implemented, thanks to the huge investments of VC and corporate’s funds in these companies.

    Reply

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