Uber's plot to take over mass transit

Hello from 20 Minutes into the Future. This week’s letter is 1,122 words, a 04:30 minute read. Tonight we’ll be taking a critical look at what happens when Uber takes over public transit. 

This post is part 4 of a series, Push a Button, Get a Car, Create Economic Injustice. In it, I’m exploring the exploitative nature of Uber’s business and its ramifications for the future. You can read the firstsecond, and third posts if you'd like to get up to speed. Up now, how Innisfil, Ontario gets under the hood of Uber's endgame. Start your engines.

Ridesharing services threaten to disrupt mass transit just as they've up-ended taxis. The PR teams at Uber and Lyft like to claim their platforms complement buses and trains. Research at UCLA and the University of Kentucky prove otherwise:

  • Rail ridership drops by 1.3%

  • Bus ridership drops by 1.7%

  • Those numbers compound for every year ridesharing exists in a city

  • 88% of major US metropolitan areas lost public transit passengers in 2017

With mounting losses in revenue many cities are looking to cut costs. Especially as their infrastructure crumbles. Now that Uber is a listed company they're under massive pressure to increase revenue. Ditto for Lyft. You can see where this is going already yeah?

Uber has inked 20 deals with cities across the US, Canada, and Australia. Lyft has lapped Uber by arranging 50 similar deals. The extent of how invasive these deals are varies:

  • In Denver, Uber sells Regional Transportation District tickets in its app.

  • In Centennial, Co Lyft offers "free rides" to transit stations. Free to the consumer, not free to Centennial.

  • Other cities (like Atlanta) are debating low-cost versions of the above. Even at $3 a ride that’s still more expensive for low-income families than owning a car. (CAP's math costs Uber at $2,150 vs $2,000 for a car).

  • Dallas Area Rapid Transit (DART) subsidizes shared Uber rides near it's stations. This is in the obvious hope riders will become passengers on DART.

  • In some cities Uber serves in an official capacity as 911 transport. In many others it's unofficial. And drivers hate it for some pretty obvious reasons.

No deal has been more parasitic than the one made in Innisfil, Ontario. In recent years its population has boomed. Population swelled 17% from 2006 to 2016. The mix was of seniors, students, and other carless adults. The once-tiny agricultural hamlet needed to a transit solution.

Local leaders did some back-of-the-envelope maths and weren't happy with the results. One bus to serve a projected 17,000 residents would cost the hamlet $270,000 Canadian dollars for the first year. Never mind the hard graft of designing the system.

Enter Uber. Gord Wauchope, then the Mayor of Innisfil said at the launch of "Innisfil Transit":

“Rather than place a bus on the road to serve just a few residents, we’re moving ahead with a better service that can transport people from all across our town to wherever they need to go."

Riders were able to pay $3 to $5 to go to any number of predetermined hubs and Innisfil would pick up the rest of the tab. Innisfil even discounted trips to other destinations by $5 per ride. Who wouldn't love that?

By the end of the program’s first year of service, residents were taking 8,000 trips a month. Well over the one-time $270,000 price tag for that bus they took a hard pass on. Innisfil had to make some changes. As of April, fares went up by $1, trip discounts dropped to $4, and a monthly cap of 30 rides was put into effect. That last one was at Uber's suggestion (residents hate that change most of all).

Innisfil Transit is a victim of its success. Traditional public transit systems deliver more efficiencies the more people use it. The opposite is true here. Per-capita costs are fixed and only so many people can fit in a backseat. Ergo the town is forced to hike rates and cap rides in response to adoption of the system.

What's worse there's no end in sight. In traditional systems a city would respond to added demand by adding new lines or trains or buses. And they'd be able to do that with revenues from the system. Innisfil makes next to no money off of Innisfil Transit. Uber takes the lion's share of revenue. We all saw that coming right?

What does grow is the hamlet's costly subsidy of Uber:

  • $150,000 in 2017

  • $640,000 in 2018

  • $900,000 in 2019

Innisfil's story should be a cautionary tale for cities everywhere. This is war and few cities have the filthy lucre behind them that Uber does. Beth Osborne, director of Transportation for America sums things up:

Uber is saying don't invest because I can provide service for way cheaper. But what they mean is cheaper only as long as venture capital is plugging the hole.

Cities are desperate and so they're turning to venture-backed short-term solutions. But those companies are also desperate as they continue to post astronomical losses. Uber lost over $5 billion this quarter. Lyft lost $644 million. What happens to Innsifil's budgets when Uber raises their rates to cover those losses?

Adie Tomer, a fellow at the Brookings Institution Metropolitan Policy Program asks.

“What happens when you build out a public-facing shared service treating Uber and Lyft like a transit agency, and they go under? They don’t have the fiscal resiliency of a public-transit agency. No one is going to bail out Uber and Lyft.”

We don’t know the answer to Tomer’s question yet but Innisfil will be amongst the first to find out.

File under: #uber #gigeconomy #businessmodels #masstransit
Next week: How drivers, riders, and cities are fighting back.

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20 Minutes into the Future is a critical look at how technology is shaping our lives today. And what actions we can take for a better tomorrow. If you you're not already a subscriber and found this newsletter worth your while then please sign up.

Daniel Harvey writes 20 Minutes into The Future. He is a product designer and has written for Fast Company, Huffington Post, The Drum, & more. If you're pissed about the current state of tech and want to see us do better then you’ve found a kindred spirit.

You can email him at daniel.harvey@gmail.com or follow him on Twitter @dancharvey.