The Gig Economy's Shock Doctrine: When Public Transportation Flails, Uber Comes Rushing In

Uber’s entry into the transportation marketplace of Cambridge, Massachusetts was all bare knuckles and flying elbows. Its CEO, Travis Kalanik, called Cambridge Mass. home to “some of the most anticompetitive, corrupt transportation laws in the country.” In fact, Cambridge regulated ride services like most other cities, with a regulations that envisioned taxi cabs and livery services as the only business models and sought to protect riders from rogue operators and dangerous drivers.

American businesses have a playbook they use when regulations impede their business plans. They hire lobbyists, make campaign contributions, and sometimes, they sue. Uber, reflecting the libertarian ideology of its CEO, did none of that. It simply started doing business and dared communities to try and stop it. Cambridge tried, pursuing Uber through its Licensing Commission. Cambridge ultimately failed when the state overruled them. Because this was a licensing action, the decision turned on whether Uber’s GPS-based app had been certified by the National Institute of Standards and Technology (NIST) to measure accurately the distance traveled. Whether Uber improved the transportation system wasn’t part of the decision.

Cambridge’s Kendall Square has been called the most innovative square mile in the world. It has seen astonishing growth as it attracts the headquarters and research labs of major pharmaceutical companies, as well as an uncountable number of startups. Economic development officials come from all over the world to see what the magic is and if they can duplicate it for themselves. Traffic and parking officials come from all over the United States to see how Cambridge has, at least until recently, managed this growth while reducing car traffic.

The answer is twofold. First, Cambridge has a rigorous Transportation Demand Management plan that makes parking onerous and encourages other modes such as bicycles. Second is the tremendous private investment in transportation. MIT runs an extensive shuttle network in the area. The Charles River Transportation Management Association runs its own network of buses on behalf of its two dozen member companies, a network that connects directly to public transportation nodes. And during rush hours, the streets are full of smaller van services, luxury buses connecting suburbs to large corporations, and Uber and Lyft cars. Rather than grow public transportation, wealthy institutions and well-paid Kendall Square workers have been able to buy their way around its limits.

But eventually, capacity limits in the bus and subway system will be reached. Concerned about this coming gridlock, Cambridge and the state of Massachusetts convened a joint task force. The solutions are obvious. A bus fleet that, literally, has no spare buses, must be expanded, routes added and frequencies increased. A subway line has to add capacity, which means new signaling systems and power capacity. But, as state officials explain, there is no money for increased capacity. If a state tells representatives of its prized innovation economy that it doesn’t have the money to get its employees to work reliably, imagine what that means for the rest of us.

The problems of underfunding public transportation run broad and deep. Boston’s modest, court-ordered expansion of its light rail system ran into trouble recently as cost estimates ballooned by $1 billion. Consultants brought in to review this fiasco concluded the MBTA, Boston’s regional transit agency, didn’t have enough staff to manage the project. The MBTA’s sprawling maintenance facilities in Everett look like a land that time forgot, resembling more the backroom of a handyman’s shop, than a vital cog in critical infrastructure. While there is an occasional state-of-the-art machine tool, the real tell is the lack of computer screens, part and parcel of modern systems and workflow tracking. Indeed, the most ubiquitous innovations are the biometric sensors that have replaced the time card. It should come as little surprise that MBTA management and the union representing the workers in the warehouse portion of the facility are locked in a battle over outsourcing, with the state seeking to save money and the union advocating for investments the facility so obviously needs.

Uber has grown to serve over 500 cities in 66 countries, achieving a valuation of close to $70 billion. What it hasn’t achieved is profit, recently telling its investors that it had lost an astounding $1.2 billion in the first half of 2016. Maturing technical companies start looking for guaranteed revenue streams, ones that don’t require them to earn customers one at a time. For Uber, that stream is public transportation.

As Florida officials planned Sunrail, an Orlando area commuter rail line a decade ago, they knew they had to find ways other than single occupancy cars to get riders to the train. Their regional bus authority, LYNX, had a novel idea. They’d create Flexbus, an on-demand bus service to pick up passengers destined for the train. In 2013, less than 10 months before the service was to start, LYNX threw up its hands and abandoned the project saying it was unable to implement the service. Still needing a way to get riders to commuter rail, Altamonte Springs, Florida, began a program this year to subsidize all Uber rides that begin and end in the community. Rides to the SunRail station will be subsidized 25%, all other rides 20%, with the discount to the rider automatically calculated by the Uber app.

When voters in Florida’s Pinnellas County, near Tampa, rejected a 2014 referendum to fund expanded bus service and build a light rail system, transit officials had a problem. The Pinellas Suncoast Transit Authority had to cancel two bus routes and, instead began pursuing partnerships with Uber and local taxi companies. Earlier this year, PSTA announced a program that would subsidize Uber and taxi rides destined for bus stops within certain geographic zones. This month, it started another Uber partnership, funded by a grant from the state of Florida, that provides up to 23 free nighttime rides per month for the “transportation disadvantaged,” those whose household income does not exceed 150% of the federal poverty level. This program also does not require a cellphone, marking the first time Uber users can hail a ride with a traditional phone call. Unlike the Altamonte Springs Uber program which subsidizes riders regardless of need, the PSTA efforts focus on those for whom car ownership would be an economic burden, a traditional role of public transit.

It’s one thing for desperate officials facing a public unwilling to fund transit or the collapse of a decade-long project to find an eager private partner in Uber. The tactics employed by Alphabet, the corporate parent of Google, in Columbus, Ohio rise to a completely different level. Columbus was the victor in a federal “smart city” contest. With that victory come federal grants and packages of giveaways from corporations. Alphabet is offering Columbus not only free wifi, but also a package of traffic, transit and parking management software. But there’s one more thing. Alphabet wants all 90,000 low-income transit users who are currently given discounted fares or passes, should to be able to spend those subsidies on Uber. Not content to have the private sector leap into public transit funding gaps, Alphabet wants to create new ones by siphoning away public money. Alphabet, through its subsidiary Google Ventures, owns 7% of Uber.

Uber has been able to become a global transportation force because it hasn’t faced any of the usual friction to growth. It hasn’t had to finance the purchase of a vehicle fleet or build facilities to store and maintain cars. It hasn’t had to hire a workforce, insure them or pay for their retirement or healthcare. It hasn’t had to build a single road or right-of-way, nor has it had to negotiate for curb space for passenger pick up and drop off. When public officials, forced by shrinking dollars, seek out Uber as a cheaper alternative, we need to realize what we’re giving up. Government transit jobs are generally the good jobs at good wages we claim to desire. Uber drivers are contractors, not employees, self-funding healthcare, retirement and their vehicles and they get paid poorly for it, as well. And Uber isn’t public. A transit agency has to go through extensive public processes to change services. Uber just tweak its app.

This week’s app change brings us, without public announcement, Uber Plus, a flat-rate, door-to-door service for $2, undercutting bus fares. If you’re still not convinced of Uber’s intent, there’s nothing like unsustainable predatory pricing to provide clarity (Uber will be paying driver subsidies to make up for the lost revenue).

But Uber is not the only model. BRIDJ, a transportation network company started in Kendall Square. Noting the bus routes hadn’t change to match current commuting patterns, they conceived of an on demand van service. Unlike Uber, BRIDJ worked with applied for licenses, and worked with local officials on stops and routes. Starting in Boston, it's grown to Washington DC, and Kansas City. In the latter city, the Kansas City Area Transportation Authority owns and operates the vans—built at a local Ford assembly plant—while BRIDJ provides the underlying technology platform and receives a service fee. The public service remains fully public, with all the protections and accountability that implies, and the private company provides its particular its particular innovative platform, with a customer experience not usually found in mass transit.

The war on public transportation is on and, so far, only one side is fighting.

The author is a member of, but not speaking for, the city of Cambridge’s Transit Advisory Committee.


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