Are city authorities a friend or a foe for mobility platforms?

by Matthew Niblett on 11 Sep 2018

The issue of how to regulate new transport technologies, especially ride hailing and bike and scooter sharing, is one that has become increasingly newsworthy since these platforms first emerged. Grouped loosely under the moniker of ‘on-demand transport’, these technologies have had a significant impact on urban transport in less than a decade and, for some, even less time than that. Uber is now part of the English lexicon, bike sharing schemes are de rigueur for major European cities, and shared electric scooters are becoming increasingly common in North America and in Europe.

Debates around how to regulate these services are often polarised. Authorities can seem overwhelmed by the speed of the change that these services can precipitate. Indeed, the world of policy can seem increasingly to be a hostile environment for technology firms.

However, some recent developments have shown that city authorities can be willing to be patient, to analyse, and ultimately to devise regulation that both accommodates new technologies and also co-opts them into the pursuit of public policy goals.

Below, we analyse some of the recent trends in the regulation of urban mobility and demonstrate that the market is moving towards a series of increasingly localised solutions.

The end of 'move fast and break things'

New York City recently passed a Bill that imposes a moratorium on new private hire licences and which guarantees minimum payments for drivers. Uber had its licence revoked in London last year and, although it has now been granted a temporary new one, still has its critics in the UK Parliament and in other major cities.

Spain in recent months has been a case study of the fraught politics of these issues, with violent strikes by taxi drivers, angered by the Government’s inability to enforce a legally-mandated ratio of one private hire driver for every thirty taxi drivers. The city of Barcelona took matters into its own hands, introducing a new licence which adhered to the prescribed ratio, but the law was struck down by the Superior Court of Catalonia, who argued that the city had no authority to introduce these new licences. The Spanish Government then decreed that the Autonomous Communities (Spain’s regional governments) can have the power to licence private hire vehicles if they so wish. This has received a mixed reception, with half of the Autonomous Communities welcoming the development, and the other half accusing the Government of attempting to devolve away a mess of its own making. Ultimately, this will lead to a confusing patchwork of different regulations between cities and regions, making the business of ride hailing in Spain significantly more complex and costly.

The spillover of the 'Uber effect'

The emergence of electric scooter firms has also garnered a mixed reception. San Francisco residents are known to have vandalised e-scooters and there have been reports of people in Los Angeles setting them on fire or throwing them into the Pacific Ocean. Reports and images from China testify to areas where dockless bicycles are dumped en masse, while in the UK vandalism has got so bad that Mobike has withdrawn from Manchester.

In Madrid city authorities have reprimanded Lime, the electric scooter company, for putting its scooters on the streets (which is not illegal) prior to the introduction of the city’s new mobility law in September which will legalise their use. In fact, a spokesman for the city stated that this as a case of Uber “constantly flouting its [Madrid City Council’s] authority”, even though Uber is only a minority shareholder in Lime.

The strategy of many such companies has been to launch on a large scale in a number of locations. Companies compete to launch first in as many markets as possible, which may lead them to cut certain regulatory corners. The mantra of many disruptive technology companies has been that it is better to beg for forgiveness than to ask for permission. Frustrated by perceived regulatory inertia, companies have launched without gaining permits and occasionally been issued cease and desist orders. Electric scooters are the latest iteration of this phenomenon, but it is essentially a repeat of the experience of ride hailing companies.

In relation to dockless bikes and scooters, a rapid roll-out strategy can cause anxiety in local administrations, who fear that their jurisdictions will be littered with discarded bicycles and scooters, as some cities in China have become. The launch of three scooter firms in San Francisco was dubbed ‘Scootergeddon’ by some, as thousands of scooters were placed on the city’s streets. Authorities in San Francisco and Santa Monica argued that those using them were often failing to adhere to the rules of the road and sometimes endangering pedestrians. They were also concerned that companies had launched without gaining explicit consent from city authorities.

Even in Silicon Valley there are signs that the approach has begun to wear thin; San Francisco City Attorney Dennis Herrera has said that “San Francisco has had enough of the mantra ‘Move fast and break things’”.  In this context it is tempting to view recent legislative interventions by governments across the world as a blow to new technologies and the on-demand economy, but new trends can be detected which point towards a more collaborative future. Uber’s newer competitors in the ride hailing market, such as Olacabs, are taking a different approach to market entry to offset what could be called “the Uber effect”, by taking an engaged approach to dealing with city authorities.

Recent governmental approaches: moving from knee jerk reaction to evidence-based policy making

In some cities the regulatory responses to the rise of electric scooters have demonstrated this notion. San Francisco, having initially handed cease and desist orders to a number of e-scooter operators, has distributed a limited number of licences for a year-long pilot. Santa Monica has imposed a system which allows companies whose scooters are seeing a lot of use to put more on the street and, conversely, requires companies whose scooters are not being used to remove them. In San Antonio, Texas, the head of the city’s Transportation Committee stated that the city does not want to “scare away the technology.” Some in the city’s administration are keen to avoid repeating their experience with ride hailing; Uber and Lyft both left San Antonio because they felt that the restrictions put in place were too onerous for them to operate.

The trend can also be observed in bike sharing. Seattle spent a year collecting data on the 10,000 bikes that it permitted three companies to operate in the city, and asking residents about their attitudes towards the innovation, in what amounted to an explicit pilot of these schemes. The city is continuing to allow companies to operate while it considers what kind of regulatory solution it might want to implement.

This is also essentially what the city of New York has decided to do with respect to ride hailing. By capping the number of ride hailing vehicles in the city for a year, the administration has given itself time to study the impact of the vehicles on congestion, pollution and a range of other social issues. In a year’s time it may well legislate once more, and the city’s argument will be that it has built up an evidence base upon which to do so.

Regulation that serves wider public policy goals

All of this contributes to an opinion amongst some that governments are getting better at regulating the sharing and on-demand economy. They are also using regulation to harness and amplify the positive externalities generated by these innovative technologies.

Two particular trends have emerged: ringfenced taxation to fund public transport and other services, and incentives to reduce congestion. In May, Rio de Janeiro announced a new tax on every ride hailing trip. A large proportion of this revenue is due to be redirected into the city’s own mobility app. Whilst raising concerns about certain aspects of the regulation, Uber did comment that Rio was “leading the debate” when it came to ride hailing regulation in Brazil. Mexico City’s 1.5% per ride tax is invested partially in the taxi industry, whilst New York City’s Metropolitan Transportation Authority receives the revenue from a surcharge of $2.75 for every trip in Lower and Midtown Manhattan.

Similar policies have been adopted elsewhere; Washington D.C. has this year increased its tax on ride hailing trips from 1% to 6%, with much of that money being re-invested into the city’s metro system. The city is reportedly considering lowering its 6% per ride tax to 1% for pooled rides as part of efforts to reduce congestion. In New York, the $2.75 surcharge is reduced to $0.75 if rides are pooled. London has mooted stripping private hire vehicles of their exemption from its congestion charge, which imposes a daily fee on vehicles which do not meet certain environmental standards.

Beyond regulation, new technologies are being integrated more closely into the fabric of urban transport networks. Whim, a mobility-as-a-service app that allows users in Helsinki to pay in advance for a range of transport options in the city, and which provides a one-stop-shop in terms of hailing and finding transport, has announced that it will be expanding to the UK, starting in the West Midlands. Los Angeles, meanwhile, will start including ride hailing and car sharing as transport options which can be paid for through its TAP card, which has previously only been usable on public transport.

The future of urban mobility: towards localised solutions

What unites many of the above examples is that decisions about regulation are being made at city level. Cities are, and will remain, the key decision makers in matters of urban transport.

Many cities see new mobility technologies as part of the solution to their mobility problems. They are willing to accept new technologies such as ride sharing and bike/scooter sharing, due to their potential to solve issues around ‘lateral mobility’ in areas currently less well-served by public transport and also as ways to solve ‘last mile’ mobility problems. They can also see the value of these services in pursuing other goals, such as reducing pollution and congestion, and providing additional funding for local transport budgets.

Such cooperation may deepen over time as cities and companies begin to share and publish more open data, which will more explicitly allow private sector bodies to plug gaps in public sector transport infrastructure. Uber has shared its Movement open data tool in a number of cities worldwide, including Bengaluru in India and San Francisco in the USA.

If this is the case, then why aren’t all cities rushing to sign up new transport platform providers in their cities? There are a number of reasons why, but the most fundamental is that a core function of any city authority is to provide public transport infrastructure and having multiple private sector companies entering the city (and pulling out of the city) without some controls makes it very difficult to plan an integrated transport system.

A second, and equally important consideration is the concern that widespread uptake of private transport solutions will result in lower receipts from public transport, thus making the funding of public transport less tenable in the long term. Additional concerns may emerge around social exclusion, with private transport options only being accessible to wealthier citizens or disproportionately serving wealthier neighbourhoods. Of course, for each of these concerns there is a counter argument. In New York it is notable that the city has been threatened with a lawsuit citing discrimination against ethnic minorities who are less likely to be able to hail a cab on the street due to discrimination.

Each city has its own policy priorities. Large cities such as London and New York, whose jurisdiction sprawls beyond the central urban core, must either improve radial rail and bus links to enable lateral suburban transport, or continue to rely on cars at least in their outer regions. Smaller cities can benefit from the adoption of bikes and scooters to solve last mile transport issues, or more generally as alternatives to privately-owned cars. As more cities pilot and analyse new services, they are likely to see opportunities for these technologies to help them solve public policy problems. These solutions may vary depending on the city’s priorities, and so we might see an increasing diversity in regulatory solutions throughout urban areas, and a rise in bespoke agreements between corporates and urban administrations.

The need for a clear public affairs strategy

These trends indicate that mobility platform providers cannot afford to operate without an understanding of the political and regulatory environment of the countries and cities in which they operate. Rolling out services to new areas at speed is possible with the right level of planning and engagement with policymakers.  This is not a simple task; navigating regulation at several different levels and across numerous different geographies requires an in-depth knowledge of the particular contexts and circumstances of each individual urban market. Each city has its own vision of what future mobility will look like, its own policy priorities and its own unique set of political variables that will require bespoke and tailored approaches to policymakers. Indeed, with so many different levels of government at play, it will require a knowledge of which policymakers to target at which level, and how best to tailor messaging to attract the attention and support of policymakers.

In such a rapidly developing area of policy and with an increasingly crowded market of providers, there is a great opportunity for mobility companies to shape their approach to chime with the goals of policymakers. Demonstrating how their platform plays a role in delivering public policy goals will greatly assist in lobbying for the creation of a favourable regulatory environment.

Inline Policy is the leading political consultancy for the technology sector, with a deep knowledge of the on-demand and shared mobility sector. If you would like to discuss how we can help your company enter new markets and engage with policy makers please get in touch.

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Topics: Sharing economy, Public affairs

Matthew Niblett

Written by Matthew Niblett

Matthew provides monitoring and analysis to short-term accommodation clients and writes a weekly newsletter for shared and on-demand transport clients.

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