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How Uber hopes to profit from public transit

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The ride-hailing corporation Uber reported its first-quarter earnings Thursday, and billions in losses continue to mount. After the company's disappointing IPO, and the similarly lukewarm debut of its rival, Lyft, it's increasingly clear both will have to expand their business models to something that might actually turn a profit.

[NEW YORK] The ride-hailing corporation Uber reported its first-quarter earnings Thursday, and billions in losses continue to mount. After the company's disappointing IPO, and the similarly lukewarm debut of its rival, Lyft, it's increasingly clear both will have to expand their business models to something that might actually turn a profit.

One of their strategies is to replace public transportation — an ambition that affects all of us and the environment, not just passengers and drivers.

Uber and Lyft have been clear about their intentions. In documents filed with the Securities and Exchange Commission, Uber identifies a "massive market opportunity" in the estimated 4.4 trillion miles traveled by people on public transit in 175 countries in 2017.

"A portion of our trips can be a substitute for public transportation," the company said in the filing. Uber continues to heavily subsidise per-ride costs and pursue a vision of transit in which it provides a wheeled conveyance for every occasion, distance and duration — ride-hailing cars, vans, scooters, bikes and, eventually, self-driving vehicles.

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The first step for these companies on the way to supplanting community systems is to fill obvious gaps. Lyft's IPO filing emphasizes its capacity to supplement public transportation "by providing rides for the first and last leg of commute trips, late-night rides home and shuttle replacement rides". Uber, too, says it wants to solve the "first-mile, last-mile" problem of getting riders to and from a bus stop or train station.

All this can only benefit cities, the companies say. Uber bills itself to public-transit agencies and investors as a helpful resource that can "reduce costs of underused routes" and "provide access to under-served communities".

Both companies have begun to try out a range of public partnerships. In the Tampa-St Petersburg area in Florida, the local transit authority offers discounted US$1 Uber trips between a passenger's bus stop and final destination, within a reasonable distance (usually about five miles).

In Denver, the Regional Transportation District integrated Uber into its app alongside the public bus and commuter-rail system. In a handful of cities, Lyft's app displays public options nearby, a bid to get customers to think of ride-hailing as just another way to commute.

Uber and Lyft hope that these public-private partnerships will, in sufficient quantity, become profit centers. In the Tampa-St Petersburg programme, for example, while the commuter pays only US$1, the city (using taxpayers' money) subsidises the actual cost of that ride. Of course, drivers who provide this service, unlike public-transit workers, are not considered employees, let alone employees with union protections and benefits.

Americans badly need more convenient public transport, but the risks of privatisation are grave. Last year, Uber logged some 5 billion trips and US$1.8 billion in losses; Lyft provided 619 million rides and reported more than US$900 million in losses. These apps are popular because they're artificially cheap: Uber and Lyft subsidise rides to increase their number of monthly users, a key metric for investors, while allocating relatively little per trip to drivers.

By reducing the cost of individual rides, Uber and Lyft also draw a privileged subset of passengers away from public transit systems. That, in turn, undermines support for public transportation.

Researchers have also found that ride-hailing tends to make cities more congested and polluted, not less. Alejandro Henao of the National Renewable Energy Laboratory, who drove for Uber and Lyft as part of his research, showed that in Denver, ride-hailing was responsible for an 83 per cent increase in the miles that would otherwise have been travelled by car. Much of that increase came from "deadheading", or driving in search of the next fare. As Mr Henao puts it, Uber may be reducing the public-transit base without providing enough services "to make up for that negative effect". 

Then there's the question of accountability. "With public agencies, there's a protocol for how to hold them responsible, whereas with private companies, their bottom line is profit," said Naomi Iwasaki, a transportation planner and advocate in Los Angeles. "They look at their users as customers, not constituents."

Ride-hailing companies "make a lot of money off these streets and sidewalks," she noted, but they have no obligation to invest in the infrastructure they use. Nor are they required to serve low-income neighbourhoods or cater to the elderly, non-English speakers or people with disabilities.

All of this erodes the fundamental idea of public transportation as a service that everyone uses.

Jarrett Walker, a transit-design consultant, recently noted on the "Rideshare Guy" podcast that when Uber and Lyft divert relatively affluent riders from public transit, there's a damaging effect on "elite opinion". He added: "The notion among elites that, 'Well, Uber is the thing, because it's so convenient to me. Therefore, public transit should somehow become more like Uber.'"

As the stereotype goes, the public sector is bloated and inefficient; the private sector, lean and ruthlessly productive.

And yet Uber and Lyft, billions of dollars in the red, have set their sights on community transit — not because they can do it better, but because they need to be bailed out.

NYTIMES