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On-demand ride services

by Peter Viechnicki, Tiffany Fishman, William D. Eggers
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    19 May 2015

    On-demand ride services Part of the "Smart mobility" research report

    19 May 2015
    • Peter Viechnicki United States
    • Tiffany Fishman United States
    • William D. Eggers United States
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    Although a relatively new trend, on-demand car services are contributing to the rapid transformation of traditional transportation models.

    DUP_1155_OnDemandBannerArt1000x345

    On-demand ride services: Disrupting and complementing taxi service

    On-demand ride services (also called ridesourcing or ride-hailing services) like Uber, Lyft, and Sidecar are creating new business models and reshaping transportation markets by allowing private individuals to sell rides to eager customers.

    Many issues concerning on-demand transportation are being widely debated today, from their potentially disruptive impact on taxicab companies to their impact on reducing drunk driving. Because our focus here is on congestion and economic benefits, we focus more narrowly on traffic reduction.

    The market for on-demand rides is relatively new and evolving rapidly. Substantive studies of it are rare. We have nevertheless identified some general trends likely to affect the future paths of these service providers.

    Uber’s and Lyft’s ridership rose rapidly during the past two years. One study sifted through Uber and Lyft transaction records to find 25 percent monthly growth in ridership at both firms at the beginning of 2013.1 That growth declined to a still-impressive 10 percent monthly rate by the beginning of 2014, however, and most analysts seem to agree that on-demand services face significant new headwinds as competition stiffens, markets become saturated, and calls for regulation increase.2

    The US Census Bureau does not distinguish on-demand ride services from other transportation modes when it collects statistics about commuting patterns.3 The Bureau of Labor Statistics lumps Uber and Lyft drivers together with taxi drivers in its national surveys of employment and wages.4 Uber, however, has recently signaled a new openness to releasing trip data.5 As data from on-demand providers and government increase, we’ll get a better sense of how these services fit into the broader mobility ecosystem.

    Estimating the economic potential of on-demand ride services

    The release of several years of complete data on New York City cab rides offers the possibility that, in the near future, we will be able to calculate nationwide potential economic benefits of on-demand car services to the extent that such services substitute shared rides for some taxi trips.

    Further data will be needed, however. On-demand ride service providers recently began piloting programs that allow customers traveling similar routes to link up and share their ride.6 Uber estimates that such pooled services could remove up to a million vehicles from New York City streets, although the company has not specified its methodology.7

    A recent study of New York City cab trips found that cumulative trip length could be cut by 30 percent with little inconvenience if passengers were willing to share their trip with another passenger traveling the same way.8 Another study found the average length of a trip in San Francisco in 2008 was just 4.2 kilometers.9 Yet another study counted taxi rides in New York City and found that passengers logged 3.4 million trips per week, while a separate dataset recorded 173 million trips in the city between January and December 2013, with an average distance of 8.3 miles.10

    Such findings allow us to estimate that, if on-demand ride service providers could facilitate trip sharing for 30 percent of New York City’s trips, the total number of trips would be reduced by almost 52 million a year, leading to a rough estimate of 431.2 million VMT eliminated. A reduction of that magnitude implies congestion savings to commuters of $495 million annually with 14 million hours in delay saved, and infrastructure savings to New York City of $959 million on road construction over 25 years. We further estimate a 139 thousand-metric-ton annual reduction in carbon dioxide emissions and 350 fewer annual traffic accidents.

    It’s worth noting that this estimate does not take into account the potential congestion reductions that would come from lower car ownership due to increased mobility provided by on-demand ride services. We await empirical studies of the magnitude of this effect.

    Seven ways to increase the public value of on-demand ride services

    1. Ensure that government data collection captures on-demand services. If national economic and transportation data collection programs captured distinctions about on-demand ride services, it would be far easier to understand their benefits and potential downsides. For example, the Census Bureau could include on-demand ride services as one of the options for journey-to-work questions in its American Community Survey. The Bureau of Labor Statistics could include on-demand ride services in relevant surveys on employment and wages, while the Federal Highway Administration could include similar categories in its National Household Travel Survey. Specific information in these national datasets would greatly aid transportation planners in assessing the impact of on-demand ride services.
    2. Encourage cities to release taxi trip and fare data online. New York City’s decision to release a year’s worth of taxi trip data in response to a Freedom of Information Act request set off a flurry of research activity that allowed for real progress in charting the potential benefits of shared transportation.11 Now imagine that all of the nation’s major cities posted anonymized taxi trip data on an open portal. The benefits to transportation research and planning would be enormous. Encouraging private providers to open up their trip data, as Uber has done in Boston, would confer additional benefits.
    3. Support pilot partnerships between government agencies and on-demand mobility providers. These projects could test whether the purchase of mobility services from on-demand providers could help government achieve mobility equity and access at a lower cost. Many cities provide wheelchair-accessible “paratransit” services to their residents. Several others, including Atlanta, considered outsourcing paratransit in 2014, although concerns were raised about the reliability and quality of private providers.12  Wait times for paratransit often exceed one hour, according to the Disability Rights Education and Defense Fund.13 Both private and public paratransit operators suffer from high turnover rates, inadequate compensation, and low morale, according to a study by the Transportation Research Board.14 Cities should consider whether purchasing on-demand mobility services from the private sector can fill this same need more reliably and less expensively. Helsinki’s long-range transportation plan includes such a provision.15 In 2014, Uber launched a similar pilot program in Chicago, including having third-party-owned wheelchair-accessible cabs in its ride dispatching service.16
    4. Fund studies and pilots to determine the optimal position of on-demand ride services within mobility ecosystems. Adding on-demand ride services to the list of priority topics for major transportation-related research grants would help researchers answer basic questions about how on-demand ride services can function most efficiently within a robust multimodal system.
    5. Enlist private partners to achieve ridesharing targets. As discussed earlier, governments should explore partnerships that leverage the reach of companies such as Uber and Lyft to further the policy goal of increasing ridesharing. Many cities already partner with carsharing companies, allowing them unlimited on-street parking at meters in exchange for a yearly payment. Helsinki’s long-range transportation plan envisions the city purchasing transportation from providers such as on-demand ride service providers, and then offering that service while allowing citizens to do the same using their own vehicles.17
    6. Contract with on-demand ride services to provide guaranteed rides home. Governments should consider partnering with on-demand ride service providers to operate guaranteed-ride-home programs, if doing so could improve service while marketing the program’s existence more effectively.
    7. Craft thoughtful regulation to encourage the spread of on-demand mobility. Public officials are beginning to look for ways to legitimize on-demand ride services. In September 2013, for instance, California’s Public Utilities Commission unanimously authorized peer-to-peer transportation in the state, assigning a new legal label—transportation network companies, or TNCs—to distinguish these vehicles from taxis.18 TNC companies and community members worked with regulators for months leading up to the decision, clarifying business practices while ensuring safety and quality service.

    Explore our collection of research on smart mobility at the links below.

    • Key findings from the smart mobility study
    • The promise of smart mobility
    • Ridesharing
    • Bike commuting
    • Carsharing
    • On-demand ride services
    • Alternative transportation atlas (interactive map)
    • Impact by metropolitan area (interactive table)
    • FULL REPORT—Smart mobility: Reducing congestion and fostering faster, greener, and cheaper transportation options
    Credits

    Written by: Peter Viechnicki, Tiffany Fishman, William D. Eggers

    Cover image by: ilovedust

    Acknowledgements

    The authors would like to thank the following individuals for providing helpful input into this research: Steve Keathley and Jim Templeton of Deloitte Consulting LLP; Kathryn Alsegaf and Maureen Johnson of Deloitte Touche Tohmatsu Limited; Bharath Gangula, Steve Schmith, Daniel Byler, Patricia Buckley, and Danny Bachman of Deloitte Services LP; Peggy Tadej at the Northern Virginia Regional Council; Allen Greenberg at the US Federal Highway Administration; Lisa Rayle of the University of California, Berkeley; Todd Litman of the Victoria Transportation Policy Institute; Kris Keith of the Central Texas Regional Mobility Authority Support Team; Carl Eppich, Ben Lake, Rick Harbison, and John Duncan of the Greater Portland (Maine) Council of Governments; Lori Kaplan and Andrew McGee of the Central Indiana Regional Transportation Authority; Bruce Wright of the Fairfax Alliance for Better Biking; and Elizabeth DeJesus of the North Florida Transportation Planning Organization; and Robert Poole of the Reason Foundation.

    The authors would also like to thank Kenny Ling, Amit Shivpuja, Clare Stankwitz, Zach Whitman, Zac Andereck, and Matthew Gentile for their assistance with the geospatial components of this project. The authors would like to extend special thanks to Pankaj Kishnani for his extensive research support, and also thank Vikrant Jain, Mohinder Sutrave, Pulkit Kapoor, Amrita Datar, Mahesh Kelkar, and Nikita Shah of Deloitte Services LP—India for their contributions to this research. Finally, we gratefully acknowledge the congestion data provided by the Texas Transportation Institute in their 2012 urban mobility report, which was central to our calculations.

    Endnotes
      1. Chris Nicholson, “Study: Uber pulls ahead of Lyft in riders and revenue with 12x lead in US,” FutureAdvisor Blog, September 11, 2014, http://blog.futureadvisor.com/study-uber-pulls-ahead-of-lyft-in-riders-and-revenue-with-12x-lead-in-u-s/. View in article
      2. Alison Griswold, “How Uber and Lyft stack up in the United States,” Slate, September 11, 2014, http://www.slate.com/blogs/moneybox/2014/09/11/uber_vs_lyft_futureadvisor_study_compares_revenue_users_growth_at_the_companies.html; Ellen Huet, “Why Uber and Lyft should be focusing overseas,” Forbes, September 11, 2014, http://www.forbes.com/sites/ellenhuet/2014/09/11/uber-lyft-slowing-growth-rate/. View in article
      3. See, for example, Brian McKenzie, “Modes less traveled: Bicycling and walking to work in the United States: 2008–2012,” US Census Bureau, May 2014, http://www.census.gov/prod/2014pubs/acs-25.pdf. View in article
      4. Personal communication from Census Bureau Employment and Occupation staff, August 2014. View in article
      5. Rebecca Harshbarger, “Uber finally turns over electronic trip data,” New York Post, February 3, 2015, http://nypost.com/2015/02/03/uber-finally-turns-over-electronic-trip-data/. View in article
      6. Michael Byrne, “In New York, virtually every taxi trip can be shared,” Motherboard, September 1, 2014, http://motherboard.vice.com/read/in-new-york-virtually-every-taxi-trip-can-be-shared. View in article
      7. Steven Johnson, “The revolution in the driver’s seat,” CNN, January 6, 2015, http://www.cnn.com/2015/01/06/opinion/johnson-car-revolution/index.html. View in article
      8. Paolo Santi, Giovanni Resta, Michael Szell, Stanislav Sobolevsky, Steven Strogatz, and Carlo Ratti, “Quantifying the benefits of vehicle pooling with shareability networks,” Proceedings of the National Academy of Sciences 111, no. 37 (September 16, 2014), http://arxiv.org/pdf/1310.2963.pdf. View in article
      9. Wenjun Wang, Lin Pan, Ning Yuan, Sen Zhang, and Dong Liu, “A comparative analysis of intra-city human mobility by taxi,” Physica A: Statistical Mechanics and its Applications 420 (February 15, 2015), pp. 134-147. View in article
      10. Xinwu Qian, Xianyuan Zhan, and Satish Ukksuri, “Characterizing urban dynamics using large scale taxicab data,” Transportation Review Board, Transportation Research Record, 2013; Dan Work, “Open data,” http://publish.illinois.edu/dbwork/open-data/, accessed March 20, 2015. View in article
      11. Santi, Resta, Szell, Sobolevsky, Strogatz, and Ratti, “Quantifying the benefits of vehicle pooling with shareability networks.” View in article
      12. Amalgamated Transit Union, “Marta workers praise CEO Parker for report on perils of outsourcing paratransit,” October 14, 2014, http://www.atu.org/media/releases/marta-workers-praise-ceo-parker-for-report-on-perils-of-outsourcing-paratransit. View in article
      13. Disability Rights Education and Defense Fund, Topic guides on ADA transportation: Topic Guide 6, On-time performance in ADA paratransit, June 2012, http://dredf.org/ADAtg/OTP.shtml. View in article
      14. Transit Cooperative Research Program, Report 142: Vehicle operator recruitment, retention, and performance in ADA complementary paratransit operations, 2010, http://www.atu.org/atu-pdfs/alanta-campaign-2014/TCRP-Report-142.pdf. View in article
      15. Sonja Heikkilä, Aalto University School of Engineering, Mobility as a service: A proposal for action for the public administration, May 19, 2014, https://aaltodoc.aalto.fi/handle/123456789/13133. View in article
      16. Ted Trautman, “Will Uber serve customers with disabilities?” NextCity.org, June 30, 2014, http://nextcity.org/daily/entry/wheelchair-users-ride-share-uber-lyft. View in article
      17. Aalto University School of Engineering, Mobility as a service. View in article
      18. Kurt Wagner, “California legally approves peer-to-peer ridesharing,” Mashable, September 19, 2013, http://mashable.com/2013/09/19/california-approves-ridesharing/. View in article
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    Peter Viechnicki

    Peter Viechnicki

    Manager | Deloitte Services LP

    Peter is a strategic analysis manager and data scientist with the Deloitte Center for Government Insights, where he focuses on developing innovative public sector research using geospatial and natural language processing techniques.

    • pviechnicki@deloitte.com
    • +1 571 858 1862
    Tiffany Fishman

    Tiffany Fishman

    Senior Manager | Deloitte Services LP

    Tiffany is a senior manager with the Deloitte Center for Government Insights. Her research and client work focuses on how emerging issues in technology, business, and society will impact organizations. She has written extensively on a wide range of public policy and management issues, from health and human services reform to the future of transportation and the transformation of higher education. Her work has appeared in a number of publications, including Public CIO, Governing, and EducationWeek.

    • tfishman@deloitte.com
    • +1 571 882 6247
    William D. Eggers

    William D. Eggers

    Executive director

    Bill is the executive director of Deloitte Services LP’s Center for Government Insights where he is responsible for the firm’s public sector thought leadership. His latest book is Delivering on Digital: The Innovators and Technologies that are Transforming Government (Deloitte Insights, 2016). His eight other books include The Solution Revolution: How Government, Business, and Social Enterprises are Teaming up to Solve Society’s Biggest Problems (Harvard Business Review Press 2013). The book, which The Wall Street Journal calls “pulsating with new ideas about civic and business and philanthropic engagement,” was named to ten best books of the year lists. His other books include The Washington Post best seller If We Can Put a Man on the Moon: Getting Big Things Done in Government (Harvard Business Press, 2009), Governing by Network (Brookings, 2004), and The Public Innovator’s Playbook (Deloitte Research 2009). He coined the term Government 2.0 in a book by the same name. His commentary has appeared in dozens of major media outlets including the New York Times, Wall Street Journal, and the Washington Post.

    • weggers@deloitte.com
    • +1 571 882 6585

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