Cap’n Transit is writing about how, given that the political system in the New York area is hostile to public transportation expansion, private taxi companies are filling the gap,
and this is fine (update: see the Cap’n’s comment below). This is not the first time I see people in the US claim that private shared-ride services are a substitute for public transportation; on Vox, Timothy Lee wrote that a ride-share service offered by Lyft is “the beginning of the end” for public transit. The tones are different – the Cap’n is hopeful that these services would get people out of cars, Timothy Lee is denigrating public transit and its supporters – but the message is the same: ride share is a substitute. I would like to explain why not only is this not happening, but also any hope of Uber, Lyft, and similar companies making the jump to conventional public transit is unlikely.
First, let us consider costs briefly. The biggest marginal cost of bus service is the driver, leading various futurists to fantasize about driverless taxis vastly reducing costs and competing with large buses. The only problem is, it costs too much to operate a car even without taking the driver’s wage into account. In the US, households spend 19% of their income on transportation; nearly all of this is private cars rather than plane travel or public transit. This works out to around $1.5 trillion a year, or about 30 cents per vehicle-km. Taxis have to pay this, and more, due to the cost of either the driver’s wage or the technology involved in automation. This is within the range of US urban public transportation‘s cost per passenger-km; the New York subway is 21 cents, and to be accessible to the masses it is subsidized. Of course, given automation, the subway would cost substantially less to operate.
This means that the only way taxi services can be affordable is if people share rides; Uber and Lyft are indeed moving in that direction. The problem is that sharing a car with a stranger ends the entire advantage of being in a car rather than on a train or bus. Slugging is not a popular mode of transportation; Wikipedia mentions a few thousand daily users in various US cities, whose subway systems get multiple hundreds of thousands of users. To offer even somewhat reasonable fares on their shared ride services, UberPool offers $5 promotional fares, and a maximum of two unrelated riders per car; sometimes, when the Uber system can’t find a second rider, there is just one rider, paying an express bus fare for private taxi service. It is not possible to make a profit in this manner.
Now, what the private sector can do, beyond taxis, is to scale up and offer vans and buses. It happens every day in the urban parts of New York beyond subway range: these are the dollar vans of various immigrant neighborhoods in Brooklyn and Queens, and the private services running in Hudson County. It’s possible that Uber and Lyft will eventually go that route. So far, tech startups involved in transportation have tried to reinvent the wheel, for example Leap’s failed attempt to provide premium buses within San Francisco, but it’s possible that a well-capitalized private company will instead try to offer more conventional bus service.
The problem is that the private sector has never in recent history scaled beyond that. This was not always the case: the London Underground, the New York els, and the Chicago L were built by private companies, often in competition with each other; in Japan, there are many private railroads, which built commuter lines by themselves in the prewar era. However, in recent years, rapid transit outside Japan has always been built publicly; when private companies exist, they either operate trains by contract, as in Singapore, or were initially public and only privatized after they were already running trains, as in Hong Kong. Japan belongs in the same category as Hong Kong, with one complication: the private railroads still build commuter lines in the suburbs, but, at least in Tokyo, they rely on the publicly-built subway for passenger distribution within the city core, as (due to prewar government regulations) the private lines do not enter Central Tokyo. Let us examine why it’s the case that the private sector no longer builds subway systems.
In the biggest cities of the world in 1900, the urban geography was simple: people worked in city center, or in their own neighborhood. This monocentric arrangement made it easy to build streetcars and rapid transit privately, since all a company needed was to build a line from the center to some suburb or outer-urban neighborhood. Network effects were weak, and transfers were not so important. The Manhattan els radiated north from South Ferry because there wasn’t much demand for east-west transportation; the Brooklyn els, the Chicago Ls, and the London Underground lines similarly radiated from the center in all directions.
Developing-world cities are in a similar situation. As they build their CBDs, they create situations in which people work in their home neighborhoods or in the CBD. For example, Nairobi’s matatu network is CBD-centric, with not much crosstown service, because the jobs that require commuting are concentrated in the CBD. Of course, there are many local jobs within neighborhoods, but usually people work in their own neighborhoods rather than commuting crosstown. However, construction costs in the third world are typically higher than they were in 1900 in what is now the developed world. When New York built the Dual Contracts – already at public expense – the cost was $366 million, which is (contrary the link to the cost figure) $8.6 billion today. This is around $50 million per km, about 42% underground. This cost is not unheard of today, but it is low; in China, $160 million per km is more typical of underground construction. See examples here, here, and here. Moreover, in the poorest countries considering transit expansion today, incomes are a fraction of the level of the US of 1913 ($6,500 in today’s dollars): Kenya’s GDP per capita is $3,000, Ethiopia’s is $1,500. Thus, rapid transit is less affordable. India, at $6,000, is more comparable to the US a hundred years ago, but it has high construction costs, and an urban geography that’s diverging from the monocentric layout I’m describing here.
In the developed world, construction costs, while higher than a hundred years ago, are more affordable, because the GDP per capita is not $6,000 but $30,000-$60,000. However, the cities are no longer monocentric; even relatively monocentric Stockholm has major secondary centers in the universities and in Kista, with high peak demand for subway service. In a polycentric city, a single line is no longer enough; the transit lines must work together as a network. The entire philosophy of Jarrett Walker‘s network restructures (i.e. the frequent grid) is based on this fact, taking bus networks that have not changed much from back when the cities were monocentric and updating them to reflect modern-day everywhere-to-everywhere travel reality.
With network effects so great, private startups can’t really step in and supplant the public sector. The barriers to entry are large, which is why the only companies doing so have a long history of corporate existence, either as private Japanese railroads or as recently-privatized companies, and are not startups. Of course, online social networks have large network effects as well, but they operate in a young industry, whereas transportation is a mature, conservative industry, without much opportunity to offer new service that does not yet exist. Advances come from engineering and network design and are slow and cumulative, unlike the situation in the tech sector.
Of course, the government could structure its regulations in a way that lets the private sector tap into public-sector network effects. For example, it could compel operators to cross-honor one another’s transfer tickets. But this is the exact opposite of how tech startups work, which is without such regulations. You can’t send a Facebook message to a Twitter account. It’s also not how European private ventures that run on public tracks and compete with public operators work: the Italian private high-speed rail service, NTV, does not cross-honor tickets from the public operator, Trenitalia, and vice versa. Once the government mandates free transfers between companies, and joint planning for network optimization, and schedules that are more cooperative than competitive, we’re back in the world of public planning, and the private companies just run service by contract, as they already do in such cities as Singapore and Stockholm.
Improving public transit, then, requires improving the public side of transit. Taxis are a niche; so are buses that can be run privately, to the CBD or to the public subway network. The core of transit ridership, in the cities where public transit usage is high, consists of a mesh of buses and rapid transit that cannot be grown spontaneously by the private sector. If the government can’t provide this, the city will be auto-oriented. Good transit advocates have to then work to make sure the government is more competent and can build this network, rather than hope successful private ventures will save them; there is no alternative.