Traditional Demand-Response Model Meets Uber and Its Ilk

Author: Sheryl Gross-Glaser

Published: November 1, 2016

What are people talking about in the DRT world? Uber, Uber, Uber, repeat, repeat, repeat, and Lyft, autonomous vehicles, and coordination, with a sprinkling of other topics. If one thinks of a word cloud Uber would be huge, in the middle, and crowding out much, but not all, of everything else. This situation exists to the chagrin of those who question the value – despite the low cost – of public funds paying for or subsidizing ride hailing services instead of traditional demand-response transportation services, including, but going way beyond, paratransit operations.

The TRB International Conference on Demand Responsive Transportation (DRT) in late September included attendees and speakers with different perspectives on this fast-moving change to the world of DRT operations and policies. Some welcome the changes, whilst others are bracing for the disappearance or, at least, a marginalization, of many traditional transportation providers.

Cost and convenience

Four reasons float to the top when ride hailing companies, usually Uber or Lyft, are called in:

    1. Low cost;
    2. Convenience of arranging for the service for the rider;
    3. No need for advance reservations; and
    4. Ease for transit or other agencies or organizations of getting the transportation service and its informational and scheduling aspects implemented.

Possible, but essentially unnecessary, are initiatives relating to: coordination meetings, contributions from separate funding streams, and lots of outreach and explanations.

This is basically a plug-and-play solution. From an agency perspective, costs are saved and the service is quick and easy to arrange—for both the agency and the customer.

Even in the places where Uber does not exist or does not provide targeted services to older adults and people with disabilities, other app-based companies are beginning to pop up and work with the public sector to bring these developments to specialized transportation and paratransit. In fact, in Austin, TX, Uber and Lyft were essentially rejected and app developers quickly filled the void to provide ride hailing services.

What’s not to like?

The first objection to ride hailing as a piece of the pie is generally that many people still lack smartphones or are unable to use them. In many instances ride hailing companies have solved this problem by working with an institutional partner, sometimes an agency, other times a non-profit, to allow for telephone arrangement of trips by ride hailing companies – or rather their drivers. (From a legal perspective, Uber, particularly, has made the argument in lawsuits that app-based sourcing of transportation does not put the company in the transportation business.)

It must be acknowledged that even in small cities and rural areas that lack transit and ride hailing services, everyone has heard of Uber and the expectations for transportation services in whatever form and wherever they exist have been raised.

What about value for the healthcare and insurance industries?

Value includes both expenses incurred and costs saved, but with demand-response transportation savings are generally captured by entities external to the parties providing or arranging for transportation. For example, access to non-emergency medical transportation in the form of demand-response services incurs value to the healthcare system in terms of savings from avoided hospital stays and emergency room visits. These savings are financial considerations for healthcare players, though they do not enter into the math of the price of a trip to a doctor or other healthcare facility. The transportation provider has not generally been rewarded for producing these savings or for delivering high quality service at a somewhat higher cost.

Taxi and other traditional demand response providers admit that their services are higher cost than those provided by the new kids on the block, Uber and other ride hailing services. The traditional players argue, however, that the value of their service over and above what ride hailing provides is worthwhile – and worth the higher cost – to the healthcare system, to insurance companies and their government-provided insurance counterparts, and to public health.

Is the cost low, but the price too high?

The taxi industry, other transportation providers, and many transit professionals maintain that the cost of a transportation service is not and should not be the only financial variable taken into consideration. Also relevant, they say, is value in terms of service to people who need personalized assistance, particularly the value of experienced drivers and ones who are well trained to work with people with disabilities and older adults, as well as the social value of matching riders with drivers who are familiar with them. Another concern is that often ride hailing companies take only the rides that do not require accessible vehicles, leaving those who need accessible vehicles with less than spontaneous service that is not equal to what other riders receive. People with disabilities still need advanced reservations or receive the unequal service of a longer wait for a ride.

Because ride hailing drivers are not typically well paid and are often driving to supplement another source of income, the turnover tends to be high and their level of experience much lower than that of an experienced professional driver. Most either do not receive sensitivity and other training that helps them provide quality service to older adults or people with disabilities, or when they do receive training, it is a brief, online training. This is in contrast to the training given many taxi drivers and other drivers for specialized transportation services.

Familiarity with drivers

Often the point that many raise to show the superiority of traditional specialized transportation providers and volunteer driver programs is the bond that forms between driver and rider. That social bond is cited as an important relationship for a person who lives alone and has few opportunities to socialize.

But in a world where data in general, and especially data on costs, are closely tracked, and what is and can be measured forms the basis for funding determinations, the intangibles, such as a fondness for a friendly familiar driver, get lost in the quest for convenient service at a low-cost.

Beguiled by first-mile/last-mile solutions

It is not only access to healthcare that is drawing the attention of the DRT world. Also intriguing to many transportation professionals are the transit/ride-hailing partnerships popping up around the country to solve two long-time challenges for transit agencies.

(1) The first-mile/last-mile problem: To help with first-mile/last-mile challenges, transit in a growing number of localities, large and small, is either subsidizing or arranging for ride hailing companies to provide full fare or partially- or fully-subsidized rides (meaning free or low cost to the rider) within a certain radius of stations or bus stops. This effectively extends a transit system’s service area by providing a quick and convenient connection.

(2) The significant per capita expense of transit service during off-peak and nighttime hours: To reduce costs for those hours when transit buses are empty or almost empty, a few transit agencies are entirely replacing their own fixed-route services with ride hailing. Essentially transit is acting like a matchmaker to maintain or to extend service hours by providing on-demand service. Unlike a traditional bus and bus driver, which are paid for no matter how many or how few riders get on the bus, ride hailing expenses are only incurred when a ride is requested and for the duration of a ride.

What such programs teach us is that transit agencies are willing to work with a new type of partner, one that is popular with the general public and one that might convince more people to choose transit.

Who pays the price for low-cost service?

If the cost of a ride is reduced, who is bearing the brunt of the lower cost? At the DRT conference a significant and frequent objection that was raised against ride hailing was the poor compensation for drivers. The low pay and complete absence of benefits and job security are inherent in what is commonly known as the gig economy, of which the ride hailing world is an important part. And the future is not likely to change this situation; in fact, the future is likely to be worse in this regard because driving as a job does not have a rosy future.

Back to the future

The topic of autonomous vehicles came up quite a bit at the DRT conference. The point was made that self-driving services will allow for the current dual roles a driver performs to be “unbundled.” Right now, the driver is both the operator of the vehicle and the temporary caretaker of the person receiving the ride. Theoretically, these two roles can be unbundled, thus permitting hiring and retention to be judged on the primary basis of a person’s caretaker skills.

A concern with the looming transportation revolution is that when there is no driver, rather than unbundling, there will be no funding made available for anyone to be paid to perform the caretaker role. It is possible that in most communities there will either be no caretaker or volunteers will be asked to perform the caretaker role.

No answers, more questions

While practical concerns of how to provide rides and fund rides were much discussed at the DRT conference, the inevitable changes to passenger transportation for the general public and for those who need assistance loomed large in the discussions. The speakers and participants were well aware of and interested in the quickly changing transportation universe. For the first time since the car became the dominant mode of transportation, the confluence of ride hailing and driverless transportation threaten to completely transform how transportation is provided and used. The possibilities and the timelines for these developments were debated during sessions and during informal networking intervals throughout the conference.

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