IMG_2800At the end of August, transportation and tech writers seized on the news that not only is Uber losing money, it’s hemorrhaging cash faster than any startup in history. In the first half of this year, Uber’s losses totaled $1.27B, and subsidies for Uber ‘driver-partners’ accounted for a majority of the losses.

Though purposefully losing money is customary to gain market share, and though some of Uber’s losses are attributable to competitive pressure, a majority of the red ink is coming from driver subsidies.

Think about this for a moment. Uber loses money hand over fist because it can’t charge prices high enough to retain both drivers and customers. Just like transit, its farebox recovery is less than 100%. Raising prices will drive off customers, while lowering them will cause driver losses.

These losses are occurring despite remarkable competitive advantage: Uber has few fixed assets beyond human and intellectual capital, it places all capital risk and depreciation on each individual contractor, it avoids nearly all employer taxes, and it is able to soak customers during periods of high demand (via surge pricing) and soak its drivers in periods of heavy traffic (by lacking a minimum wage guarantee). But it’s still losing tons of money, with venture capital playing the role of the subsidizing taxpayer and taking up the slack.

Many tech-minded transportation folks see Uber as the inevitable triumph of private-sector innovation over government ineptitude, and an eventual replacement for transit. But while many have shown that geometric facts ensure that this will never be the case in medium or high density cities, it’s also becoming clear that pesky arithmetic is tagging along.

As fast as the technology will allow, Uber and others are racing to eliminate human operators with the (plausible) expectation that massive profits will come when Uber owns assets that don’t demand wages rather than functionally leasing assets from contractors who do. If driverless technology stalls in its maturation and/or cannot function at scale, Uber and its competitors may be in for a rough ride. Well-financed startups can fund growth from revenue, debt, or venture capital, taking a decade or more to turn real profits (e.g. Amazon). But if the success of Uber and its peers depends on the rapid removal of humans from the equation, even the best-financed startup in history might eventually be on shaky ground.

None of this is to denigrate these (truly revolutionary) services. Rather, I think it’s important to set appropriate expectations for the role they can play in our lives. They will add value, not supplant it.

At the very least, we should see that not only is the current financial model unsustainable, but that even in a fully realized driverless era, urban geometry will set a hard cap on Uber’s potential economies of scale. In any real city, traditional public transit isn’t going anywhere. If anyone tells you otherwise, duck lest you be hit by all the handwaving.

53 Replies to “Uber Discovers the Necessity of Subsidies”

    1. What does this have to do with Libertarians? Wait ….are your the guy that blames everything on Obama?

      1. I blame Obama for your nonsensical response.

        It’s merely a jab at the Reagan/Thatcher-esque ‘Libertarians’ whom are constantly beating the privatization drum that for-profit companies can always do something better and cheaper than the government. In reality, it’s pick one, better or cheaper, or in most cases, pick neither.

      2. I think experience always teaches that real private enterprise works best for things that people enjoy most and need least.

        Uber’s present condition is proof that it’s Government’s natural job to do work that everybody needs, but nobody can make a profit on.

        What just happened to ITT shows the usual outcome of operating a profit-impossible function with public money yields worst of both worlds.

        To sum up, after what’s left of your former population gets found and reburied….your realize that regardless of ideology, sewage always flows the same way and needs to be pumped the other way.

        And that coin-operated home toilets have chronic trouble with non-payment from the coin collectors themselves.

        Mark Dublin

    2. It’s a simplification to be sure, but libertarians generally want to privatize everything feasable. So not national defense and the courts but practically everything else. Individuals may feel more or less strongly about particular policies.There was a thing a while back called “The World’s Smallest Political Quiz” which attempted to show that libertarians are fiscal conservatives but social liberals (laissez-faire, deregulation, but legal drugs, gay rights, atheists’ rights, etc), and that most Americans are too. The libertarian movement has described its origins as, “It started with Ayn Rand…” The dividing line between libertarians (minarchists) and right-anarchists is fuzzy, but some libertarians support at least the theoretical idea of private police forces, private currencies, the gold standard, voluntary private food-safety ratings instead of government agricultural inspectors, treating river pollution as violating the fishes’ property rights, etc.

      The far northern states has been described as traditionally favoring “social capital” and collective solutions due to Yankee, Scandinavian, and Native American influences, while California and the Southwest and Silicon Valley have been described as more libertarian/individualist leaning. By that measure it’s not surprising that Uber and friends originated in San Francisco, by tekkies who created their own individual solution rather than waiting for government (i.e., improving San Francisco’s and the nation’s transit).

      1. Once upon a time, you had the laissez-faire Libertarians, who genuinely believed that less laws and less government would lead to a more efficient and free society, where the Glorious free market would solve all of our problems and we would live in harmony. Fast forward to the present, where we know that’s not true. The only sticking point that has hung around is the social Libertarian aspect regarding individual rights: do whatever the hell you want, as long as it doesn’t infringe on somebody else’s rights. Instead of laws, everything would be handled in a court with a (theoretically) neutral judge.

        Any whispers of the original brand of Libertarianism got rolled into the mainstream conservative party, eventually the GOP. The social Libertarian portion was forgotten and the only thing that remains is the small government aspect. Not in a individual rights type of small government, but rather a “I already got mine, so I shouldn’t have to pay taxes towards the society that enabled me to get where I am” type of fiscal government.

        This has left us with the most famous Libertarians: the Kochs and some lesser known ones, like Bezos, Kalanick and McAfee. It’s also left us with a bunch of delirious ‘Libertarian’ techies who honestly think they are special little butterflies who picked themselves up by their own bootstraps with no help at all from society and so feel like they should not have to pay back into society. We can only hope this selfish movement dies out (next tech bubble bursting?), because it’s going to harm our society.

        Back to article relevance: I do think that Kalanick ‘Libertarian’ delirium is a major part of Uber’s money losses. He didn’t want to play nice with the establishments (government and taxis), thinking he could his way was best, and it’s backfiring on him.

      2. I was libertarian and Libertarian from around 1993-2001. It’s not the same thing as the GOP or the tea party, and its proponents are at least somewhat closer to what I described. I haven’t followed it closely since then so I can’t say how much religious right and hyper-meritocracy ideas have gotten into it. I won’t try to analyze how it relates to the current tech meritocracy. (“Everyone can become a billionaire if they try hard enough; the poor have only themselves to blame.”); that gets fuzzy and complicated. But the Kochs’ “no taxes and no regulations” comes right out of the libertarians’ ideals. That’s what I used to believe and don’t anymore; I didn’t realize how much it could be perverted to a billionaires’ oligarchic paradise.

      3. Not all libertarians are reflexively anti-transit, in my experience. I know some who’d add ‘infrastructure’ to the short list of appropriate public tasks, and who then realize massive road construction without transit is effectively a version of taking sides/picking winners and losers/subsidizing the auto industry, and (correctly) see mass transit as a part of infrastructure.

    3. I guess the libertarian response could be that the cost of transport is distored due to state action (be it subsidized roads or transit, taxes, or regulation), so Uber is suffering from a distorted market.
      Then again, Uber probably wouldn’t exist in its current form without other state interventions – so it could well be six of one, half a dozen of the other.

    4. Term “libertarian” begs some questions. Starting with precisely whose liberty to do exactly what? To whom. Like the freedom to relocate industrial poison, from fracking chemical to coal smoke, wherever its creator pleases.

      With lasting horror of that dreadful tyrant Abraham Lincoln, who robbed multiple States of their freedom to…ok, you Slavers and Secessionists, I’ll give you one point- racism is politically correct in the North too. You can keep “Libertarian”. But will you quit calling yourselves “Conservative?”

      But mainly, from beginning of time, people have always created and obeyed governments precisely to protect their freedom from the usually universal result of no government. A world of violence where after one warlord robs you, the next one kills you because you’ve got nothing left to give him.

      Middle eastern saying says it: “Better 60 years of tyranny than one day of anarchy.” Language? How many are there in Iraq? Not unbendable rule of nature, but logical conclusion from most of human experience.

      But in our own country. Three hundred million of us who, however we hate certain election choices, really think we’re in the same country. And hold this giant place together, and constantly improve it with a world-scaring work ethic. 25 or so years ago, ATU Local 587 had to call off a “Work to Rule” slowdown because not-driving was tyrannically hard. And boring.

      Hundreds of millions of us, living, or trying hard to achieve active productive well-meaning lives that no government on Earth could ever compel. When you think about it, ideological anti-Government across the spectrum is really over-acting. The United States of America is the world’s best proof that Anarchy works.

      Mark Dublin

  1. I thought Uber was designed/ meant to take on the cab industry, not supplant public transit. (although I suppose their Uberhop pilot (where you can go from Ballard to SLU or downtown, etc) was an attempt to see if they could).

    The car sharing services (Car2go, Reachnow, Zipcar 1 way) are a somewhat more legitimate threat to transit. (Just look at all the Car2gos around SLU after the morning rush hour)

    1. The total number of car-sharing vehicles and parking spaces downtown, city-wide, is no more than a tiny fraction of all the people who commute downtown. So, public transit for mainstream commuting into downtown is not going anywhere.

      Similarly, in the case of UberHop, to carry loads on the order of magnitude that Metro carries, the number of cars and drivers would have to be insane – the streets would not be able to handle it, nor would Uber be able to find enough drivers to do it. UberHop is still nice to have for special situations (for instance, connecting to Link with luggage to go to the airport), but I don’t see it replacing mainstream commuting.

    2. My impression is that when Uber was founded, it was aimed at replacing taxi service, but to some degree taxis compete with transit- a person could choose to take a taxi from the airport, or they could choose to use light rail. All modes have overlap in uses and potentially compete with each other- some days I bike to work, and on other days I take the bus.

      There’s a few areas where ridesharing competes most directly with transit:
      1) Riding Uber/Lyft in groups can be cheaper than taking the bus
      2) For people with mobility impairments, using ridesharing can be easier and less exhausting than transit
      3) For going out or coming back from a party/club/bar late at night, some people choose Uber/Lyft because light rail or their bus has either shut down for the night or is running very infrequently.
      4) For people without access to frequent transit service, ridesharing services can be much faster
      5) For infrequent transit users, ridesharing is easier to understand.

      I do have one friend who had never gotten a driver’s license growing up in Seattle, and prior to the arrival of Uber/Lyft, always took the bus, then switched over completely to Uber/Lyft for all his trips- for him ride-sharing completely replaced the bus, and my understanding is that he was one of Lyft’s top 10 customers in Seattle. I never asked him why he did this, especially since it must have been expensive- but my impression was that he found it easier- open up the app and ride appears, then drops you off right where you want- you don’t have to worry about figuring out the best buses to take or finding a bus stop. Granted, my friend is an extreme outlier.

      I have a roommate who was working a temp job in the U-District and asked me how to get there by bus so that she wouldn’t have to find or pay for parking. Sometimes, she’d miss the bus and summon an Uber to pick her up so that she wasn’t late for work- for her the infrequency of the bus route was the reason for using Uber.

    3. The car sharing services (Car2go, Reachnow, Zipcar 1 way) are a somewhat more legitimate threat to transit.

      I strongly suspect car-sharing services are good for transit, because they reduce car ownership, which is generally good for transit.

      Let’s say pre-carsharing, I only need a car for 10-20% of my trips, but since I’ve got one and it’s relatively convenient and the effective cost-per-additional-trip is quite low if you hold the insurance and car payment constant and parking is everywhere and always subsidized or built into the cost structure, I end up using a car for around 50% of my trips. If the carshare is able to handle the 10-20% and that causes me to get rid of my car, I’m going to turn to transit (or walk/bike) for a higher portion of my trips, since I’d otherways be paying the full cost for each additional ride. If I already have a bus pass, because I’m already using transit for 50% of my trips, the marginal cost difference goes down further.

      This obviously won’t be everyone, and I don’t have systematic data that supports it, but anecdotally I know several people in scenarios more or less similar to that (often going from a 2 car household to 1). Subtracting a car from a household, I suspect, strongly correlates with both increased transit use as well as car-share use.

  2. At least personally, my most common usage of Uber is getting to a P&R lot at 7:00 on a weekend morning to meet a group of people to carpool into the mountains. At about $30 for a 30-minute minute drive that burns maybe $2-3 worth of gas, that’s nearly all 60 mph on an empty freeway, I find it hard to believe that there aren’t providing decent profits on those trips for both the driver and the company.

    The problem, I suspect, is that the vast majority of trips taken on Uber are probably much shorter and much more congested (e.g. downtown to South Lake Union). Currently, the “initial charge” pick-up fee is not sufficient to adequately compensate the driver for the time the driver is driving empty to get to where you want to be picked up. For longer trips, the mileage charges make up for it, and then some, but shorter trips, they do not. So, there’s effectively a pricing model where longer trips subsidize shorter trips. Less true than with taxis, but still true, to some extent.

    1. The driver isn’t driving empty anywhere near as long as a traditional taxi since the app will optimize their next pickup near their last dropoff.

  3. So it comes down to taxpayer subsidy (transit) or private sector subsidy (Uber/VC)? I agree public transit is not going anywhere but don’t discount the fact that Uber can reach everywhere that transit can’t and Uber is exactly where I want it, when I want it.

    1. For sure. It’s a fantastic service for precisely that reason, but the point I’m making is (1. there are fundamental limits to its scaling abilities and (2. that the current pricing is too good to be true.

      1. Great analysis. This reminds me of some of similar issues a public bus-share system ran into a few years ago: There is something to the argument that it could be more efficient at scale even without a magic fix like autonomous vehicles. The ride scheduling gets more efficient when more people use it (like taxis in Manhattan) – also the value is greater when it’s ubiquitous. It’s hard to demonstrate without going to a very low percentage of personal car ownership, though. That’s true whether it’s a public or private system or some kind of hybrid.

    2. At some point VC is going to stop subsidizing Uber. They exist to get return on investment not to throw money around…

      1. At this point most venture capital is being invested in order to make a killing at the IPO. So, at this time, Uber doesn’t really need to make a profit to entice investors. When (if) Uber decides to go public the venture capitalists will be in on the ground floor and their portfolios will skyrocket–provided the IPO goes well.

        If Uber’s core business is profitable (or nearly profitable) the most important factor is revenue growth. Then, as long as revenue continues to grow the company will invest in new technology and new concepts. Many of the new ventures may be money pits, but as long as some of them mature into successful business concepts that generate revenue the cycle can be repeated.

    3. If the carshare companies go bankrupt there might possibly be public demand for a subsidized service to replace it. That would be the same evolution as private streetcar companies to government-run public transit. Of course it could also be framed as “finally addressing transit’s last-mile gap”.

      1. The critical issues for carsharing companies will be how quickly automated driving technology develops and whether or not governments decide to tax drivers as employees or as independent contractors. If the autonomous technology is slow to develop and Uber can’t sustain the driver pool because the economic model fails–either because the drivers can’t make enough money as independent contractors or because taxation makes the drivers too expensive–then the carsharing model will die. But, 10 years from now, I don’t think Uber intends to be just a carsharing company, just like Amazon isn’t just a bookstore anymore.

      2. But… the whole brave new future of universal self-driving taxis means that somebody has to own them and run them. Nobody has talked about that much, it’s just assumed that the taxis will “be there”. So Uber is stepping into that gap, and essentially responding to an open invitation by the advocates of this vision.

      3. Car sharing is a new technology, but it won’t usurp the laws of supply and demand. The Uber will “be there” as long as the economic model works out for all parties: Uber (the corporation), drivers, riders and the community (or government). That’s kind of a very basic economic reality: supply meets demand.

  4. What’s more relevant is whether or not Uber is loosing money in medium to large cities where there isn’t a major competitor (e.g. Lyft). The majority of Uber’s losses in the last year occurred outside of the USA, especially in China.

    Uber fully intends to provide all of its services in the long term without human drivers, in which case it’s costs and capital structure will be completely different, with capital costs borne by Uber (or partners) and labor costs minimized. So yes, actually – “the success of Uber and its peers depends on the rapid removal of humans from the equation”

    The limits of urban geometry are very real, but I see no reason Uber won’t be profitable in the long term in four areas:
    1) Small and medium sized cities that either don’t have or don’t merit significant mass transit
    2) Off peak service in transit rich cities.
    3) Suburban services, especially when complementing transit corridors rather than competing directly.
    4) Long haul services – basically competing with Greyhound (for people) and trucking (for cargo), two areas Uber has indicated it’s interested in moving into, eventually

    Basically, I project Uber can & will be profitable by cannibalizing taxi and SOV trips, not by cannibalizing HCT.

    1. I think even Uber would say it can’t replace the NYC subway or Chicago Metra. But the most interesting thing about the “carshares can replace transit” debate is that they essentially forget that New York City and the subway even exist. So much of the US is low-density sprawl and they’ve spent their entire lives in it that they forget that high-density cities do exist.

    1. Where in the article do you see ST3? And is everyone who has a different opinion here have to suffer the name calling, such as Transit Hater, ST3 Jackal, etc, every time they want to make a point?
      Providing people moving options from A to B is really complex, and requires efficiencies in all modes.
      Metro’s most expensive service is Demand Responsive, currently costing $61 bucks a rider. Demand Responsive-cab is 1/6th that amount, or about $10 bucks a rider. Trolleys are 1/20th that at about $3 bucks.
      I’m not sure where Uber and the other services fit into that, but everyone is not a Jackal for asking questions, and everything does not hinge on your currently chosen passion of getting ST3 passed.

      1. After spending last evening listening to the anti-ST3…. crowd like Sam and Todd E Herman to stay awake, my temper is what it is. I mean one of the raison d’etre’s of ST3 opposition after ONE trail is the ideal automated transportation will solve congestion so yeah, I brought ST3 into this mic. Context.

        I agree 100% that there need to be some conversations about Demand Responsive service. Uber and automation could be incredibly helpful in bending the cost curve for demand-response, paratransit and/or pocket service. Could be. A transit citizen’s advisory committee I’m part of is dealing with this very issue north of Everett right now.

    2. Psst, Joe, ST would be much more financially unsustainable the Uber, but they can legally take money from you to make up for it.

      – Sam. World-renowned transit philosopher.

      1. Actually, all costs are designed so that it’s all paid for by the taxes and fares that ST is asking for under a conservative model. It’s very financially sustainable.

  5. Thanks for highlighting Uber’s recent financial losses, but otherwise this take is a bit off.

    Uber is nothing more or less than a taxi service using an app for dispatching. Taxis have been around for at least 100 years, and have never required subsidizing. They do, instead, seem to require limited entry and regulated prices to be both profitable to the providers, and trustworthy for the customers. This is based on the practical experience of dozens of countries over dozens of decades. Uber could decide to be profitable, if they charged fares as high as taxis, which they could do, except for Lyft.

    The problem is that Uber, Lyft and Didi Chuxing (Uber’s local competitor in China and the source of most of Uber’s losses) have blown open the limited entry system, and are engaged in a race to the bottom. This race (might) be OK, except the availability of venture capital/investment financing allows companies to lose much more money for longer than profit/loss statements would suggest, in a system of mutually assured poverty (for drivers) and bankruptcy. Unless they can pull back from the race to the bottom…

    The introduction of truly autonomous taxis would only continue the race to the bottom, unless system entry can be fairly regulated.

    1. I agree. Uber is profitable or nearly so in its mature markets. The losses(subsidies) are mainly to eliminate the competition and break into new markets.

      However, Uber’s astronomical valuation is because the markets are betting it will be a lot more impactful than just “Taxi 2.0.” Expectations of delivery services and autonomous fleets are already baked into the price.

      @Chad why would a “race to the bottom” be a problem if the cars are autonomous? Wouldn’t that be a boon for riders?

      1. Yeah the problem with the post is that Uber isn’t trying to be “Taxi 2.0” and it’s a misleading to box it in like that. Beyond the game changing pricing dynamics of autonomous fleets, I think Uber believes that long term it can beat transit at it’s own game; moving lots of people through a city with a high degree of spatial efficiency. Uber will have top class transportation algorithms, an app that’s easy use, substantial capital, a willingness to bend the laws and will probably, barring forward thinking from transit agencies, have a substantial head start deploying automated buses and vans, with their substantial operational savings. Those forces might be enough to substantially reduce the amount of public transit in “real” cities.

        Of course there are plenty of factors working against Uber’s favor and Uber won’t be readily able to replace grade separated transit systems such as Link. But there’s no spatial constraint to Uber scaling as well as a bus system.

  6. I also recall there there is a city in Florida that actually has a pilot project of using tax dollars to subsidize Uber rides within a small suburban neighborhood. The taxpayer subsidies replace a very low-ridership bus route, which formerly ran once an hour, carrying about 5 people per trip.

    On the surface, it sounds like good thing. The problem, of course, is that if too many people start using it, either the costs will balloon, or the funding will run out and it’s back to everyone paying full fare again.

    I’ve also read various pros and cons about the merits of Uber replacing some instances of paratransit. Good for people that can’t walk to the nearest bus stop, but aren’t wheelchair bound, bad for people with more severe problems that require trained human assistance to get into or out of a vehicle.

    1. Of course that Florida service more than doubled fares ($1.75-$4) and is still subsidizing Uber heavily.

    2. There are definitely good examples of where Uber could be better than low frequency buses or paratransit. Case #1 around here would be Pierce Transit’s disastrous circulators they tried in Milton and Edgewood a couple years back, with costs per passenger exceeding $100.

    3. Welcome to Uberville

      A Florida town approached Uber to to replace a low-volume bus route with a subsidized Uber service, and when the new service started, public demand was much higher than expected. However, people without credit cards or smartphones or who can’t afford the higher fares are being left out and have to rely on the cut-back bus service that exists. More than six other cities have contracted with Uber for subsisdized quasi-transit services. This is apparently the first entire bus route that has been replaced, but cities all across the US are having trouble funding or expanding their bus network, and are finding Uber a cheaper or more conservatively-correct solution. The fear is that if this becomes more widespread and Uber starts replacing buses in entire districts and cities, the poor will be left behind without transportation. Uber is also not bound to paratransit requirements, although it says it’s moving forward on its own in improving its accessible services. A third concern is Uber is not transparent about what the tax money is being spent on. It tried to get the city to sign a confidentiality agreement (an NDA-like agreement), and when the city said that would be illegal under Florida’s sunshine law, Uber then asked for a clause that would make FOIA requests (Freedom of Information Act) requests go to it rather than the city, so that it could manage the response in secrecy. I guess that’s what the current practice is.

      1. Has anyone challenged Uber-as-public transit provider over the ADA issue? It seems like the government contracting Uber for PT services is opening itself up to a lot of ADA liability

  7. I do not believe Uber loses money/subsides rides in the North American market, but only in emerging markets.

    1. I took an Uber in Mexico City from the Condessa Neighborhood to the airport. A 30 minute, 20 km ride for $6 (105 pesos about a year ago). When I got that receipt I was not surprised there were recent riots by local taxi companies. I even gave the driver a cash tip since I felt bad.

  8. Uber won’t replace HCT and may enhance the need for it in dense cities by worsening congestion. They will likely be profitable through the triple cost elimination they are pursuing. 1st they want to minimize labor cost. That involves either automated vehicles, or maintaining the least number in service needed to meet wait time goals. The 2nd set of costs is fuel and maintenance. Right now I think this falls on drivers. Over time they plan to migrate toward more electric vehicles that would be less expensive to operate directly or allow them to reduce driver compensation. If transit doesn’t follow suit it will be at a disadvantage. Of course if we keep asking the maintenance department what vehicles to buy they will say deisel, because who votes to eliminate their own job. The 3rd cost is deadheading. They are experimenting with Uber eats and other delivery services to fill vehicles with goods when there aren’t and possibly even when there are passengers. Add to that the value they create… Dynamic routing enhances speed and accessibility while direct routing further enhances speed, reduces out of vehicle waiting and lets customers make trips without learning system complexities or exposing them to vulnerability in poorly timed or low frequency transfers.
    When the TNCs reduce these costs and provide the benefits mentioned, they will compete with transits subsidized price in almost every place that is medium to low density. They will have lower environmental impact. They will deliver more useful value than a transit network with 10 minute service at a 1/4 mile coverage range. They will be more easily accessible over greater span, be more responsive to individual travel needs and restrictions (not the case yet, but it will be), have more ability to adjust for events and seasonality and will communicate better in marketing their offerings.
    Transit is caught up in too many regulatory relationships, mandates and turf considerations that end up working against lower costs and better customer service. Agencies that are purpose built have great difficulty adapting new methods of fulfillment, unless by chance they have visionary, charismatic, risk-taking leadership (a rarity). Staff is ‘managed’ to address ‘issues’ (not opportunities) within a narrow framework of predefined acceptable solutions that meet the desires of budget ‘deciders’ rather than community needs. These inadequacies have been endured while no better alternative was fiscally feasible. That is the seismic change coming now. People ain’t gonna take shitty service and lame ass excuses no mo’!
    Routes operating less than every 10 minutes will die out. Will local govt prefer subsidizing a responsive private vendor or individual low income riders to begging for regional, state or federal cash that comes with too many strings and hoops to jump through? Will rural legislators who already want to defund mass transit have more talking points and more freedom to axe it when their jurisdictions no longer want funds to buy 40′ deisel buses?
    HCT will only be able to capture market share in dense or highly congested markets where it provides a significant time savings over other ground transport. That means it is more important than ever to make the best possible investments in the only transit that will make sense 20 years from now… Electric, automated, dedicated ROW, rail and BRT with 5 minute headways or better.

    1. Uber won’t replace existing HCT, but if enough voters vote against ST3 and similar measures in other cities because “We don’t need transit now that we’ve got Uber”, then that would block HCT expansion and it would de facto replace transit with Uber, even if it’s just potential transit rather than existing transit. I don’t think there are many people who believe this; most would say Uber has a niche in last-mile trips and in the suburbs, but not to replace a downtown-UW or downtown-Lynnwood or downtown-Bellevue trunk line. Still, a lot of the people who oppose ST3 anyway say a variation: “We don’t need transit because driverless cars are just around the corner”.

      Interestingly, now that Uber has a few fixed-route services in major transit corridors, that could be considered replacing transit. But I’m not sure that Uber thinks it can fully replace such a high-volume transit route, it just wants to skim the cream of the crop, those willing to pay the most.

  9. Another interesting issue is what to do about communities like North Bend and Vashon Island. They have enough of a population to warrant some amount of bus service, but hours are limited, headways are poor, and ridership is lacking. At least currently, neither of these communities are served by Uber, leaving a transportation void where, if you don’t have a car handy and the bus isn’t running, you have no transportation – at any price.

    For communities like these, one could imagine a taxpayer policy that, rather than directly subsidizing fares, instead, seeks to subsidize the availability of service, for example, by paying drivers $10/hour to sit around and wait for passengers when no other drivers are around.

    Without taxpayer subsidy, it is difficult to see an Uber-like service operating in rural areas – at any reasonable price. At best, one could imagine the private sector coming up with an “out of area” service, where you pay a driver to come and get you from the nearest city with regular service, but you might have to wait 30-45 minutes for a driver to show up, and pay a pick-up fee of as much as $30-40, on top of the regular fare, in order for the trip to be worth the driver’s while. One would have to be pretty desperate to use a service like this, but in places where there are absolutely no other options, it is conceivable that some people might.

  10. Uber isn’t revolutionary. They took the century-year-old concept of the taxi and found a way to make someone else to pay for the car.

    1. Aren’t livery services older than that? I recall that Holmes and Watson would hail Hansom cabs to get around London and environs. But those might have all been private operators with no middlemen taking most of the revenue.

  11. Freakonomics just had a show titled Why Uber Is an Economist’s Dream describing analyzing Uber provided data for economics research. They discussed the subsidy but also the concept of consumer surplus and the possibly that Uber is possibly proving more value to consumers that what they are charging. It’s work the 40min to listen to the whole show.

Comments are closed.