Lyft has a growing service called Line that could make the long-unfulfilled dreams of carpool advocates come true. Users who request a ride through Line are paired with drivers going to the same general destination — a true example of ride sharing instead of the ride hailing that describes most Uber/Lyft rides. Rides might take a little longer if the driver picks up other carpoolers, but the cost is only 40 percent of a regular Lyft ride. The service is available in 19 cities to date and has proven particularly successful in New York, Los Angeles, San Francisco, Chicago, and Miami.
Uber has announced that it plans to expand its app to offer a comprehensive transportation service. Users say where they want to go and the Uber app will give them options of Uber rides, bike sharing, rental cars, or even mass transit. All rides would be paid for through the Uber app, so Uber would get a share of revenues from any public transit agencies that participated.
Even if public transit is one of Uber’s options, these kinds of innovations will continue to whittle away transit ridership. People who now ride transit will be tempted to use Uber to pay for their rides, thus saving the trouble of dealing with ticket machines or exact change. Once using the app, they will also be alerted to alternatives to transit, and some will select those alternatives in place of the transit they were using.
Uber, Lyft, and other private transportation services will grow because they are willing to innovate to earn customer revenues. Public transit agencies, by comparison, are more oriented to getting the taxpayer dollars that make up 75 percent of their budgets and are relatively unconcerned about ridership or fare revenues.
Los Angeles Metro, for example, has lost five bus riders for every light-rail rider it gained since 2010 (and even more if you go back to 2008). Undiscouraged, the agency intends to spend at least $6 billion on six new transit projects, most of them light rail. Light rail was made obsolete by buses 80 years ago and it certainly isn’t working to attract net new riders today, but that’s unimportant: what’s important is that Metro convinced voters to fund more rail construction on the false promise that it would relieve congestion.
While it may be true that Uber and other ride hailing companies are relying on venture capital now to keep them afloat, this doesn’t mean they are being subsidized any more than Amazon, Apple, or other companies that got their start through venture capital were subsidized. During the 1990s, Microsoft was one of the most valuable companies in the world, yet it paid no dividends until 2003. The venture capitalists who supported ride hailing companies will get their money back from the ones that are successful, and the companies will only be successful if they attract lots of users.
In contrast, because transit agencies are unresponsive to users, they fail to innovate and instead rely on obsolete technologies. Thus, they deserve to die when ride hailing services and other innovators take their customers away.