Private Transport Monopolies Will Be Bad for Everybody

Lyft’s rumored acquisition of bikeshare company Motivate isn’t about improving mobility.

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Jun 7 2018, 12:00pm

Image: Shutterstock

Last week the transportation rumor mill pumped out a story that ride-hailing company Lyft is acquiring Motivate, the bikeshare operator behind New York’s Citi Bike, San Francisco’s GoBike, and Chicago’s Divvy Bike. The deal, which was first reported late last week by The Information, is said to be in the range of $250 million.

I’m not sounding the alarm over a $250-million acquisition, but it is worth examining how consolidation in the private transportation sector will affect the public. After all, monopolies in agriculture and healthcare have led to higher pricing, artificial demand, and antitrust strategies like price-fixing.

Lyft declined to comment and Motivate hasn’t replied to my email. But even on the off chance the report turns out to be untrue, it’s still clear players in the global transportation game are jostling for top billing. For instance, rather than compete against Didi in China and Grab in Southeast Asia, Uber capitulated knowing it could not dominate these markets. Softbank—an international conglomerate from Japan and Uber’s largest shareholder—is building a multi-jurisdictional transportation empire with its $20-billion Vision Fund. (And, for what it’s worth, Uber acquired its own bikeshare earlier this year.)

Read More: Ride-Hailing Is Deepening Social and Economic Inequity in the US

“In this market where you have one company controlling all of the pricing, that company is going to price discriminate—it’s going to give prices it thinks people can afford,” Kevin Carty, a researcher on market-consolidation issues in tech for the Open Markets Institute, told me on the phone from DC. “When there’s no competition, [that] just gets stacked on top of other inequalities.” (Uber is already personalizing pricing.)

Lyft owning a bikeshare company isn’t terrible. The concept of mobility-as-a-service is supposedly about reducing private car ownership, which is a noble goal. It’s also true that public transit doesn’t perfectly match demand; bikeshare’s current Age of Enlightenment is built on the premise that it is a last-mile solution for people using public transit.

However.

If Lyft, a ride-hailing company, enters the bikeshare and electric scooter markets as expected, that’s three modes of transportation right there. Tack on the existing Line carpooling function, as well as bus service (assuming its Shuttle eventually extends beyond Chicago and San Francisco), then step back and ask: what differentiates Lyft from a public-transit operator?

”They’re private companies providing a service that is quasi-public. It’s not that different from what your average bus company does,” said Tim Schwanen, an associate professor and the director of the Transport Studies Unit at the University of Oxford.

It’s the accidental privatization of public transit. A lack of regulation on mobility-as-a-service companies has allowed them to operate as major transportation providers while skirting the pricing and service regulations that hold public-transit agencies accountable.

Matthew Stoller, a fellow at the Open Markets Institute who is writing a book about monopoly power, attributes this to the startup mantra, “move fast and break things.” “It’s about not adhering to rules you don’t like,” Stoller told me.

Still, a resounding number of consumers, the majority of them white and middle-class—in DC, 80 percent of Capital Bikeshare users said they were white while 83 percent earned $50,000 or more—has chosen billed-by-the-minute transport options, and that could harm public transit for everyone.

Declining ridership could affect the amount of government funding transportation agencies receive, and that might create conditions—old equipment, slower or diminished service, reduced station safety, fewer (unionized) employees—that make public transit even more unpalatable. This is happening at the same time that research overwhelmingly points to effective transportation as the number one way to escape poverty.

It’s important to remember that however genuine these companies seem, their first order of business isn’t to improve mobility—it’s to generate profits. The moment a route, neighborhood, or city becomes unprofitable, the people who depend on those services face having their seat pulled out from under them. That makes riders beholden to the pricing and accessibility whims of an unregulated company.

In our phone conversation, Stoller noted that Uber’s business model has been predicated on the idea of monopolizing markets and then raising prices. “Uber’s entire model is predatory pricing. They don’t make money,” he told me, referring to the fact that Uber has yet to turn a profit. “That’s not business; that’s law-breaking.”

Regulators need to step in sooner rather than later, Stoller said. In the meantime, the free market invites any and all challengers to the ring to fight. That mechanism is essential to making sure no single transportation company wields all the power—assuming everyone fights fair.

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