Regional Transportation: A Market in Need of Innovation

By: Maxwell Abram (SAS ‘19)

Courtesy of America2050.org

For a few hundred dollars, one can depart NYC and arrive in Hong Kong sixteen hours later. This is an impressive feat enabled primarily by private sector innovation. Inter- and intra-regional travel in America is far more taxing and challenging than it should be — especially with the ease of long-distance travel in mind. And while local travel is now the focus of myriad well-funded startups, regional travel remains in need of innovators’ attention.

A primary reason that travel in the US is so poor is much discussed: American transportation infrastructure is insufficient and crumbling. In a ‘Report Card’ offered by the American Society of Civil Engineers, its various components received a median grade of “D”.

While upgrades to our national infrastructure are vital to enable continued growth in the economy, quality of life, and social mobility indices, such improvements are driven at a glacial pace by the Federal and state-level legislatures. Infrastructure investment isn’t sexy and takes far more than an election cycle to be realized; a focus on infrastructure is not the sort of platform that rockets one to political stardom. Absent such investment, improved transportation processes and outcomes need to be driven by the private sector.

The power of private sector innovation in travel technology is made clear by the previously mentioned NYC-HK flight example; travel to the other end of the world is not much more daunting than some regional trips in the US. The air travel industry has been innovating aggressively for longer than any other cohort in the world of transportation. While the nation has stood decades in wait for public investment to better enable travel within localities and from American city to American city, the private transportation industry, where not crippled by insufficient infrastructure, has continued to slash intercontinental prices and travel times and provide more flexibility to travelers.

A map of air traffic volume between the US and China, courtesy of Ruobing Su and Carto.com

Though the airline industry is the most long-term example of transportation innovation driven by the private sector, in the last decade a slew of startups addressing shorter distances than the airlines have created immense shareholder value and further illustrated the power of private innovation in traditionally public sector areas.

The most mature such group is the cohort of ride-sharing and taxi-replacement applications that provide a new class of mobility resources for distances of up to 100 miles (this 100 mile cutoff serving as a visualization, not a rule, of course). The social benefit of the efficiency in use-of-transportation-infrastructure that ridesharing companies enable is difficult to understate. Given severely constrained roadway capacity, it is of massive benefit to society that many would-be drivers now choose to hang up their keys and instead hail a ride.

This trend is perhaps most vividly illustrated by the portion of 16-year-olds obtaining a license. In 2008, a year before Uber’s founding, 31% of 16-year-olds were licensed to drive. In 2014, 24.5% did. And, for many commuters, it is in fact cheaper to hail a ride than to drive, as illustrated by this calculator provided by the US Department of Energy. And in some cities, the power of ride sharing is so clear that it has become the official method of public transportation.

Image courtesy of The Verge

Inspired by the power of transportation-asset-sharing as illustrated by ride-sharing platforms, a slew of companies has emerged in the past eighteen months addressing even shorter distances for which the use of a car is inefficient. So-called “last mile transportation” startups, like Bird and Lime, powerfully enable reduced congestion by providing an alternative to car usage in the many postwar American cities built with car transportation as an assumption ( — with poor public transportation and few walkable areas). Such companies’ offerings promise to make a dent in the 50%+ of all American car trips that cover distances under ten miles by augmenting public transit networks, providing a final link from stop or station to final destination for public transit users.

https://www.fhwa.dot.gov/policyinformation/pubs/pl08021/fig4_5.cfm

But for all the focus on short- and long- distance travel by established industry players and startups alike, few innovators have addressed the need for innovation in mid-distance, intraregional transportation. The status quo in this space remains rail and regional airlines, each of which is critical but fails to meet all market needs.

Air travel best serves long-distance travel, for which the inefficiencies and indignities of airport commuting and usage is an acceptable cost for long distance mobility. However, these costs are fixed –the same for any distance journey — and become increasingly frustrating for ‘commuter’ distances, like flights from New York to Boston or D.C.

Rail travel, the frequently tapped alternative, is the strongest contender for such middle-distance routes; customers are offered constant connectivity, few of the indignities of air travel, and frequent service. But routes are limited outside of certain “corridors,” tickets expensive (an average of $145 from trips NY-Washington in 2012), and travel slow relative to what is available is peer nations. Amtrak trains reach a top speed of 150 mph compared to Europe’s 220mph and Asia’s 267 mph.

A paradigm shift is necessary in such middle-distance travel, and given the current precedent of government investment in infrastructure, it will need to be driven by private sector innovation. With the work of the ride-sharing and last-mile industries as a template, it should be clear that the necessary innovation will not require technology beyond our age; what it will require is creative application of the tools we already have at our disposal.

Here at the WeissFund, our committee members are talking about these pain points and are eager to have conversations about how we might address them. If you are a student entrepreneur interested in tackling these issues, feel free to reach out — we’d love to be in touch!

WeissFund is dedicated to funding, promoting, cultivating, and supporting student entrepreneurship in the UPenn community. Working on a startup? Interested in partnering? Want to get involved? Drop us a line at apply.innovationfund@gmail.com.

Maxwell Abram is a senior studying Philosophy, Politics, & Economics. He has previously worked for Kayne Partners Fund, the growth equity group of Kayne Anderson, where he will return following graduation. Outside of the classroom, Max is a varsity lightweight rower and enjoys endurance sports of all kinds. Feel free to reach out to him at maxabram@sas.upenn.edu.