Don’t Be Fooled: Uber Doesn’t Care About Transit
Its Denver partnership is about PR, data, and monopoly
Uber made a big splash a few weeks ago when it announced it was adding transit directions in Denver, and that users would even be able to buy transit passes through the Uber app in the future. Many tech publications uncritically reported this as a great move by Uber and a forward-thinking initiative by the city of Denver — but this framing ignores the wider context in which the announcement took place.
Anyone who pays any attention to Uber knows the evidence it’s making traffic congestion worse and reducing transit ridership is accumulating, all while it has consistently failed to demonstrate to its investors any hint of a path to profitability. However, in lieu of profitability, Uber is trying to convince investors ahead of its IPO that it’s offering something even better, which will eventually allow it to extract sizeable rents: platform monopoly.
That is the lens through which the Denver partnership should be seen. It’s not a progressive move, but a combined PR stunt, data play, and effort to bolster its monopoly credentials. And all of these things are cause for concern.
Pushing Back Against Bad PR
Little more than a week before Uber made its flashy Denver transit announcement, it was dealing with a very different news cycle. A study by researchers at the University of Kentucky examined the effect of Uber and Lyft on transit ridership on 22 U.S. cities, and the outcome was terrible.
According to the report, when Uber and Lyft enter a city, rail ridership declines by 1.29 percent per year and bus ridership drops 1.7 percent per year. These effects are cumulative, meaning that since the ride-hailing companies surged into San Francisco in 2010, they’ve had the effect of reducing bus ridership by 12.7 percent.
When Uber and Lyft enter a city, rail ridership declines by 1.29% per year and bus ridership drops 1.7% per year
Part of the reason for this is that ride-hailing companies make traffic congestion much worse in cities — and there’s a growing body of evidence to back that up — which slows down bus services, thus making them less reliable for residents. As a result, people seek out alternative means to get to their destinations.
Given the growing pressure on the company arising from these reports, it was clear it had to make some effort to counter the perception that it was bad for transit. CEO Dara Khosrowshahi has been talking publicly about the importance of transit in recent months, in order to make Uber seem like a complimentary service, and the move to add transit was uncritically presented as a further move to promote transit use. But that announcement was a much bigger PR prize for Uber than it will be for transit riders, and it helps Uber forward its platform monopoly ambitions.
Capturing Transit Riders’ Data
Since an Uber self-driving vehicle plowed into a pedestrian last March, killing her and showing the world how far the technology still has to go, Uber’s ambitions of using autonomous vehicles to automate drivers to achieve profitability (or at least make investors think that was possible) have been dashed. As a result, it pivoted to a new strategy devised by Khosrowshahi to instead shift the focus from its ride-hailing service to its platform dominance.
Uber’s new goal is to become the “Amazon for transportation,” meaning it will be the platform that gets urban residents wherever the need to go in whatever way they want to get there. In order to achieve that goal, Uber has expanded into dockless bike and scooter services through its acquisition of Jump Bikes, and has begun adding third-party services to its app, including Lime, Getaround, Masabi, and others.
Amazon uses its platform monopoly to dominate a growing number of product categories. Uber could use its data to do something similar in the transportation space.
But adding these services isn’t just about convenience for the user — though that’s definitely part of it. By offering these services, Uber likely gets a cut from each ride taken through its app, but more importantly, it also gets the trip data to know where people are going and how they’re getting there. This data is incredibly valuable, and the inspiration from Amazon is key.
Amazon uses its platform monopoly to dominate a growing number of product categories. It does this by using the data that only it has access to on everything being sold through its platform to see what’s popular, then making its own version of those products, surfacing its private-label products ahead of the third-party offerings, and thus annihilating its competitors. Uber could well use its data to do something similar in future, but in the transportation space, and by adding transit services, it gets transit trip data to further augment its predictive and monopolistic capabilities.
Building a Platform Monopoly
The data Uber is gathering from the third-party services it adds to its app, paired with its existing dominance in the ride-hailing space, would give it immense power to challenge its competitors in the provision of private transportation services. If its share of the trip-planning userbase increases, it could also gain a lot of power to direct residents to transportation services that prioritize its business goals.
It would be easy for Uber to direct people to use Jump bikes and scooters instead of Lime, or to entice existing transit users to try services that would be better for Uber’s bottom line, but which make congestion worse and are ultimately bad for city life. It’s struggling to show investors how it can achieve profitability, but if it can control the interface through which residents plan their trips, that gives them a lot of power to extract rents from other transportation providers in future.
However, this ambition is exactly why transit agencies like Denver’s RTD shouldn’t allow transit to be added to the apps of Uber and other private transportation providers. The number of people who may take transit who wouldn’t have before is minimal, but the benefits to Uber of having transit, the associated data, and being able to further bolster its “Amazon for transportation” offer is much greater, and potentially damaging for the city.
If Uber can control the interface through which residents plan their trips, that gives them a lot of power to extract rents from other transportation providers in future
Instead of playing into Uber’s strategy, transit agencies should be challenging its desire to monopolize trip planning. Transit agencies need to serve the public good, and in order to fulfill that duty, they need to come into the twenty-first century, throw off the shackles of neoliberal thinking that says public agencies can’t innovate, and hire their own teams of developers to create stellar digital services to compete with Uber.
Uber really needed a PR win, and Denver gave it to them. Other transit agencies can’t allow themselves to be similarly duped. Instead, they need to challenge Uber’s monopolistic ambitions in service of their residents, step up their efforts to regulate ride-hailing services, and develop their own “Amazon for transportation” to push back against private companies who wish to take a dominant position in urban mobility. Transit agencies owe it to their residents to do better — and I have no doubt they can deliver.