The nagging questions about Mobility As A Service

Assorted mobility services in Quito, Ecuador. Image: Getty.

Mobility As A Service. Discussed at length in specialist magazines, here on the pages of CityMetric, and increasingly in the popular press, it is transport’s latest buzzphrase. And with promises of a seamless choice of mobility across all modes of transport, in just one place, it is a very tempting offer.

But one nagging question keeps coming up when people keep talking about it. How on Earth will anyone make any money out of it? This is for one very simple fact: it is very difficult to make any money out of transport.

In a time when it is commonly shown that companies are making millions out of transport, this seems hard to fathom. But transport is a high cost industry, with a lot of money tied up in vehicles and infrastructure. Despite the headlines of millions being made by train operators, for instance, their combined profit margin is barely 2.4 per cent. In the bus market, while operating profit margins of near 9 per cent are reported, this hides significant regional variation.

And this is before you consider the ‘loss-leaders’ that are the likes of Uber and other car sharing companies. And now, Mobility As A Service operators want a further slice of that revenue pie.

The challenge to Mobility As A Service is not technology or data. It’s making the whole proposition attractive, not add to costs, and generate revenue. Previously, generating more revenue and more demand involved one or more of the following tactics:

  • Changing your prices. Demand for public transport doesn’t change much over the short term in response to price increases, with a 1 per cent fare increase typically resulting in a 0.2 per cent decline in patronage: after all, people can’t just change their travel patterns overnight. But it does lower demand over the longer term, with a 1 per cent price increase ultimately resulting in nearly a 1 per cent decrease in demand.
  • People traveling more. But when there are only a set number of hours in the day, and long term research has indicated a typical ‘travel budget’ of one hour daily – and most of us don’t ride buses and trains for the fun of it – that is very hard to do. The only exception is in places with lower trip rates in comparison to their peers.
  • Taking trips off your competition. In the public transport sector in the UK, on-road or track competition rarely exists, as the bus inquiry and a review of bidding for train operating franchises shows. That means you are attempting to take trips off other modes, ones which have very different social-economic characteristics to your own.
  • More people. Sadly the transport sector can’t just magic more people out of nowhere. It relies on housebuilding, new employment sites, and population growth for that sort of thing. In fact, the UK Department for Transport estimates that the main driver of future traffic growth in the UK will be growth in population.

This is important to understand in the context of Mobility As A Service. In order for any such service to work, every part of the mobility system needs to benefit. For one part to extract from another undermines the commercial viability of the whole proposition. After all, if people are paying the same amount for a mobility service, and they are still getting the same public transport service that is in turn getting less money from them, it is not an attractive proposition.

Oh, and enabling demand responsiveness and efficiencies in operation because ‘data’ is unlikely to cut it. What’s more, selling data to advertisers is increasingly a challenging proposition when so much data about customers is already available. 

It is worthwhile considering the fact that Mobility As A Service as has been sold is still largely just an idea. We don’t know whether or not it will work commercially, simply because we have not tried it commercially yet for any sustained period. And early trials such as Helsinki and Gothenburg have hardly set the world on fire in terms of proving the business model, although they have shown that some modal shift is possible. It’s worth noting that they are in environments where the public sector plays a significant role in the provision of public transport, however.

Creating a new market is a very tricky proposition – and it’s not guaranteed that what will result is any more in the customer interest or financially viable. This does not mean that we should not try or experiment: doing so is the only way of moving the transport industry into the digital age.

But the emergence of new dominant market players is not necessarily in the interest of the customer and the whole mobility ecosystem .If the future is Mobility As A Service, we cannot afford for the winner to take all.

James Gleave is a transport planner who has worked on projects ranging from school crossing patrols to autonomous vehicles. He writes about the future of transport on his blog at Transport Futures, and has also written for Local Transport Today, How We Get To Next, and The Guardian

 
 
 
 

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CityMetric is now City Monitor, a name that reflects both a ramping up of our ambitions as well as our membership in a network of like-minded publications from New Statesman Media Group. Our new site is now live in beta, so please visit us there going forward. Here’s what CityMetric readers should know about this exciting transition.  

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