Spring 2015 Issue

Ride-Hailing Apps Go the Extra Mile

Services like Uber and Lyft are rapidly expanding from urban cores to the suburbs

In the past year or so, two innovative companies emerged, amid bitter competition but parallel success, to solve some of transportation’s most vexing problems. They have brought spirited late-night revelers home safely. They have gotten travelers to the airport on time. They have dropped off sandwiches to hungry offices. They have given taxi companies fits. 

They have delivered baskets of puppies. 

By some accounts, Uber and Lyft, which are each operating in dozens of metro areas around the country, have only one major challenge left to overcome. It is the one that has baffled transportation planners, highway builders, soccer moms and weary executives for generations: mobility in the suburbs.

The appeal of these smartphone-enabled ride-hailing services (sometimes erroneously called ride-sharing; more on that below) in center cities is obvious and intuitive. They attract millions of fares and thousands of drivers with scarcely any advertising. They are typically used for short trips in dense areas, areas that are often well served by transit but that can also be nightmarish to drive in. Through the combined power of big data, crowdsourcing, entrepreneurship, and, of course, smartphones, a willing driver can be just as much of a savior to the espresso-fueled executive at 7 a.m. as he was to the clubgoer just a few hours earlier.

Barriers to Entry

For all the simplicity of suburbs’ built form—acres of detached single-family houses punctuated by the occasional shopping center or office complex—navigating within, and out of, the suburbs can be maddeningly complex. Suburban living almost always assumes constant access to private automobiles.

Census data from 2010 reveals that suburban workers drive alone 81.5 percent of the time, compared with 72.1 percent of workers in center cities. A full 50 percent of Americans live in suburbs, with the rest shared between center cities and rural areas. A population base that large plus rates of solo driving that high equals gridlock on many of the nation’s commuting routes.

The two major ride-hailing services are famously secretive about their data and business practices, so their prevalence in the suburbs is difficult to quantify. Anecdotally, their presence is growing, and it seems to be doing so organically. Both companies have followed remarkably fluid—some would say too fluid—business models that have enabled the companies’ driver-entrepreneurs, who are typically private contractors who drive their own vehicles and work according to their own schedules, to meet demand nearly wherever it arises. Ride-hailing is so appealing to some suburbs, in fact, that some suburban governments have actively welcomed the services.

Beaverton, Oregon, provides an unusual case in which a center city has kept ride-hailing at bay—in part because of opposition from taxi companies—only to find that it is embraced in the surrounding areas. When Uber moved into Portland late last year without permission, the city threatened to sue. Uber agreed to withdraw while it and the city tried to work out a deal. In April, the City Council narrowly approved a 120-day pilot program that will allow the services to operate in Portland, provided the drivers abide by a series of regulations.

Beaverton Mayor Denny Doyle invited one of the big two ride-hailing services to visit the community. He said they were up and running within weeks.

“It gives folks here, where we don’t have a cab company, another option to travel,” said Doyle. “We’re tickled that they’re here.”

“I think we’ve been especially embraced in suburban communities because in a lot of communities there traditionally isn’t a lot of access to [public] transportation,” said Lyft spokesperson Chelsea Wilson.

Guerrilla Futures | Jason Tester
Uber’s rapidly expanding roster of drivers has been drawn by
the appeal of setting their own hours and driving their own cars
How well the suburbs are served by ride-hailing services is a function of driver incentives and choices. While it’s unlikely that a driver would deliberately go to a suburb seeking a fare when there’s so much action in center cities, ride-hailing services pride themselves on hiring drivers who are “regular folks,” meaning that many of them live in the suburbs. Drivers who are heading into a city center would probably much rather pick up a fare than dead-head all the way in.

“Usually they’re able to turn on the app in their driveway … allowing them to give their neighbors rides,” Wilson said.

Then again, the ride-hailing industry is getting increasingly competitive, meaning that drivers may have incentive to seek out under-served areas. Once suburbanites know that drivers are available, demand may grow.

Harry Campbell, who drives for Lyft, Uber and Sidecar in the Los Angeles area and maintains a blog and podcast at TheRideshareGuy.com, said that ride-hailing services want to be perceived as available to all passengers as often as possible. That may mean keeping a handful of cars in the suburbs on the off-chance that a potential passenger takes a look at the app.
“In most cities, suburbs are where people live, so whether they’re trying to get a ride to work or back home, having drivers available to reach the suburbs is really important,” Wilson said.

Though the ride-hailing companies are famously laissez-faire, allowing drivers to go whenever and wherever they want, Uber in particular has started nudging drivers away from obvious pickup spots like Times Square and the Loop and towards the Westchesters and Evanstons. Campbell said that Uber is now distributing weekly “heat maps” for many of their service areas that illustrate places that are often teeming with drivers and those that are under-served.

“We’re starting to see a little bit of saturation of drivers in those high-demand areas,” Campbell said. “I’ve been telling drivers on my site to start exploring new areas that are these untapped markets of the suburbs where you might not get as many requests, but during certain times, like early morning … there aren’t going to be a ton of drivers out there.”

Lyft cars can often be distinguished by a trademark pink
mustache on the car or in the dashboard area.

Wilson said that an internal analysis of Lyft ridership in Chicago revealed that 64 percent of rides originated in areas that are considered under-served by public transit.

“Taxis are oftentimes inaccessible or inconvenient to call from suburbs,” said Cory Winn, a college student who lives in Pacific Palisades, a suburban community in the city of Los Angeles. “Especially due to the lack of public transportation in Los Angeles, [ride-hailing apps] are a quick and cost-effective way to get around, even if I’m traveling long distances.”

Though it puts an awkward twist on the idea of a “kiss-and-ride” lot, ride-hailing may also enable suburban commuters to use public transportation options that they’d otherwise forgo because of the hassle of parking and switching modes.

“Bicycling and walking have relatively limited catchment areas where people will use those modes to access transit, 3 and 0.5 miles [respectively],” Ken Mcleod, legal specialist at the League of American Bicyclists, said in an email. “[Ride-hailing] services offer a larger catchment area because you can travel further in the same amount of time that it would take to walk half a mile or bike 3 miles.”

“I personally use these services to complete first-mile, last-time trips,” said Susan Shaheen, engineering professor and director of the Innovative Mobility Research program at the University of California, Berkeley. “It’s filling a gap and making it possible for me to take public transit into the city, versus driving.”

Shaheen said that in a recent survey of ride-hail passengers who were getting out of cars in downtown San Francisco, a potentially significant number had begun their trips at transit stops.

Then again, some commuters might not mind letting the meter—or, rather, the app—run all the way to the office.
“I don’t see a ton of first-mile, last-mile Uber and Lyft trips, especially at the price point that Uber and Lyft are at now. It’s almost not worth it,” Campbell said. “Now they can just take an Uber the whole way.”

Rates vary by city and are subject to fluctuation, especially when Lyft and Uber are engaged in apparent price wars. Lyft and UberX, Uber’s lower-cost option, average around $1 per mile, with base fares around $2 and small charges for idling time. However, Uber and Lyft both employ “surge pricing” whereby rates are raised, sometimes by 100 percent, at busy times.

Ride-Hailing vs. Ride-Sharing

The potential conflict between for-profit ride-hailing services and old-fashioned government-sponsored transit is just one example of the tensions and public policy questions that have arisen around these services.

The shiny, hip appeal of the major ride-hailing services has brought about what many in the media are heralding as a “ride-sharing revolution.” But some mobility advocates insist that these services are not revolutionary—and they’re actually not ride-sharing either. Whereas Uber and Lyft are largely urban creations, “true” ride-sharing—from nonprofit local transportation management associations (TMAs) and companies such as Carma, Sidecar and Flywheel (see sidebar), most of which operate in a limited number of markets—is a creature of the suburbs.

“I think Uber and Lyft have created a buzz and it has brought to attention some of these other things that are going on in true commuting,” said Jason Pavluchuk, government affairs director for the Association for Commuter Transportation (ACT).

Critics of ride-hailing services contend that they are drafting off the good will created by true ride-sharing services.

The difference between ride-hailing and ride-sharing, and the value judgments assigned to each, often depends on perspective. Purists who support ride-sharing contend that the services differ in a crucial way: ride-sharing drivers, and the companies themselves, are not necessarily motivated by profit. They seek to match drivers and passengers for the sake of a social mission—mobility, environmental protection and cost savings. A driver who makes his passenger seat available and gets a break on gas and tolls is one thing. A driver who is trying to make a living is something else. Uber and Lyft are designed to indiscriminately pick up fares whenever and wherever they can.

“A lot of these companies got into it not making the connection to public service, and that’s really what traditional ride-sharing is,” Pavluchuk said.

Uber’s famous $40 billion stock valuation may thus disqualify it from being called ride-sharing. Moreover, critics of Uber and Lyft see them largely as technology companies—or, most derisively, just as app developers—and not as transportation providers. That’s why The Associated Press has instructed publications to refer to them as “ride-hailing” or “ride-booking” services—they hail rides, but they do not technically provide the rides. (In California and Arizona, they are classified according to state regulations as “transportation network companies,” or TNCs.) 

Ride-sharing companies often rely on partnership with local governments and transportation agencies. They may not have the widespread appeal of ride-hailing for a few reasons. The matching works only when drivers and passengers are going long distances in the same direction.

“We are only trying to solve the daily commute,” said Paul Steinberg, chief business officer for the carpooling network Carma. “You don’t use us to go out drinking.”

While Uber and Lyft may be cultivating loyalty among millennials circulating around urban cores, the suburban commute remains one of the largest contributors to the nation’s aggregate vehicle miles traveled.  

Traditional ride-sharing companies are flourishing. Supporters contend that, in part because of their low cost, they can still take a much bigger bite out of rush hour traffic than ride-hailing services ever will.

Ride-sharing companies can also teach the ride-hailing services a thing or two about cooperating with the public sector.

Regulatory Challenges

Beaverton’s warm embrace of ride-hailing services contrasts strongly with the receptions they have received in other areas. While demand among consumers has been brisk, cities accuse them of flouting regulations and, essentially, build-ing their profits as semi-illegal businesses.

In many, if not most, cases, ride-hailing services have entered markets with little or no approval from the public sector, operating as businesses already approved by existing, if relatively outdated, regulations. Municipalities and other public agencies have raised concerns about drivers’ safety records and insurance coverage and about unfair competition with longstanding and often heavily regulated taxi services.

“We all know the pace of government is not the quickest, and when you compare it to tech, they’re almost polar opposites,” Campbell said. “Uber doesn’t wait around for the government. They make the government catch up to them.”

While that attitude may earn street cred, traditional ride-sharing services bristle at this maverick approach. Steinberg said that liability and safety should be paramount concerns for anyone offering transportation services, and Uber shouldn’t be immune because its creators emphasize that it’s only an app.

“If you build an app and it breaks, no one dies,” Steinberg said. “When you perform a transportation service and someone gets killed, that’s the worst possible thing.”

Steinberg said that his company, Carma, seeks partnerships and the assurance of governmental approval. “We first go before regulators and the local transportation authority to partner with them,” he said. “Maybe there’s no money changing hands, but we never received and never ever will receive a cease and desist or a lawsuit.”

The ride-hailing companies’ ability to serve non-driving residents could be even more important than what they do for commuters or for business travelers. Campbell said that many of his passengers are elderly and that, despite the seeming divide between the smartphone and rotary phone generations, they have found the apps to be relatively easy to use.

In many areas, these options could complement, or replace, services that are often costly and inefficient. These include paratransit and assistance for the elderly.

 “Agencies are raising this as a possibility,” UC Berkeley’s Shaheen said. “These trips often have to be scheduled well in advance … so spontaneous trip-making is not a possibility.”

Likewise, true first-mile, last-mile solutions may benefit from partnerships, or at least coordination, between ride-hailing services and public transit agencies.

“Ride-share also alleviates the need for park and ride facilities at transit stations, allowing more walkable developments around stations rather than large parking lots, with lots of potentially free parking,” wrote McLeod, of the League of American Bicyclists.
But, in their zeal to grab market share, ride-hailing services may have made this type of collaboration more difficult than it otherwise would have been.

“It’s tough to fight city hall and say, ‘We don’t need a government, we don’t want a government,’ and then close your eyes, turn around … and say, ‘Hey, we want to work with you,’” said ACT’s Pavluchuk. He added that Lyft has done a “better job fighting city hall gracefully” than Uber has.

Uber sent only a cursory response to a series of questions for this article. The company has been known for a more combative attitude towards regulation.

Lyft’s Wilson admitted, “When we launch, there are very legitimate questions.”

“In any conversation with civic leaders and state regulators, we’re not opposed to regulations,” Wilson said. “We want to make sure that these regulators recognize that new rules are needed for this very unique transportation service.”

Josh Stephens is a freelance writer based in Los Angeles.