A roadmap for leading public transit after the crisis

Mobility as a Service: The way forward after COVID-19?
: May 2022
June 2020

Public transit is in an unprecedented moment of crisis. Riders have abandoned public transit as the novel coronavirus spreads, and there are plenty of warning signs that they may not soon return. Can public transit agencies bring these passengers back, or will these passengers stay permanently away? The solution will come only after a fundamental evaluation of what a public transit agency does.

Brian Stein
Brian Stein

National Practice Lead for Fare Collection

Mr. Stein and Mr. Day collaborated with Tim McGuckin, CEO of MaaS America, in authoring this commentary.

Long before the novel coronavirus outbreak, bus and train ridership were being squeezed by transportation network companies (TNCs) like Uber and Lyft, forcing transit agencies to confront a series of existential questions: Can transit agencies compete with Uber and Lyft? Should they even try? Are transit agencies performing their own core services well enough to warrant devoting resources toward providing new services? And what will be the role of transit agencies in this new transportation market?

Now the novel coronavirus has pushed public transit to the brink. The March 2020 stimulus bill passed by the U.S. Congress provided agencies $25 billion in emergency funding just to remain operational, with more help potentially on the way with President Biden's proposed economic stimulus bill.

Advocates of corporate social responsibility insisted that corporations that received bailout funds should be required to limit executive pay, end stock buybacks and dividends, and retain workers on their payroll – but what “strings attached” were required of public transit agencies to receive $25 billion in taxpayer funding? Should taxpayers subsidize public transit if the business model that has governed many large agencies seems fundamentally flawed? What will emerge as the most resilient model to support transit after the crisis?

One thing is certain: There’s not much time to figure out how public transit is going to reemerge once the crisis ends.

A crisis a decade in the making

In2011, Uber began its national expansion. Lyft followed shortly thereafter. And the instant impact on national transit service soon became apparent. A 2018 University of Kentucky study found that Uber and Lyft were decreasing heavy rail ridership by 1.3 percent and bus ridership by 1.7 percent each year.

Massachusetts officials found that TNC trips increased 25 percent in their state from 2017 to 2018, according to the Massachusetts Department of Public Utilities (DPU) data, diverting an estimated $20 million in revenue each year from public transit.

Examinin gthe Massachusetts DPU data, the Metropolitan Area Planning Council of Boston found that about 60 percent of TNC users would have taken public transit, walked, biked, or not have taken the trip in the first place in the absence of Uber and Lyft.

Fears that TNC platforms will continue to eat into public transit were largely blamed for voters in Detroit rejecting a proposal for investing $4.7 billion in new public transit service.

For transit and the TNCs to co-exist, a dramatic shift in the relationship between the two has become necessary.

In 2018 and 2019 TNCs began experimenting with their web apps, integrating public transit options and alongside their own services, allowing the user to compare price and the estimated time of arrival for each option.

For organizations that long operated without competition, transit agencies were confronted with a choice: build more transit service or undertake or fundamental business model innovation.

The former, given budget constraints and core capabilities, remains unlikely. Transit agencies are simply ill-equipped to directly compete with Uber, Lyft, and other new transportation service providers to provide first- and last-mile service.

The latter requires cooperating with new transportation services and re-evaluating what a transit agency does.

Mobility as a Service

Without the option of building new routes and service options, transit agencies have begun exploring a “mobility as a service”(MaaS) model. MaaS is designed to link all forms of regional mobility through a single platform and payment source, linking street parking, scooters, ferries, buses, and light rail with ride-hailing services like Uber and Lyft.

Travelers use MaaS platforms to schedule a trip, pay for it, and monitor the status of the trip in one seamless experience. MaaS users can opt to subscribe to a service, much like Netflix users for home entertainment, in one monthly bundled payment, or pay as they use the service.

A simple idea in theory, MaaS requires cooperation from a dizzying array of stakeholders in practice.

If (or when) MaaS platforms take hold, it could transform urban mobility and could force transit agencies to make a fundamental shift in mindset, opening a range of planning concerns that were hardly on their radar until recently.

Integrating Uber and Lyft in current service

Since 2016 the Federal Transit Administration has provided “sandbox” grants to transit agencies to coordinate with TNCs to better provide first- and last-mile service. Several awardees have provided a glimpse into how transit agencies are evolving as TNCs grow.

The FTA funded a Dallas Area Rapid Transit (DART) program that allows passengers to register their “GoPass” account information into their Uber and Lyft accounts, allowing for smoother first- and last-mile service. (DART has since opened up the platform to other agencies.) Other private mobility services, including SpareLabs (carpooling) and a local taxi company, are included in the DART program.

DART has recently allowed for college students to connect their GoPass to their university cash accounts, and for all riders to integrate Apple Pay accounts to their GoPass.

A Los Angeles Metro program, also funded by the FTA, allows riders to register their Transit Access Pass (TAP) card information in their Via account. Riders using their LA Metro TAP accounts can receive $2 off each Via ride. LA Metro also has a deal with Lyft to provide Lyft carpooling riders with credits to take public transportation.

Lyft has also partnered with the Charlotte Area Transit System (CATS) to provide first- and last-mile service at two selected stations, providing a $4 credit toward Lyft rides that originate or terminate at these two stations.

The rebates and credits are essential. For MaaS to work, it will need to provide a level of convenience and cost savings not provided by current transportation options.

Who’s app?

Ultimately what could define the relationship between transit and the ride-hailing services is who will be providing MaaS service. As many metro regions continue to grow, transit agencies approach an urgent and decisive fork in the road.

Will MaaS be provided by Uber or Lyft, a public mobile platform, or a public-hybrid platform managed by a third-party?

If they wait too long to decide, likely it will be Uber and Lyft – not public transit agencies – dictating the terms of public transportation.  

Recently Lyft allowed selected users in Denver to connect to Regional Transportation District (RTD) service on their Lyft app. This follows a similar RTD program that allowed Uber users to track and pay for transit service through their Uber app by selecting an icon labeled “Transit.”

And the Massachusetts Bay Transportation Authority (MBTA) recently entered a similar partnership with Uber, Lyft, and Curb to pilot MaaS for para-transit.

Just who, precisely, will benefit from these partnerships is an open question.

MaaS in Helsinki, Finland, is largely largely by Whim, a mobile app that aggregates service times and pricing from different modes of public transportation. Designed by the Helsinki-based MaaS Global company, Whim allows users to pay for a multi-modal trip –including an Uber ride to a train ride to a bus ride – in one transaction.

Whim users can pay as they go or subscribe to a monthly service of unlimited rides (about $565 in U.S. dollars every month). The revenue is then shared between public transit agencies and the ride-hailing services.

It’s notable that MaaS Global is a third-party, private company. This model provides what other MaaS platforms cannot: independent data on what the most cost-effective and timely mode of transportation is at any given moment, without conflicts of interest.

Other transit agencies have opted to provide their own MaaS platform.

In 2019 Berlin’s public transit service launched Jelbi, a MaaS platform that synthesizes service information from all public transportation services, preempting other third-party companies from providing their own MaaS service.

In the United States, perhaps the most powerful MaaS service can be found in Louisville, Ky., where the Transit Authority of River City (TARC) launch edits multimodal trip-planning app. In one app, Louisville travelers can access public transit options, scooter and bike-share services, and Uber and Lyft.

Last year, TARC integrated parking information into the app, allowing users to know what nearby parking spaces are available in real time, and add an integrated-payment capability.

The role of transit agencies

Open up Google Maps to plan a trip across town and you will find the most time-efficient route using the General Transit Feed Specification, or GTFS, the Application Programming Interface (API) that transit agencies use to publish transit data in real time. GTFS feeds let travelers know where their bus is and when it’s arriving.

But what about all the other forms of transportation? Can they too publish their data on a common platform? And can we compare the prices of all our transportation options?

These questions call to mind a new role for public transit agencies, one of service and information integrator, forging harmony between public and private transportation providers.

That’s not an easy mandate.

The range of stakeholders who would need to be committed to a MaaS solution include the MaaS platform (e.g., Whim), riders, transit operators, the cloud service provider, bike sharing platforms and scooter services, city managers and law enforcement, and of course the ride-hailing services. (Another not-to-be-discounted stakeholder: investors who have backed MaaS platforms will be putting heavy pressure on providers to demonstrate profitability.)

All these stakeholders will need to be compensated according to their portion of the revenue.

It is not altogether clear how willing a partner Uber and Lyft will be. Both have fought to close price comparison apps, a function that would likely be a part of future MaaS platforms. Both have aggressively entered the bike-sharing and scooter markets on their own, without coordinating efforts with public transit agencies.

There is not much time for transit agencies to act. Without city governments taking leadership after the crisis ends, transportation networks will develop separately, shaping people’s preferences for transportation and leaving public transit agencies behind.

The moment confronting public transit

At a time when essential workers in healthcare and emergency response were rightly recognized as heroes, transit workers were often called to transport essential workers, exposing themselves to the virus.

A third of regular transit riders work in industries assessed to be “essential” to the Covid-19 response by local and federal officials, according to U.S. Census data.

Already confronted with technological changes that forced transit agencies to rethink their business model, this crisis couldn’t have come at a worse time.

Agencies reliant on three sources of revenue – taxes, farebox revenue, and federal subsidies –instantly lost massive shares of the first two, leaving the third source, federal grants, the only avenue to continue operations. Clearly this is not a sustainable set of circumstances.

What now?

A recent McKinsey report summarized a pathway to navigating the crisis, mapped out in “five Rs”: to meet the challenge through action, demonstrate through the economic shock, to operational health, ways to add value through new business models and technologies, and organizations to reflect and respond to the new normal.

First, resolution, resilience, and returning to something approaching normality. Transit agencies need to continue operating through this crisis. In directing tens of billions of dollars toward transit agencies, Congress is passing a lifeline to agencies that had lost billions of dollars in farebox revenue.

Transit leaders should think strategically inleading their teams and how it will function during this crisis. McKinsey recommends relaxing top-down approaches and forming teams to tackle separate aspects of the crisis. For transit leaders, this might mean forming one team to think through service and route changes during the crisis, another to navigate budgetary challenges, and a third team to monitor the health and safety of operators. The critical challenge, according to McKinsey, is for executive teams to promote rapid problem solving and execution.

Capital restructuring like that extended to small businesses during the crisis is a possible outlet for sustaining public transit through the crisis, but far from painless. Many transit agencies work with unionized front-line workforces with contractual agreements that protect workers against personnel cuts for the sake of efficiency.

Without the immediate need to serve large numbers of customers, transit agencies have slashed services (not projects), made slight but impactful changes to protect operators, and made best use of time and resources. Last year the Bay Area Rapid Transit system used the sharp decrease in service to more rapidly complete construction projects. The Metropolitan Atlanta Rapid Transit Authority (MARTA) reduced bus service to 40 routes, connecting hospitals, urgent care centers, grocery stores, and job centers.

When the crisis ends, the perceptions of public transit, formed before and during the crisis, will remain unless the industry acts quickly. Rightly or wrongly, finding a ride from Uber and Lyft will be viewed as safer transportation options if transit providers cannot combat the perceptions that the handrails are not safe to touch, and the seats are not clean to sit in. During the initial weeks of the outbreak, transit agencies felt the heat to clean vehicles. In April, New York Gov. Andrew Cuomo required transit agencies in the state to disinfect cars every 24 hours, an unprecedented measure reflecting the urgency of riders’ concerns.

This issue of cleanliness extends to manufacturers, who should be thinking about building vehicles with the kind of infrastructure and materials that better support and communicate cleanliness.

A forward-looking response will also require anticipating the residual social response to the pandemic. Patience will be required. The New York Metropolitan Transportation Authority could not regain the full volume of riders it served before the Sept.11, 2001, terrorist attacks for another six years.

Transit agencies should be in close communication with their customers to understand their preferences and how preferences might have changed during and after the crisis.

Given that the workforce has learned how to work remotely during this crisis, will they stay there? Will customers fear crowded spaces even if public health authorities are no longer asking Americans to maintain social distancing?

Looking beyond the next six months leads to a conversation beyond shorter-term measures to increase ridership and into a discussion of transit’s business model, supporting cooperation between stakeholders and producing a MaaS product to unify forms of transportation.

Reimaging what public transit will look like after the crisis

City governments should step forward and take the lead in ensuring consumers can plan a trip, pay for a trip, and monitor the status of a trip in a unified MaaS platform. That will require city governments to find synergies between themselves and the major TNC apps. Conversations about provide MaaS service must now move to major cities will provide MaaS service.

Regulatory bodies must provide market access to all mobility providers. At the same time, the TNCs cannot be expected to participate in MaaS without a profit incentive. The solution will come only after transit agencies and TNCs fit incentives together like a jigsaw puzzle.

This moment,calls for leadership from city governments and transit agencies. City leaders should communicate with the TNCs to begin to develop a collaborative solution to the new market.

Cities must first be united at the bargaining table. If Uber and Lyft can create MaaS capabilities that can be seamlessly used across cities, they will be able to dictate the terms of the local transportation market to an uncomfortable degree. If transit agencies can identify what they require from the TNCs and what they will be willing to share, they would block Uber and Lyft from playing Dallas against Houston, New York against Philadelphia, and so forth.

One non-negotiable point of contention: MaaS service must not be exclusive to one platform. City residents should have multiple MaaS options; if cities cannot support competition, they will leave Uber or Lyft (or another service) in a position to exploit consumers.

Recognize that the same crisis facing public transit confronts Uber and Lyft. Passengers that fear exposure to the novel coronavirus in buses and trains likely also fear contracting the virus in a four-door sedan with at least one stranger.

So as long as public transit is subsidized without a requirement to make a profit, transit agencies will be able to keep fares under prices charged by Uber and Lyft, who are facing withering pressure from investors to demonstrate profitability.

If MaaS is to work as a solution for the public transportation market after this crisis, city governments need to think of themselves as a referee between market participants. One idea that warrants consideration is to create public mobility commissions to provide critical oversight for transit operators and ride hailing companies. These commissions will be charged with protecting market competition and preventing pricing excesses and exploitation of consumers, while maintaining respect for individual choice and preferences.

Urgent need for action

There is little doubt that public transit is at an inflection point.

The good news for public transit professionals and advocates is that policy makers and consumers cannot simply abandon bus and rail service. The second-order impact on the housing market, increase in gas prices, and a host of other malign market movements would be too great. We need to make public transit work, and we need to bring the TNCs into the solution.

A sign of cooperation emerged last year in Miami, where transit officials temporarily ended overnight bus service, but did offer to provide customers with one $45 voucher for Uber and Lyft rides – paid for by the Miami-Dade Transit System – while health officials recommend social distancing.

Public transit agencies may still get another aid package from the federal government in response to the novel coronavirus outbreak with the coming Biden stimulus plan.

Before the outbreak, public transit agencies and city planners faced the reality that TNCs were pulling passengers out of public transit and onto the road, contributing to – not reducing – congestion and carbon emissions. Soon that trend could increase geometrically, but with principled, visionary leadership from city governments, this current crisis could instead drive much-needed reforms that could fundamentally change how Americans go from “A to anywhere.”

You can watch a webinar discussion, featuring Mr. Stein, Mr. Day, and Mr. McGuckin, on the topic of Mobility as a Service here.

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