Uber wants to work with public transit agencies—but first it needs their trust

Uber wants to be seen as friends of public transportation.
Uber wants to be seen as friends of public transportation.
Image: REUTERS/Jeenah Moon
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As Uber unwinds its moonshot bets on self-driving cars and flying taxis, it is focusing on a less audacious if no less ambitious goal: enmeshing itself in public transit systems around the globe.

In January, Uber published a 52-page report on what it aims to do for public transportation, amid a crisis that has hollowed out transit agency budgets and sent ridership on a steep decline. The company’s pitch to government officials includes several options: Transit agencies can pay Uber to provide rides to people traveling to and from transit stations , or to replace inefficient routes with Uber service. They also can buy routing software to guide both pre-planned and on-demand trips, or allow users to plan, book, pay for, or navigate any trip on public transportation straight from the Uber app.

The hope is that sometime in the next three to five years, while standing at a transit platform, you will be able to pull up an Uber app featuring various fare offerings you can purchase, whether that’s for the bus, subway, scooters, bikes, or ride-sharing.

Numerous analysts, academics, and bloggers have tried to answer whether Uber is a friend or foe of public transportation. Covid-19 may have clarified the status: In the past year, Ivan Mihov, head of strategy and planning for Uber Transit and a co-author of the company’s report, says that interest on the part of public transit agencies has increased.

“We start to see a future where public transportation is much more of a public-private partnership, but agencies are the ones with that in control,” says Mihov. “We’re just improving their tool box.”

It started with a partnership in Florida

Uber’s first government partnership launched in 2015, with Uber connecting senior citizens in Gainesville, Florida, to UberX rides. That program still exists.

In 2019, Uber Transit became a standalone unit. In the past year, it has inked deals in several places, including Marin County, California, which uses Uber’s software to route four wheelchair-accessible vans. It also makes public transit schedules and discounts available on the Uber app, and offer vouchers for riders taking Uber to travel the last mile to their destination from transit stops.

In Chicago and Sydney, riders using public transit can plan their journey—combining UberX with walking directions and bus, subway, or train connections—on the Uber app.

Since the Covid-19 crisis started, Uber Transit says it has been working with dozens of other transit agencies and expects to roll out more offerings in the next three to six months.

These partnerships not only could transform public transportation but also, ultimately, help Uber achieve its overarching goal of getting more people to swap their cars for ride-sharing.

But Uber’s success depends in part on public transit agencies wanting to work with a company that has been known to move fast and loose when it comes to navigating the rules in multiple cities and countries. Uber will need to back up its claims that it wants to complement, and not just compete, with public transit.

Making friends with transit

While Uber’s whole business model was built to bend and flex with ridership demand (see surge pricing), transit agencies, have largely fixed operating costs, and could get the benefit of Uber picking up and dropping off people during off-hours and on routes where typical bus service is too costly. Using a sampling of publicly available US agency route-performance reports that include data on ridership, cost per trip, and average trip length, Uber estimates in its report that 1% to 6% 1 of bus trips could be replaced by Uber pool, allowing agencies to reduce their costs per trip by 15% to 30%.

Having Uber fill the gaps in public transit also could make transportation more accessible. Chris Pangilinan, head of global policy for public transportation at Uber and co-author of the company’s January report, says that with Uber, transit agencies can provide rides for people who aren’t within walking distance to traditional public transportation. The report notes that agencies could subsidize Uber rides to help underserved populations get to work or access healthcare services.

If it works, this could also be big for Uber. Working with public transit would not only mean increased trips, making its economics more efficient overall; it also would give the company an opportunity to expand its customer base by tapping into the non-typical Uber user.

Corey Harper, an assistant professor of civil and environmental engineering at Carnegie Mellon, says, “there’s a negative side to this, too,” depending on how Uber gets used by public transit customers. “Uber impacts congestion and energy use and impacts the efficiency of our transportation system,” he says. “Transit agencies have to think this through—what you don’t really want is people just switching from the transit agency to take Uber.”

RTD and Uber: The Denver experience

In 2019, Denver, population 705,576, became the first city in the world to start selling public transit mobile tickets through the Uber app. The Regional Transportation District (RTD), which operates in the Denver-Aurora-Boulder area in Colorado, sells mobile tickets via four different channels (including the Lyft app beginning in December). In 2020, 11% of the agency’s ticket revenue came through mobile channels. Tonya Anderson, a senior product manager of electronic fare operations at RTD, says most of the revenue came from the agency’s app, while about 4% currently comes from the Uber app.

Mobile tickets provide convenience for users, but not everyone wants to download another app, she says. Selling tickets on Uber’s app offers another way to reach customers.

In the long run, Anderson says the agency’s goal in working with Uber is to replace inefficient routes. But she says the RTD still needs to collect and analyze the data and “have these experiments running for a little bit longer” before it can “more confidently engage with Uber and TNCs [transportation network companies] to augment our services.” The agency also is wary of the potential implications for congestion.

There are several other potential sticking points—for example, what to charge customers for replacement rides offered by Uber. (At $3, the current price of a one-way local fare ticket costs a lot less than the average Uber ride. Ideally the new price is fair to customers and would reduce the agency’s operating costs.) Anderson says it’s also likely the RTD will need to negotiate with its union workers before it can implement something with Uber at scale.

I think, just to be transparent and honest, but trying to stay positive, there is a little bit of apprehension when it comes to public transportation agencies working with Uber because of some of not-so-great experiences in the past,” says Anderson. The agency’s initial conversation with Uber “wasn’t very collaborative,” she says. But over the last year, she says the agency has found that the new Uber Transit division, which is specifically focused on public transit, genuinely wants to learn about the agency’s goals and help it achieve them.

Uber’s global domination of transportation

There’s still a question of where Uber Transit fits within Uber’s overall strategy and its goal of becoming profitable. Uber, which reported a $6.7 billion loss for 2020, declined to disclose how much it has invested in Uber Transit.

Uber’s rides business has taken an earnings hit in the pandemic, and the company has sold the divisions that were spearheading its bets on things like air taxis and autonomous vehicles. But Mihov notes that the 220-member Uber Transit team hasn’t lost any headcount throughout the crisis. He says that “it’s still one of the bets within Uber” with “an area of growth and opportunity.”

Mihov, who formerly worked at Zoox, a Bay Area autonomous vehicle startup, adds that the deployment of AV technology “is a really long-term thing.” Assuming that self-driving vehicles become standard a decade from now, or whenever, they would be another mode plugged into Uber’s transit offerings, Pangilinan says.

Working with transit agencies certainly fits well into the goal of creating an ecosystem where users will have more choice. “We really do think that a better public transportation system is, one, better for cities, but two, it is also good for Uber,” says Pangilinan. “It’s also good for all of us that are not in the business of selling people cars.”

But it will be up to transit agencies to make sure whatever deals they strike with private providers don’t end up cannibalizing their ridership. Perhaps that will mean limiting Uber’s involvement to trips taken to or from rail or bus stations, or during disruptions in regular service, Carnegie Mellon’s Harper suggests. The agencies and private transportation companies “will have to work together to figure out a mutually beneficial partnership,” he says.

After working with Uber Transit for a little over a year, Anderson says, “[t]here’s still a lot of work that we can still do just for Uber to understand public transportation and for us to understand Uber.”

With RTD’s revenue shortfall for 2021 projected to be $140 million, Anderson says transit-agency officials are asking more questions about whether Uber might be a solution.“If the pandemic didn’t happen, if we didn’t have coronavirus and we were just going along our merry way,” she said, “I don’t think we would be having these conversations with Uber.”