Panel: MOD Business Models
The second day of the workshop commenced with a panel discussion on Mobility On Demand (MOD) business models. The discussion was moderated by Prashanth Gururaja of SUMC.
Michelle Poyourow from Jarrett Walker + Associates introduced the basic characteristics of different types of transit. These services lie on a spectrum, from local, fixed-route service, which can carry up to around 60 riders per service hour, to fixed-route with deviations, to demand-response service to one or a few points, to door-to-door service, which maxes out to around 5 riders per service hour. Service hours are a basic unit of operating cost. The political floor for a fixed bus route seems to be around 10 riders per service hour.
How can you bring more riders to a microtransit service? You can ask people to walk to a pick-up location, travel at different times, go on longer ride-alongs, limit their options of a trip end, or reserve their trip in advance (like traditional paratransit services). In other words, rigidity–responsiveness to individual desires is a trade-off against the maximum rides that can be provided per service hour.
When looking to implement new technologies or services, a careful approach must be considered about what the problem is, and then choose the solution accordingly. For emissions and efficient use of energy, electric vehicles are the solution. For efficient use of human effort and safety, autonomous vehicles are the solution. For efficient use of space, use big vehicles that can carry many people. And the solution to bad information is good information.
John Urgo from AC Transit described his agency’s thinking on deploying AC Flex, an on-demand service, and incorporating it into system planning. The Newark, CA service was started to address the declining use of bus service in the area, which was slow and required many transfers. Three options were considered – ridehail subsidy, contracted operations, and contracted technology. After considering a number of factors, including ADA access, livable wages, cost effectiveness, and considerations for the unbanked, the agency opted for the contracted technology option.
The Flex service can be booked on-demand or in advance online or via phone. Riders are notified when the bus is on the way, then board at specific stops. The drop-off point for many trips was the BART station, to enable connections to the rest of the region. Return trips could be boarded at the BART station without a reservation. Vehicles were 26-foot cutaway buses, as opposed to the traditional 30-foot bus.
The service had improved frequency and on-time performance, and most riders preferred Flex to the previous bus service. The service was deployed without a change in the number of operators or vehicles from the previous service. While the technology cost was lower for the Flex service than the fixed bus route, the ridership was also lower than the target of 5 to 7 per service hour, while the subsidy per trip was significantly higher for the Flex service.
The future of Flex may be in being able to redesign the transit network by reallocating funds by upping the number of higher-frequency fixed routes and using the Flex-type service for coverage services.
Next, Eleanor Joseph of Via described her company’s business models to providing on-demand transportation. They offer four different services, each with a different revenue model:
- Transportation as a Service (TaaS) – a turnkey solution where Via provides software, drivers, vehicles, and charges per vehicle hour
- Software as a Service – where agencies use their own drivers and vehicles, and Via charges for the installation per vehicle and ride
- Simulation – analysis aimed at lowering the risk of on-demand services prior to deployment, charged at a fixed price
- Direct-to-Consumer – consumer-facing shared ride services, which charge riders directly
Jeff Ericson of RubyRide described his company’s approach to serving riders. Most of the US population lives in the suburbs, many of which have limited transit options. RubyRide’s model is to sell a bundled transportation service, charging a monthly fee for travel within a zone and an additional fee to cross over into other zones. They also aim to create a marketplace for sponsored service. Drivers are employees and work close to home, so they know the neighborhood and often the users of the service as well.
The benefits of this community-driven approach have been recurring revenue every month, leading to a faster break-even point, high utilization even in low-density areas, and limited competition since single-occupancy vehicles typically comprise 98% of the market where they operate.
Diogo Lousa of Massachusetts Bay Transportation Authority (MBTA) then spoke about his agency’s on-demand paratransit pilot program with TNCs. The goals of this pilot partnership were to improve customer flexibility and mobility, provide equal or better service at lower cost, convert traditional trips to on-demand trips, and assess the feasibility of the on-demand model. As the program grew both in ridership and service characteristics, changes to the program became significantly harder to implement.
The trips in the pilot program were lower in cost, but the demand was much higher, perhaps as a result. Thinking was required about pricing and ways to control demand to maintain financial sustainability. Pilot customers valued the on-demand service, and a growing proportion of customers were comfortable with using TNCs. However, what customers valued, such as travel time and reliability, may have worked in opposition to saving costs. But overall, Lousa pointed out, on-demand services can change customer behavior, so agencies should plan for it.
Next steps for the agency involve integrating TNCs into the MBTA centralized call and dispatch center and upgrading the paratransit technology and core software. One important challenge to note is that on-demand services must be accessible for all customers, which means that scaling the wheelchair fleet as the program scales should be an important factor.