On-demand ride services Part of the "Smart mobility" research report

Although a relatively new trend, on-demand car services are contributing to the rapid transformation of traditional transportation models.

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On-demand ride services: Disrupting and complementing taxi service

On-demand ride services (also called ridesourcing or ride-hailing services) like Uber, Lyft, and Sidecar are creating new business models and reshaping transportation markets by allowing private individuals to sell rides to eager customers.

Many issues concerning on-demand transportation are being widely debated today, from their potentially disruptive impact on taxicab companies to their impact on reducing drunk driving. Because our focus here is on congestion and economic benefits, we focus more narrowly on traffic reduction.

The market for on-demand rides is relatively new and evolving rapidly. Substantive studies of it are rare. We have nevertheless identified some general trends likely to affect the future paths of these service providers.

Uber’s and Lyft’s ridership rose rapidly during the past two years. One study sifted through Uber and Lyft transaction records to find 25 percent monthly growth in ridership at both firms at the beginning of 2013.1 That growth declined to a still-impressive 10 percent monthly rate by the beginning of 2014, however, and most analysts seem to agree that on-demand services face significant new headwinds as competition stiffens, markets become saturated, and calls for regulation increase.2

The US Census Bureau does not distinguish on-demand ride services from other transportation modes when it collects statistics about commuting patterns.3 The Bureau of Labor Statistics lumps Uber and Lyft drivers together with taxi drivers in its national surveys of employment and wages.4 Uber, however, has recently signaled a new openness to releasing trip data.5 As data from on-demand providers and government increase, we’ll get a better sense of how these services fit into the broader mobility ecosystem.

Estimating the economic potential of on-demand ride services

The release of several years of complete data on New York City cab rides offers the possibility that, in the near future, we will be able to calculate nationwide potential economic benefits of on-demand car services to the extent that such services substitute shared rides for some taxi trips.

Further data will be needed, however. On-demand ride service providers recently began piloting programs that allow customers traveling similar routes to link up and share their ride.6 Uber estimates that such pooled services could remove up to a million vehicles from New York City streets, although the company has not specified its methodology.7

A recent study of New York City cab trips found that cumulative trip length could be cut by 30 percent with little inconvenience if passengers were willing to share their trip with another passenger traveling the same way.8 Another study found the average length of a trip in San Francisco in 2008 was just 4.2 kilometers.9 Yet another study counted taxi rides in New York City and found that passengers logged 3.4 million trips per week, while a separate dataset recorded 173 million trips in the city between January and December 2013, with an average distance of 8.3 miles.10

Such findings allow us to estimate that, if on-demand ride service providers could facilitate trip sharing for 30 percent of New York City’s trips, the total number of trips would be reduced by almost 52 million a year, leading to a rough estimate of 431.2 million VMT eliminated. A reduction of that magnitude implies congestion savings to commuters of $495 million annually with 14 million hours in delay saved, and infrastructure savings to New York City of $959 million on road construction over 25 years. We further estimate a 139 thousand-metric-ton annual reduction in carbon dioxide emissions and 350 fewer annual traffic accidents.

It’s worth noting that this estimate does not take into account the potential congestion reductions that would come from lower car ownership due to increased mobility provided by on-demand ride services. We await empirical studies of the magnitude of this effect.

Seven ways to increase the public value of on-demand ride services

  1. Ensure that government data collection captures on-demand services. If national economic and transportation data collection programs captured distinctions about on-demand ride services, it would be far easier to understand their benefits and potential downsides. For example, the Census Bureau could include on-demand ride services as one of the options for journey-to-work questions in its American Community Survey. The Bureau of Labor Statistics could include on-demand ride services in relevant surveys on employment and wages, while the Federal Highway Administration could include similar categories in its National Household Travel Survey. Specific information in these national datasets would greatly aid transportation planners in assessing the impact of on-demand ride services.
  2. Encourage cities to release taxi trip and fare data online. New York City’s decision to release a year’s worth of taxi trip data in response to a Freedom of Information Act request set off a flurry of research activity that allowed for real progress in charting the potential benefits of shared transportation.11 Now imagine that all of the nation’s major cities posted anonymized taxi trip data on an open portal. The benefits to transportation research and planning would be enormous. Encouraging private providers to open up their trip data, as Uber has done in Boston, would confer additional benefits.
  3. Support pilot partnerships between government agencies and on-demand mobility providers. These projects could test whether the purchase of mobility services from on-demand providers could help government achieve mobility equity and access at a lower cost. Many cities provide wheelchair-accessible “paratransit” services to their residents. Several others, including Atlanta, considered outsourcing paratransit in 2014, although concerns were raised about the reliability and quality of private providers.12  Wait times for paratransit often exceed one hour, according to the Disability Rights Education and Defense Fund.13 Both private and public paratransit operators suffer from high turnover rates, inadequate compensation, and low morale, according to a study by the Transportation Research Board.14 Cities should consider whether purchasing on-demand mobility services from the private sector can fill this same need more reliably and less expensively. Helsinki’s long-range transportation plan includes such a provision.15 In 2014, Uber launched a similar pilot program in Chicago, including having third-party-owned wheelchair-accessible cabs in its ride dispatching service.16
  4. Fund studies and pilots to determine the optimal position of on-demand ride services within mobility ecosystems. Adding on-demand ride services to the list of priority topics for major transportation-related research grants would help researchers answer basic questions about how on-demand ride services can function most efficiently within a robust multimodal system.
  5. Enlist private partners to achieve ridesharing targets. As discussed earlier, governments should explore partnerships that leverage the reach of companies such as Uber and Lyft to further the policy goal of increasing ridesharing. Many cities already partner with carsharing companies, allowing them unlimited on-street parking at meters in exchange for a yearly payment. Helsinki’s long-range transportation plan envisions the city purchasing transportation from providers such as on-demand ride service providers, and then offering that service while allowing citizens to do the same using their own vehicles.17
  6. Contract with on-demand ride services to provide guaranteed rides home. Governments should consider partnering with on-demand ride service providers to operate guaranteed-ride-home programs, if doing so could improve service while marketing the program’s existence more effectively.
  7. Craft thoughtful regulation to encourage the spread of on-demand mobility. Public officials are beginning to look for ways to legitimize on-demand ride services. In September 2013, for instance, California’s Public Utilities Commission unanimously authorized peer-to-peer transportation in the state, assigning a new legal label—transportation network companies, or TNCs—to distinguish these vehicles from taxis.18 TNC companies and community members worked with regulators for months leading up to the decision, clarifying business practices while ensuring safety and quality service.

Explore our collection of research on smart mobility at the links below.