Mobility as a Service Is Not a New Idea, but It Does Need Rules

You need to get across town and don’t have access to a vehicle of your own. There are vehicle owners willing to give you a ride wherever you need to go in exchange for a fare. These owners are providing mobility as a service (MaaS). MaaS is not a concept restricted to a future filled with automated vehicles. It’s not something that sprang up in the past decade with the age of the smartphone and it’s not even unique to the age of the automobile. The first formal regulation of MaaS dates from mid-17th century London.

Long before Uber, Lyft, Didi, and others—and more than 200 years before Karl Benz tested his first Motorwagen—hackney carriages provided MaaS to London's residents. MaaS likely goes back centuries before that. At their core, modern mobility services are not fundamentally different from those of the past. For today’s riders, friction has been reduced by using a mobile app to request a ride (rather than standing at the edge of the road trying to wave down a driver) and payment can be handled electronically rather than by exchanging cash. 

Current News for Old Concept

So why has there been so much excitement about the recent initial public offering (IPO) from Lyft and the pending IPO of Uber for what is essentially an age-old idea? There is some feeling among investors that applying modern technology automatically makes a process more efficient. While that has certainly been true in many applications over the years, it doesn’t necessarily apply everywhere. 

Modern MaaS providers are using ubiquitous communications capability to remove friction from the ride transaction for users and drivers. But they haven’t taken cost out of the total ecosystem. Arguably, they have added cost by disaggregating the vehicle operators, taking a slice from every transaction and increasing the supply of rides without enough corresponding increase in demand. 

The Cost of Unregulated Ride-Hailing

Since the days of the original London hackney carriage ordinance, regulated cab services to modern taxi medallions have enforced an artificial scarcity that kept prices up and the services profitable. That scarcity also provided a barrier to entry for new providers. 

In the current unregulated ride-hailing market, platform providers have an incentive to keep prices down and supply high to encourage use at the expense of a sustainable business model. Drivers face challenges in earning a living wage in this environment, riders are incentivized away from more sustainable mass transit or micro-mobility options, and congestion in many cities has worsened due to too many operators on the streets in search of too few rides. 

A future of automation may reduce the cost of driver wages while introducing many new costs for servicing and maintaining high technology vehicles—as forecast in Guidehouse Insights’ recent Market Data: Automated Driving Vehicles report. Without some mechanism to manage the number of vehicles in urban centers regardless of whether they are driven by humans or computers, there is a significant risk of missing out on many of the potential societal benefits that could come with a move to more MaaS. 

Past limits on licenses for cabs were probably too restrictive, while a completely laissez faire approach invites urban chaos. An application that combines policies like congestion charges with current technology may help cities find the right balance of all transportation modes to benefit the maximum number of residents.