Original publication: May 2017
Authors: Transport Area of the Florence School of Regulation (FSR Transport) at the European University Institute (EUI):
Team Leader: Matthias FINGER, EPFL and EUI Team Members: Nadia BERT, EUI; David KUPFER, EUI; Juan J. MONTERO, UNED Madrid; Marcin WOLEK, University of Gdansk; Editing: Kathryn BOUCHARD, EUI
Short link to this post: http://bit.ly/2zarauD
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Background

The sharing economy is disrupting the transportation industry worldwide. A more complex mobility system is emerging. There are new actors, such as online platforms (BlaBlaCar, Uber and many others) and non-professional service providers (individuals who share their vehicles and rides). New transport services, such as ridesharing and ride-splitting are spreading. Thanks to price-comparison websites, booking apps, and others, a more fluid interaction among the different transport modes as well as among the different transportation players is emerging.

 

This new mobility ecosystem, however, will need to be sustainable. Transportation requires major investments in infrastructure. As this disruption of the transportation industry unfolds, it becomes necessary to understand how these changes affect investments. In the EU in particular, regulation can play a relevant role to set the right incentives for all players to participate in the funding of the infrastructures, both in terms of maintenance and the development of transportation infrastructures.

Aim

The purpose of this study is to identify the existing and the potential impact of the sharing economy on the funding of transportation infrastructures.

The study uses a broad definition of infrastructures, which includes the underlying physical infrastructures, such as roads, tracks, stations, airports, etc., as well as assets for the provision of transport services such as buses, railways, rolling stock, along with all the necessary support systems, including maintenance, staff, and more.

A new layer, the data layer, is emerging on top of the traditional physical infrastructure layer and the services layer. Online platforms are establishing themselves as managers of this new data layer (in transportation), yet their business models continue to rely on the existing infrastructure. Therefore it is necessary to ensure that the new players and new services enrich the transportation ecosystem without threatening the financial sustainability of the indispensable underlying infrastructure.

A wide definition is also used when it comes to the concept of “sharing economy”, which can be understood as “a new socio-economic model that has taken off thanks to the technological revolution, with the internet connecting people through online platforms on which transactions involving goods and services can be conducted securely and transparently” (European Parliament, 2015c, para. 110).

Scope

Shared mobility: a rising challenge
The value of the sharing economy transaction in the transportation industry – the so-called “shared mobility” – in Europe in 2015 has been estimated at EUR 5.1 billion, growing at a rate of 77% from the previous year. This value is expected to reach more than EUR 100 billion in 2025. The revenue of transportation platforms in 2015 was estimated to be EUR 1.6 billion, up 97% from 2014 (PwC, 2016).

Europe is leading in shared mobility solutions, such as subscription-based bike- and car-sharing. The global leader in the carsharing industry is a European company, car2go, and Europe is the continent with the highest revenue for the provision of carsharing services, i.e., around EUR 230 million in 2015 (BCG, 2016).

However, when it comes to urban shared mobility solutions based on highly developed platforms, such as Uber and Lyft, the US and Asia are the global leaders. That is also where more sophisticated services, such as ride-splitting are currently emerging.

The situation is different when it comes to long-distance carpooling: here the world leader is the French platform BlaBlaCar. For example, the number of passenger–km mediated by BlaBlaCar in France in 2015 reached 12% of the passenger-km managed by SNCF, the French railway undertaking, in domestic long distance passenger services (DGDD, 2016). The value of BlaBlaCar transaction for France is estimated to be EUR 210 million in 2015.

Less revenue from passenger fares
The immediate challenge posed by shared mobility to transport infrastructure funding is the reduction in revenues from travellers’ fares, as travellers migrate from traditional mass-transit services to new shared mobility services.

Among the different forms of shared mobility, carpooling has the greatest potential to affect traditional transportation. Carpooling empowers owners to make more efficient use of their private vehicles and it is substituting traditional long-distance transportation services (railway and coach), thereby reducing the revenue of existing operators. In France, 71% of long distance carpooling passengers would have used traditional transportation had carpooling not been available, and 64% of car-pooling users are travelling less by train. Carpooling has reduced the number of domestic long distance railway passengers in France by approximately 6% in 2015 (DGDD, 2016).

Shared mobility is not a substitute but rather a complement to urban transportation. Moreover, it is reducing private car usage and ownership, albeit, on a very small scale so far. Mobility as
a Service (MaaS), the combined commercialisation of different transportation services by a single provider, may well be the future of urban transportation.

Revenue for traditional transportation is reduced as the substitution of traditional long-distance transportation services by carpooling takes place. Such a reduction is indirectly affecting the revenue of railway infrastructure managers, particularly in countries where railway infrastructure funding heavily relies on access-charges imposed on railway undertakings (France, Belgium and Germany in particular). No substantial effect is identified for road infrastructure funding, as it does not rely so significantly on tolls, and in any case, carpoolers also pay road tolls.

Revenue reduction might trigger a vicious cycle of reduction in frequencies and further reductions in passengers in long-distance railway and coach services. Furthermore, such substitution increases the cost of Public Service Obligations (PSO) and threatens the sustainability of PSO financing thanks to internal cross subsidies in an undertaking with exclusive rights for the provision of packages of both profitable and non-profitable services. Revenue of railway infrastructure managers is also reduced.

However, in the long run the situation could also reverse. As private vehicle ownership diminishes at the urban level due to the attractiveness of alternatives to the private vehicle (both new shared mobility and traditional public transportation), travellers will increasingly rely on alternatives to private vehicles for long distance trips. It is estimated that if 10% of private vehicle users stop using their cars, the number of passengers using alternative services, including traditional public transport and shared mobility solutions, would double.

Other challenges
Online platforms can reduce the funding available for transportation infrastructures by capturing a growing share of the value created in the entire mobility ecosystem. Online platforms charge commissions for their intermediation services. Such commissions are typically set around 20% and have even reached 30% of the total value of each transaction. Value capture does not seem to be an issue at the moment, as platforms have created new markets. Platform users, both drivers and passengers, keep growing despite commissions. However, as platforms might take a leading role in integrated mobility solutions, including traditional services (such as Mobility as a Service), commissions might capture part of the already tight revenue of traditional public transportation companies, both urban and long distance.

It is important to ensure that as shared mobility evolves, all players in the mobility ecosystem contribute to the funding of infrastructures without freeriding. The examples of media, telecommunications and electricity show that freeriding can reduce the available financing for infrastructures. While the same effect is not observable to a significant extent in transportation yet, this may well happen in the future as platforms start commercializing both traditional public transportation services and new shared mobility solutions under a single roof. The conditions (i.e. pricing) to be negotiated between platforms and traditional public transportation providers (often public authorities) will be of a key importance.

As public subsidies are a major source of infrastructure financing, it is important to ensure that new players such as platforms and non-professional providers contribute to the funding of infrastructures.

Finally, transportation platforms concentrate a great amount of interesting data that can be commercialised. However, new revenue derived from big data management might not be reinvested in infrastructure.

Recommendations

1. More statistical information, particularly in an EU-standardized format on shared mobility is necessary. National best practices should be monitored to produce a good set of data from surveys, web-crawling and traditional statistics at EU level.
2. New shared mobility services should be integrated into the existing regulation. This way, legal certainty will increase and coherent regulatory policies across all transport modes, both traditional and new, will be possible. Most of the competences on transport regulation are national but the EU has competences to ensure the free provision of information society services.
3. Shared mobility should be promoted as a substitute for the use and ownership of the private vehicle. Specific measures are proposed: (i) Promote each single shared mobility service, in particular ensuring legal certainty; (ii) Promote the complementarity of shared mobility to mass-transit services (first mile/last mile, etc.); (iii) Promote Mobility as a Service as the instrument to combine mass-transit and shared mobility services as a valid alternative to the private vehicle. Transport infrastructure will benefit from the increase of passengers and revenue in mass-transit systems.
4. In limited cases, shared mobility might compete with mass-transit services. A level playing field is necessary. It is recommended to eliminate potential regulatory advantages that favour shared mobility over mass-transit services, such as undue exemptions from charges for the use of the infrastructure, taxes, social contributions, or PSO financing, particularly when such advantages go against the commonly agreed policy objectives to reduce congestion, environmental damage and accidents.
5. Shared mobility should be taken into consideration for the redefinition of some public service policies. Competition from shared mobility is threatening crosssubsidies in mass-transit franchises of profitable service and non-profitable services. This is often the case when minimum frequencies are imposed and peak services finance off-peak services. At the same time, shared mobility provides new possibilities for a more efficient provision of public service.
6. As a new data layer emerges over the traditional physical infrastructure layer and transport service layer, it is recommended to closely follow the evolution of platforms’ activities in order to identify at an early stage arrangements that challenge the financing of infrastructure. Challenges to financing can derive from value capture by platforms in the form of commissions. They can also derive from freeriding as in the case of telecommunications and energy infrastructure.
7. Online platforms are centralising a large amount of data on mobility. It should be ensured that online platforms share big data on itineraries, frequency, duration and other travel parameters. Similarly, online platforms are well positioned to share data with public authorities for the management of taxes and other legal obligations.

Link to the full study: http://bit.ly/601-970

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