Digital urban mobility: what role for the transport authorities?

Enlighten • Pulse #2 • 3 min
By Matthias Finger Researcher and professor at the Ecole Polytechnique of Lausanne (Switzerland)

Digitalisation affects all human and industrial activities world wide. Digitalisation consists of three closely linked dimensions, namely data generation and storage (from more and more sources and in bigger and bigger quantities), data exchange (bigger volumes, increasingly in real time) and data analysis (bigger amounts of data, thanks to more and more sophisticated algorithms).

This purely technological evolution enables the emergence of so-called “digital platforms”, where data about physical activities are stored, exchanged and analysed. These platforms are establishing themselves as the new intermediaries between the users or customers of a physical service and the physical service provider itself. Let us take three globally recognised examples of such digital platforms. Amazon used to be a digital platform intermediating between book producers and readers (buyers of books). It has since become an intermediary between almost any producer of a physical (retail) good and almost any buyer of such goods. Spotify is an intermediary between a music producer and a listener (consumer of music). And Airbnb is an intermediary between a renter of an apartment and person (customer) seeking to rent such a space.

The same technological evolution can potentially be applied to urban mobility, and, as a matter of fact, is already being applied. So-called “mobility platforms” are seeking to establish themselves as intermediaries between the providers of transportation services in the various transport modes and the users or consumers of such services (passengers).

Initially, such platforms solely offered information about public transport offerings, such as timetables, increasingly in real time. These platforms then evolved into offering ticketing services. But now, we see the emergence of even more sophisticated platforms offering so-called “mobility services”, travel services across modes, whereby a user can be transported from A to B in an integrated and seamless way (e.g., “Mobility as a Service” or MaaS).

As in all such digital platforms two basic economic principles apply, namely so-called “direct” and “indirect network effects”. We actually know “direct network effects” already from the traditional physical world : basically  the value of a (physical and digital) platform goes up the more users or customers are connected to it. The more citizens are connected to the postal network, the higher its value to everybody who is connected; the more users are connected to a telephone network, the higher the value for all the users and of the network itself. Applied to a mobility platform, this means that the more transport modes and transport offerings are connected to the platform, the higher the value for all the (potential) users. “Indirect network effects” come on top of direct network effects and result from the analysis (by the platform) of both the users and the producers. The more knowledge we have about the users, the more valuable the platform becomes for the producers, and the more (quality) information we have about the producers, the more valuable the platform becomes for the users. Both, direct, but especially indirect network effects are strong drivers of monopolisation, a phenomenon also called “winner takes all”. In other words, there is generally only room for one digital platform in a given domain, meaning that, for purely economic reasons, there is typically only room for one digital mobility platform in one urban or metropolitan area. Thus, the mobility platform that manages to be first on the market will prevent the survival of other competitive mobility platforms or even simply their emergence.

But what does this all mean for public transport authorities? It is obvious that such digital mobility platforms are of utmost interest for transport authorities and cities more generally. They contribute to organising urban transport more efficiently, reduce emissions, tackle congestion and increase safety. More generally, they also reduce car ownership to replace it with more sustainable intermodal mobility. On the other hand, it is unlikely that transport authorities will be able to develop such (digital) mobility platforms by themselves, let alone evolve them into a viable business model. This can, in my opinion, only be done in collaboration between the transport authority, the various transport services providers (some of which may be owned by the transport authority) and digital mobility platform developers and operators. The latter are most likely international companies that have already been able to learn from similar experiences elsewhere. Nevertheless, I strongly advocate for a public policy or public service perspective when it comes to digital urban mobility platforms.

Conversely, I am not advocating for a purely commercial approach to digital urban mobility (platforms): while a purely commercial mobility platform operator will ultimately want to maximise mobility by exploiting to the maximum the direct and indirect network effects, a transport authority seeks to promote the public in terest, which, in this case, is to reduce the use of the private car for environmental, public health or simply efficiency reasons. From this public policy perspective, thinking in terms of integrated mobility, door-to-door transport and ultimately Mobility as a Service does make perfect sense. It is therefore cities and metropolitan areas that have to promote mobility through mobility platforms. This means that they have to plan for them, create the institutional conditions for them and most probably also contribute financially to them.

Mobilité urbaine : pourquoi les villes doivent prendre l’initiative face au digital

Matthias Finger

is a professor of management of network industries at École Polytechnique Fédérale Lausanne (EPFL) and a director of the Florence School of Regulation Transport Area. Since 2014 he has directed IGLUS, an executive training programme on Innovative Governance of Large Urban Systems to which Keolis is a partner (www.iglus.org).