Changes in our transportation modes, such as ride-hailing, could have significant implications for our communities. Cities are leading the way in managing that change.
How do you usually get to work? Do you walk or bike? Do you take public transit? Do you drive in a car that you own? Do you take a taxi or ride-hailing service? What about in 20 years from now: can you envision a future in which you might travel to work in an autonomous vehicle or self-driving bus?
Self-driving vehicles are not as far off as we might think. In February 2018, I rode in an autonomous vehicle in Tempe, Arizona. While there was a human operator sitting in the driver’s seat, the car was predominantly in self-driving mode. As we travelled along the congested city streets, the car turned left and suddenly stopped when a delivery vehicle turned left in front of us. Luckily, there was no negative outcome. Tragically, about a month afterward, an Uber vehicle and operator, travelling on a similar route in Tempe in self-driving mode, failed to detect a woman crossing the street and killed her.
Around that time, Uber was planning to put self-driving cars on city streets by the end of 2018. Although Uber is no longer testing self-driving cars in Arizona, other companies such as Waymo continue to do so and have already tested self-driving vehicles for passenger services. Even though self-driving cars will be operating on only a small number of city streets by the end of this year, it behooves us to think about — and plan for — what transportation might look like in 20 years, and how we want to direct that change as a society.
In Canada, we have organized our lives, land and economy around mobility, mostly around a model that privileges private vehicle ownership. Between 1996 and 2016 the proportion of commuters who drove to work in a private vehicle has declined by a mere 1.2 percent, from 80.7 percent to 79.5 percent. In the three largest cities, however, less than 70 percent of commuters commuted in a private vehicle, choosing instead alternatives such as public transit, walking and cycling.
Now, after decades of business as usual in the transportation sector, these mobility models are experiencing severe disruption. The reasons for this shift are complex and multifaceted. They include:
- efforts to decrease vehicle emissions and associated negative environmental impacts;
- increased congestion and lengthening commute times;
- the high cost of private vehicle ownership, estimated at $9,000 per year;
- more emphasis on alternatives to private vehicle ownership, such as public transit, active transit and car-sharing services; and
- the introduction of new technologies by the private sector to transform mobility options and services.
The leading-edge innovation that has been particularly disruptive is ride-hailing, which makes use of the widespread adoption of smartphones, GPS and wireless Internet to digitally match up nonprofessional drivers of private vehicles with paying passengers. The process is arranged at the tap of a smartphone, the cost to the rider is confirmed in advance, the payment is digital, and the transaction is facilitated by a digital intermediary.
When ride-hailing first emerged, the overarching narrative was that it would disrupt the taxi industry. This is a highly regulated industry whose regulations focus on the safety of riders and drivers. Regulating taxis is mostly a municipal responsibility in most provinces; the exceptions are British Columbia and Quebec, where ground transportation is provincially regulated.
As digital-platform firms were launched in city after city, facilitating the release of drivers without taxi licences onto city streets, there was a rapid and negative impact on taxi drivers’ livelihoods. Taxi drivers, dispatchers and medallion owners took collective action. They organized protests that included staging sit-ins at city halls and disrupting service on city streets. Furthermore, they began to publicly applaud the role of municipal regulation to govern the total number of taxi licences, the age and condition of vehicles, the use of winter tires, training drivers in CPR and how to support elderly passengers, licensing rates and more. Actions also emphasized the value of family-owned taxi businesses, highlighting local ownership and job creation. While these actions may have helped to suspend or delay the launch of ride-hailing operations in some instances, they have not proved to be successful in Canada over the long term.
And while ride-hailing may have started with the disruption of the taxi business, that’s not where it ends. Ride-hailing has moved on to disrupt all kinds of logistics industries: people delivery, food delivery and package delivery.
Initially the conversation about ride-hailing was predominantly about one company, Uber. Now every major auto manufacturer and all the big technology companies are actively engaged in that space. Importantly, the emergence and acceptance of ride-hailing are contributing to much deeper changes in mobility models with respect to vehicle ownership. There are suggestions that ride-hailing, in connection with the anticipated convergence with autonomous vehicles, could lead to a major disruption in automobile ownership.
Cities are clearly at a key juncture with respect to mobility and its impact on the spaces where we live, work and play. How we choose to respond will undoubtedly have significant implications for all of our futures.
Examining the emergence and evolution of ride-hailing, and the disruptions it has caused, can highlight challenges and opportunities for municipalities with respect to regulation, economic development and partnerships.
UberX launched in Toronto in 2014 and then in other Canadian cities in quick succession. Taxi drivers and brokerages were furious and demanded the city respond by enforcing taxi regulations. Uber’s response went something like “We’re not a taxi company, we’re a technology company. Therefore, taxi regulations do not apply to us.”
The City of Toronto filed a lawsuit against Uber in November 2014. Then in June 2015 the Ontario Superior Court of Justice deemed that neither the city’s taxi regulations nor the regulations governing the operation of limousine services applied to Uber. This decision precipitated the development of regulations specific to ride-hailing across Ontario and much of the country.
As of early June 2018, ride-hailing firms are operating in 21 of Canada’s 30 largest municipalities, and 19 out of those have passed ride-hailing regulations.
The usual narrative about technological disruption suggests that private-sector-led innovation is rapid, while government response tends to be slow. However, the example of Toronto demonstrates that municipal governments — which traditionally may not move quickly because they must be methodical, thoughtful and consultative — are in fact capable of adapting fairly quickly to change. While a few cities and provinces (British Columbia, for example) chose the option of not making any policy changes, ride-hailing went from renegade to regulated in just a few years in Canada’s biggest cities.
Cities have demonstrated an ability to address, manage and direct change through regulatory policy tools as well as supports from other levels of government. Technology continues to facilitate disruptions that cities have had to address, such as short-term accommodation rentals and autonomous vehicles, plus new technologies that we haven’t yet begun to imagine. Regulation is an important way that municipalities can begin to address the policy challenges associated with technological disruption.
Transformation in transportation modes is not just altering the way we get around, it’s also changing employment, the attraction and retention of investment, and firms’ decisions.
Globally, automotive manufacturing is a $3-trillion industry, while mobility is valued at $5 trillion. At a time of deep uncertainty with respect to the future of employment, firms associated with urban mobility have the potential to create jobs and concentrate investment.
According to my research, 11 ride-hailing firms have reached a market valuation of $1 billion or more since 2012. The tech sector calls these firms “unicorns.” Two are headquartered in San Francisco, and the cities of Bangalore, Beijing, Dubai, Jakarta, Madrid, Moscow, São Paolo, Singapore, Tallinn and Tel Aviv each have one. None are headquartered in Canada. This matters, because the locations of headquarters are also the site of a firm’s command-and-control activities, of highly skilled and remunerated workers and of direct and indirect impacts on the local economy.
Canada is home to a large automotive manufacturing sector — concentrated in Ontario — which is ranked 10th in the world for vehicle production. Automotive firms have already begun to build and invest in mobility services divisions so they can be well positioned for a future focused less on private vehicle sales and more on ride-hailing, with fleets that are perhaps jointly owned by automotive firms, and on autonomous vehicles. The municipal regulatory environment can encourage local investment by global firms. In an interview I conducted in January this year with a major auto manufacturer that was developing a ride-hailing division, I was surprised to learn that the impetus for doing so was not the push of aggressive entrepreneurs but how quickly governments introduced regulations.
Canadian cities and municipalities need to determine how they can best lead as this transformation proceeds. An area of opportunity is our advanced industries sector. One of the first questions municipalities should ask is, Are there policy choices that can both influence investment and support municipal goals?
Although these transitions may appear overwhelming, there is some good news for municipal governments and policy-makers: you are not in this alone — we are all in it together. It is increasingly obvious, as we move toward greater inclusion, sustainability and innovation, that the key to success lies in partnerships.
A potential partner is the federal government, which has recently demonstrated a renewed commitment to engaging with cities on specific issues. One example is the Smart Cities Challenge, with a funding pool of $300 million over 11 years. The first round of the competition was launched in late 2017 and attracted proposals from 199 communities across Canada. While the shortlist of 20 proposals will be further whittled down to just four winners, an important outcome of the challenge is that a number of new partnerships have been created: among municipalities, and between municipalities and public, private, education and nonprofit organizations.
In the field of mobility, and particularly ride-hailing, partnerships are also key to success. Lyft launched in Canada in December 2017, and four months later Magna announced a $200-million investment in Lyft and its plans to collaborate on developing autonomous vehicle technology. In Innisfil, Ontario, Uber partnered with the municipal government to provide a service that cost less than public transit, in a low-density environment. Although the move was not without its critics, the municipality estimates it saved $8 million through this partnership. And when the company attracted a highly sought-after University of Toronto engineering professor and expert in developing self-driving cars, it established an office and a partnership in the city to facilitate the transfer of knowledge and skills between the university and industry.
In The Road Ahead, Bill Gates suggests that “we always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.”
Technology and even technological disruption can be forces for positive change. How should we plan for an uncertain future — a future in which the one thing we can be certain of is that it will look different from today?
Mobility is undergoing a transformation that has the potential to reshape all cities and communities in Canada. Working together, we can and should direct that transformation. And this goal is achievable through policy, economic development opportunities and multisectoral partnerships.
This essay is based on remarks the author made at the closing plenary of the Federation of Canadian Municipalities annual conference, on June 3, 2018. The research received financial support from the Social Sciences and Humanities Research Council.
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