The real disruptive technology for transportation is road-pricing.
There’s been a surge of interest in road pricing in the past few weeks. In a new study of growing traffic congestion in New York City, Bruce Schaller attributed traffic delays to the expanding number of Uber and Lyft vehicles on city streets. Given the economics of the business, and the concentration of fare-paying passengers in dense urban neighborhoods (plus the added inducement of earning surge fares), ride-share drivers have strong incentives to drive at peak hours in city centers. The only feasible solution for this, according to Schaller, is to implement some form of road-pricing, as he says:
If TNC growth continues at the current pace (and there is no sign of it leveling off), the necessity of some type of road pricing will become more and more evident. Technological innovations have created new options for design and implementation of a road pricing system that targets the most inefficient use of scarce road space during the times and on the streets where additional vehicles contribute the most to traffic delays. There are thus practical opportunities for officials to design, test and gain public acceptance of a road pricing scheme carefully targeted to reducing unnecessary traffic congestion.
At City Observatory, we’ve long diagnosed traffic congestion as the failure to confront users, particularly peak hour single occupancy car drivers, with anything approaching the full cost of road use. Prices are too low, and demand overwhelms limited capacity (just as Ben and Jerry’s are overwhelmed when they give ice cream away free once a year). When we price road capacity–as Louisville recently demonstrated by pricing its I-65 bridges–we suddenly find that peak hour traffic congestion disappears, and that our infrastructure is more the sufficient to accommodate the demand from travelers who actually are willing to attach even a modest financial value to road use. Our speculation is that in the absence of road pricing, both fleets of “transportation network company” (TNC) ride-sharing vehicles will aggravate this problem. And its likely to reach crisis proportions when self-driving vehicles lower costs still further. We think we’re rapidly approaching an inflection point that will require a sharp change in the way we pay for roads.
We were somewhat surprised, to read two weeks ago, that Uber has issued a corporate statement of support for road pricing. The company’s director of transportation policy Andrew Salzburg wrote a short direct column in Medium–titled “Road Pricing the Solution to Gridlock“–and going so far as to quote the Duranton & Turner paper “The fundamental law of road congestion.”
To tackle this issue at its core, the cost of driving ultimately needs to reflect its cost to our cities. It’s becoming increasingly clear that the most effective way to manage vehicles on the road is through pricing. By charging a fee for all vehicles (private motorists, delivery vehicles, taxis, and services like Uber), road pricing creates an incentive for everyone to share space more efficiently.
Salzburg’s’s endorsement comes not long after two of Lyft’s founders–John Zimmer and Logan Green–published their own Medium essay on “The End of Traffic” which also endorsed road pricing, under the gentler rubric of “smart lanes”:
Smart lanes will supercharge everyone’s commute by being active during peak hours and returning to regular (or “dumb”) lanes in off-peak hours. The smart lanes will be 100% free for any vehicle with three or more people and have a market-based price for vehicles with fewer than three people.
It might not be immediately obvious why these two companies would support road pricing. Right off the bat, they’d be two of the biggest payers of road fees, especially if fees varied by time of day or by location (as they should). These firms disproportionately serve the most congested locations at the most congested times, and so would end up paying a lot. But Uber and Lyft recognize that un-priced roads aren’t really free, and that rationing road capacity by queueing rather than price will cost them (and everyone else) a lot of money.
I suspect their are at least three reasons why the TNC’s might be pushing ahead here:
First, they may be genuinely altruistic. They recognize that road-pricing will stem congestion, and provide better travel times for everyone. If urban transport markets get saturated and car travel becomes slower, the growth of demand and the profitability of the TNC industry could be sapped. Less congestion would be better for business.
Second, they may be trying to get ahead of the game and avoid a system where TNCs get burdened with fees, and other road users do not. As the Schaller report makes clear, its tempting to blame TNCs as being the sole or major cause of growing congestion. Even though that isn’t entirely fair–every vehicle on the road at rush hour contributes to congestion, not just the last one–the TNCs could easily get painted as the villains, and then get socked with the bill. The fact that their vehicles are already fully instrumented, and in many cases required to share data with municipalities, makes them an easy target for fees and taxes (already many municipalities piggyback many fees on TNC operators, as they do taxi operators). In a world where TNCs pay road use fees, and private car owners do not, TNC’s would be at a significant competitive disadvantage.
Third, the more we move to marginal, per-trip pricing for all car travel, the stronger the case for people to not own cars, and instead to rely on a diverse array of modal options optimized for each trip: routine commutes, mostly by transit or bike, urgent ones by TNC. Already, we’ve shown that the uptake of TNC’s like Uber is highest in those cities with the highest parking costs. High parking costs make owning and using a private car of one’s own relatively less attractive that using and Uber or Lyft vehicle when you need one. Road pricing would reinforce that calculus, and ultimately expand the market for the TNCs.
As Congressman Earl Blumenauer explained last week, the end of the gas tax as a viable means of road finance is now clearly in sight. Self-driving cars and electrification are looming ever larger.
With more fuel-efficient and zero emission vehicles, the bottom will fall out of the transportation funding model. All autonomous vehicles entering service will be electric. This will hasten the death spiral of how we fund transportation.
The result is the we face a once in a century inflection point for re-thinking our road finance system. If we do it in a way that comes closer to getting the prices right–and that specifically includes peak hour road pricing–we could potentially make major improvements to urban transportation.
Perhaps these two companies that have so disrupted urban transportation have put their finger on the next big disruption. Uber and Lyft are on board for road pricing. Do I hear an “Amen!,” Waymo?