When I was a grad student in Ottawa in 1980, there were regular notes posted on the cork bulletin board at the university: “Need ride to Toronto, willing to share cost of gas.” If you had a car and were driving to Toronto anyway, giving a ride to this person was a win-win: there really wasn't any extra cost; they helped pay for the gas; and who knows, you might even have interesting conversation for the four-hour trip.
This and other sorts of ride-sharing were not new, even in 1980. “Carpooling,” for example, as it was then known, originated after the Second World War and really took off in 1973 during the energy crisis, when gasoline prices shot up dramatically. People who drove to work tried to save money on gas by getting together with others on the same street who were also “heading downtown.”
Moreover, governments encouraged such car pooling by creating “high-occupancy vehicle” (HOV) lanes on the bigger highways, which were reserved for cars with two or more people inside. (Ironically, if not enough people gravitate to the HOV lane, they actually cause more congestion in the fewer remaining lanes; as a result, many of these lanes have been discontinued.)
The amount of carpooling dropped significantly in the 1980s and afterwards, as the price of gas stopped its precipitous increase from the previous decade. Plus, it was a difficult model to sustain. What if your usual driver was sick? What if your working hours changed? Or if you simply had to stay late at work? The concept generally was a good one, but the tools to implement it – essentially the telephone, as you frantically tried to call your fellow carpoolers the night before to tell them you couldn't drive – were rudimentary.
> THE INTERNET CHANGES EVERYTHING
Then along comes the Internet, and various social media tools, and now consumers can connect to one another efficiently and cheaply, including to pool private transportation resources. Consider Zimride, which operationalized the “ride home from university” scenario I mentioned above.
Started in 2009, this tech start-up specialized in connecting university students over a Facebook site. That physical cork bulletin board I noted above was replaced by a ubiquitous, low-cost information-sharing service that could create an online marketplace in an instant.
A similar kind of service (created by the founders of Zimride) is Lyft, which falls into the general category of “peer-to-peer ride-sharing.” Essentially, Lyft facilitates through smartphone technology the creation of a community of riders and drivers, typically in an urban setting. Its tagline is “your friend with a car.”
You see this phenomenon particularly gaining traction among millennials — they don't have a car, and generally they don't need one for their day-to-day lives (they take public transit to get around). But when they need a car to move something heavy, they call a friend who has a car. Well, they can now “call” Lyft or a similar service, through which they can connect to a “virtual, new friend” who has a car. And the price is roughly 30 per cent cheaper than a taxi.
> UBER'S METEORIC RISE
Speaking of cabs, the most highly developed form of the smartphone-enabled ride-sharing company today is arguably Uber. Uber connects consumers who need a ride with drivers who want to provide a ride service. This marketplace is facilitated through an app that performs some very interesting (and useful) services.
With a traditional taxi company, when you call for a cab, the dispatcher tells you that the driver will arrive to pick you up in, say, 10 to 15 minutes. But when, after 15 minutes, no cab shows up, you get very nervous, because you have to be at your client's office to deliver a major presentation. Your heart rate goes up, and your blood pressure enters unsafe territory.
With Uber, because it makes much use of geo-location technology, you can actually see, on your smartphone, the driver coming to pick you up. Overlaid with GPS-enabled driving conditions, you can also see if the route is clogged with traffic (in Toronto, you can just assume this, unfortunately). This is a very powerful stress-reducing feature.
> NOT JUST MORE OF THE SAME
The point about Uber is that it's not just the traditional taxi cab service updated to run on an app. The entire business model is transformed.
Consider pricing. The traditional taxi cab system has set prices, regardless of the particular dynamics of supply and demand at any given time. In downtown Toronto, where I work, I often see a long row of cabs waiting for a fare; and at other times, especially during inclement weather, you can't get a cab for any amount of money.
Uber's technology, and business model, allows for dynamic pricing. When there's a big storm, and cabs are usually scarce, Uber can increase prices to instantly attract more drivers into the market. In essence, Uber's technology platform allows the company to price up and down the demand curve, thereby introducing efficiency and competition into the mix.
By the way, mobile technology is moving us in this direction across a wide range of industries. In the retail sector, for example, one marketing concept involves customer walking by a specific store, say, a clothing outlet, and that store sends the customer a message — “come in right now, and buy a shirt, and get 20% off, provided you do so in the next 30 minutes.”
Consider it a private “sale,” because the store knows you from previous purchases and they happen to have an excess of inventory in the particular shirts that fit you. The retailer likes this mobile marketing functionality because they don't have to do a storewide discount sale. Rather, they can communicate just with you, one-on-one. And of course you love it because it makes you feel special.
> MORE DYNAMIC PRICING
This type of technology-enabled mass-customized dynamic pricing for tech-savvy consumers is not entirely new in the transportation sector. The airline industry has done it for years. But now, with sophisticated mobile platforms in your hand, it will no longer be limited to big-ticket purchases, like an airline ticket. With ubiquitous hosted solutions accessible on a smartphone, we'll be able to have dynamic prices in many other areas of the economy, and throughout society.
Currently, I take the GO Train (the Government of Ontario's regional commuter rail service) into Toronto to work each day. The cost of each ride is essentially the same. But outside of rush hour, ridership is quite a bit lower, because seniors (who could ride in these off-peak hours) find GO's fares rather expensive.
If GO were to take advantage of smart technology, though, it would be able to institute cheaper fares at off-peak times, to encourage seniors to take the service from late morning to early afternoon. It would be a win-win. By pricing down the demand curve using digitized price-setting technology, more seniors would get out on public transit, the GO system would earn more revenue, and fewer cars would be clogging up Toronto's streets. Actually, not just a win-win, but a win-win-win!
In Toronto, there is a new initiative, Line Six Transit, that is attempting to crowd-fund a new transportation option for long suffering residents of Liberty Village. These commuters have a real challenge getting on a streetcar going downtown, so Line Six, if successful, will provide members with a private bus alternative — all enabled through an online crowd-funding campaign.
> THE TIP OF THE ICEBERG
Uber's rise has been truly breathtaking. It is barely four years old, having been launched in San Francisco in 2010. In a very short time, it has been able to attract some very serious financial backers. In June 2014, it closed on a round of funding that brought in $1.2 billion (which put a value on the company of $17 billion).
The Uber revolution will be repeated in many other industries, where today's inexpensive networking technology will allow new marketplaces to arise for very little cost, and for great consumer welfare outcomes. Consider Airbnb, which is similar to Uber in concept and approach, but for finding a bed and breakfast. We have seen the peer-to-peer enabled future, and it is happening now.
Some of these new services are very edgy indeed. Consider Monkey Parking. You know that situation, when you're in a busy parking lot, and are about to leave, and you see a lot of new car arrivals wanting your spot — and you say, “I could sell this spot.” Well, Monkey Parking allows you to do just that in the context of on-street parking. It's an app that has people bidding on your spot. It essentially works on the age-old premise that, where demand exceeds supply, a lucrative market can be created — except now instantly with mobility-enabled network intelligence.
These are all fascinating new services and business models. It will be very interesting to see how they develop, and how they are received. Some of them raise novel legal and regulatory issues. For example, San Francisco has a local bylaw prohibiting the selling of public parking spaces. For its part, Monkey Parking says “we're not renting a parking space, we're just telling people when it becomes available.”
Some critics of such “sharing economy services,” however, say there is a big difference between a mobile-enabled business model, like Airbnb (which, through disintermediation of “middlemen” allows users to leverage their private assets), and Monkey Parking, which would permit private individuals to capture value from public assets. Wherever you come out on this question, rest assured you'll see these new smartphone-driven businesses showing up in courts, municipal councils and legislatures as the legacy businesses impacted by them attempt to respond.
George Takach is a senior partner at McCarthy Tétrault LLP, the author ofComputer Law, and an Adjunct Professor in Computer Law at Osgoode Hall Law School.