How Exclusive Deals Stifle Innovation and Limit Access for All
In recent years, bikesharing has emerged as an eco-friendly, affordable, and accessible transportation option for millions of urban dwellers. However, the growth of bikeshare systems has been accompanied by concerns about exclusive deals between cities and bikeshare operators, effectively creating “backroom monopolies.” This blog post will explore how these monopolies limit access to bikesharing, especially for residents in poorer neighborhoods, and how they stifle innovation in the long term. We’ll discuss a specific case involving Uber and the city of Chicago as an example of this phenomenon in action.
The Problem with Exclusive Deals and Backroom Monopolies
In August 2019, Uber filed a lawsuit against the city of Chicago, alleging that the exclusive deal between the city and Lyft to operate the Divvy bikeshare system constituted a “backroom monopoly” (source: https://blockclubchicago.org/2019/08/02/uber-sues-chicago-over-its-divvy-bike-share-deal-with-lyft-calling-it-a-backroom-monopoly/). According to the lawsuit, this exclusive deal locked out competitors and limited the ability of other operators to provide bikesharing services in the city.
Exclusive deals between cities and bikeshare operators result in monopolies that lock out potential competitors, reducing the diversity of services available to the public. These monopolies may lead to a lack of investment in underserved communities, stifle innovation in the bikeshare market, and have negative consequences on equitable access to transportation options. When a single operator dominates the market, they may not have the incentive to improve their services, expand their reach to all neighborhoods, or invest in new technologies. This creates several negative consequences:
- Limited Access for Residents: In some cities, exclusive contracts with bikeshare operators have been criticized for not sufficiently expanding into lower-income neighborhoods, leaving many residents without access to bikesharing options. This lack of access can exacerbate existing inequalities and limit opportunities for residents in these communities.
- Stifled Innovation: Monopolies in the bikeshare market can hinder innovation as operators may have little motivation to develop new technologies or improve their services. This can result in outdated or inefficient systems that do not meet the changing needs of urban residents.
- Negative Impact on Equity: Exclusive deals can disproportionately affect low-income neighborhoods and communities of color, as these areas are often the last to receive new services and infrastructure. This can reinforce existing inequalities and limit access to affordable transportation options for those who need them most.
How to Encourage Competition and Innovation in Bikesharing
To counter the negative effects of monopolies, cities should focus on fostering competition and innovation in bikeshare systems. Here are some strategies:
- Open Bidding Processes: Using transparent bidding processes when selecting bikeshare operators ensures all potential operators have an equal opportunity to participate, as demonstrated by the success of London’s Santander Cycles, which underwent an open bidding process.
- Encourage Multiple Operators: Allowing multiple operators to offer bikeshare services can increase competition, as seen in Paris, where multiple operators coexist, promoting better services and access for residents.
- Incentivize Expansion to Underserved Areas: Cities can offer incentives to operators for expanding services to lower-income neighborhoods, ensuring that all residents have access to bikesharing options.
- Foster Public-Private Partnerships: Cities can collaborate with private operators to develop innovative bikeshare solutions tailored to specific local needs and challenges, as seen in the partnership between Los Angeles and Metro Bike Share.
Monopolies in bikeshare systems pose a barrier to innovation and limit access to affordable transportation options, disproportionately affecting residents in poorer neighborhoods. By promoting competition, using open bidding processes, and fostering public-private partnerships, cities can create more equitable and efficient bikeshare systems that benefit all residents. It is crucial for policymakers and city planners to consider the broader implications of exclusive deals in order to ensure that bikesharing remains a sustainable, accessible transportation option for everyone.