LTT Comment: Could regulation deliver public good and trigger vitality in the new mobility sector?

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Mobility Matters February 2017

Alistair Kirkbride writes in Local Transport Today

The relationship and role between the public and private sector keeps rearing its head as the mobility world develops. Court cases between public sector bodies and Uber, or the lack of meshing between fast-evolving carsharing operators and London Boroughs make the national press. The subtext is often “cash rich young guns outpace conservative old guard”. However, even though the vast majority of people and things that move do so in “traditional” ways, the new and disruptive operations are all predicted to become major players and are already having major influence on the new mobility landscape.

If we scratch underneath the headlines, what do they say about the growth pains of “new mobility” and how might these get resolved? Is it possible for the private sector’s profit-led drivers (or at least race to viability) to mesh with the public sector’s responsibility to deliver public good for mutual benefit? What might this world look like?

This raises two relevant concepts – viewing transport as a utility (and hence whether the regulatory and governance models of other utilities might illuminate the future direction of “new mobility”) and the Porter hypothesis. Exploring these together might help us understand some of the questions around regulation and fast-moving disruptive mobility services.

Let’s start with the Porter hypothesis.

In its pure form, this says that strict environmental regulations can reduce inefficiency and encourage innovation which improves commercial competitiveness. When proposed (in 1995), it was seen in some quarters as turning prevailing economic theory on its head. The idea of constraining markets through regulation to trigger growth flew in the face of the predominant economic and political dogma of the time. However, its core idea seems to have survived subsequent critiques and reviews pretty much intact, and its application has been stretched to relative competitiveness of whole countries.

So let’s apply the idea to the relationship between the public sector – via regulation and policy – and the disruptive private sector mobility operators. This leads to a couple of useful questions.
Firstly, could more – or better – policy and regulation lead to efficiency, innovation and competitiveness in the new mobility sector? The car sharing sector is pretty much unregulated. Quality assurance is provided by the Carplus accreditation scheme or BVRLA membership, and is used by the public sector to determine whether to enter into contractual arrangements with operators. But if we look at London, there are significant differences in how car sharing is implemented in different boroughs, and this is microcosm of the rest of the UK. This is currently limiting the sector’s ability to realise the scale of potential “public good” benefits that could be delivered.

Secondly – and more importantly for the purposes of this argument – would increased efficiency, innovation and competitiveness in this sector enhance public good?

Brought together, these two questions frame the sort of regulatory constraints that might lead to better outcomes.

Alongside the Porter hypothesis, let’s also look at what we can learn from how utilities are regulated. Might utility regulation contribute to a new framework?

Is it appropriate to consider mobility as a utility? A quick trawl provides fairly clear definitions of what constitutes a public utility as “…a business that furnishes an everyday necessity to the public at large. Public utilities provide water, electricity, natural gas, telephone service, and other essentials. Utilities may be publicly or privately owned, but most are operated as private businesses” .

The ongoing shift to people consuming mobility services – and the subsequent challenges being addressed here relating to regulation – suggest that there is at least some mandate to follow this argument. This is interesting when we consider how other utilities are regulated in relation to mobility.

The UK’s system of regulation means that each sector has its Regulatory Office – Ofgem, Ofcom etc. “Ofmob” might not win any points for graceful branding, but let’s consider it for the new mobility sector. If we look at Ofcom for guidance, its purposes are to “… make sure that people in the UK get the best from their communications services and are protected from scams and sharp practices, while ensuring that competition can thrive.” Furthermore, “Ofcom’s principal duty is to further the interests of citizens and of consumers”. These purposes and focus are shared by the other regulatory bodies, if the way in which they carry out their duties vary.

It’s not a massive stretch to see the application of such purposes to the new mobility sector leading to some common sense in dealing with the consequences of new types of operation. Combined with the Porter hypothesis, a pragmatic and recognisable model of regulation could be a set of instruments to trigger sector vitality and check developments that are not for the public good.

A second example is from the energy sector. Similarly to mobility, an asset-heavy, fairly slowly evolving sector has been disrupted for a variety of reasons: the multiple scales of distributed renewable energy generation coupled with an imperative to reduce carbon emissions and the technical ability to use demand pricing means that the regulatory framework has had to change.

These sorts of issues sound familiar to changes in the mobility sector – the emergence of new models, the imperative for emissions reduction and the opportunity for demand pricing. Ofgem’s recent snappily titled RPI-X@20 review was intended to identify how better regulation could lead to better energy efficiency, accelerating the adoption of new technology and speeding up decarbonisation of the energy sector.

Once more, re-framing these intentions for the new mobility sector makes sense – better efficiency, new technology (for public benefit rather than for its own sake) and emissions reduction. For new mobility, I’d probably add spatial efficiency and fairness in the mix, but the direction looks sound.

So what might be in and out of ‘Ofmob’s scope?

It could be argued that the areas of “new mobility” that aren’t currently regulated are mainly those involving car services that replace private cars owned by individuals. This would include carsharing, new taxi services (Uber etc) and autonomous vehicles for starters, and provide a framework to include new types of services as they emerge. The infrastructure needed to serve these would fit in – so would probably include EV charge point networks.

This opens the question of what is left out rather than what goes in.

Firstly, I suspect when we look back in a few years, Uber will be remembered as the disruptor that changed how people pay for on-demand driven car (i.e. taxi) journeys. In this respect, taxi services – in terms of how they contribute to new mobility – should be in.

Secondly, I’d elect to include bikeshare. Whilst impacts of bikeshare all point solidly to public good, there are already indications that new operators and types of operations eyeing the UK market could muddy the benefits that we are currently seeing.

Thirdly, “Mobility as a Service” means the development of mobility packages comprising services from both the new and old mobility sectors. Should we re-think how all personal mobility services are regulated together? Could this co-exist with existing regulation of the traditional transport service providers, or does the wholescale shift to service consumption raise the question for a wholescale review of mobility regulation?

The answer goes back to the two starting points: how regulation might help deliver public good from the new world of mobility; and whether it can trigger a better business environment for “good” service development.

If ‘Ofmob’ manages to remove the need for more court cases between the public sector and operators and provide better consistency in service delivery than is currently the case, then who wouldn’t benefit?

This article brings together ideas from conversations with Laurie Laybourn-Langton of IPPR and refers to ideas suggested by Professor Jillian Anable.

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