Challenges of Regulating an On-Demand Mobility Service

By Siegfried Mortkowitz

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8th November 2022

In February of this year, the European Commission announced several initiatives regarding the regulation of mobility services.

It adopted a guidance notice for national and local authorities that clarifies how internal market rules should be applied to taxis and private hire vehicles and how appropriate regulation can make these services more sustainable, accessible and fair. More significantly, the EC also published its long-awaited Data Act, a proposal to establish a harmonized regulatory framework for data sharing in the European Union.

According to Shwetha Surender, director of future mobility at Frost and Sullivan, regulation of on-demand mobility will be essential to its success, saying: “Regulation is a prerequisite for the model to take off and for the market to scale up.” She views access to transportation as one of the primary services any government offers to its citizens, as essential as healthcare. She explained that: “[The main goal of a public transport system] is to provide equitable and accessible transport to your community and your citizens and MaaS is effectively an extension of that. So, if transport or access to transport is going to be privatized, they have to ensure that that it continues to be equitable and accessible.”

Regulation will be especially important in areas where the services have a big private-sector presence, “when it will tend to be driven by profit and by shareholder demands,” Surender said. “In regard to MaaS, it’s going to be increasingly important, from a regulatory standpoint, to provide some oversight.”

Adam Kozłowski, head of automotive research and development at Grape Up, said that regulation will be important in a number of areas, including personal data handling and cybersecurity, to avoid data theft and data breaches. Also the use and sharing of public space, such as parking lots and sidewalks, both to prevent monopolies from taking over the very limited public space in city centers. Lastly, to establish clear pricing rules and predictable cost of travel; and to ensure the safety and security of passengers, drivers and potential victims of the reckless use of shared vehicles.

“Some of that is already in place, like anti-monopoly rules or GDPR, and just require unification and small amendments to be used for mobility-as-a-service purposes,” he said.

Regulation will also be important to residents of areas where there is a low level of transportation utilization. Surender said: “Public transport tends to run in areas that have high levels of utilization as well as low levels of utilization but if you open the Uber app, you’re not going to find a taxi if demand in the area you’re in is low. That’s the danger with the entire transport infrastructure being privatized. The government can mandate a certain level of transport for areas with a low level of utilization and some governments already have done that.”

Solutions to this problem are already operating, as in the US state of Florida, where Uber partnered with the Miami-Dade Transit (MDT) during the pandemic to offer publicly subsidized Uber rides to replace suspended late-night bus routes. In addition, Uber is working with the Pinellas Suncoast Transit Authority (PSTA) to connect residents of Pinellas, Pasco, and Hillsborough counties and extend transit service on nights and weekends to low-income and transit-dependent residents traveling to and from work, healthcare providers, schools and other essential services. This venture is supported by funding from the Florida Commission for the Transportation Disadvantaged.

However, these solutions will be limited to governments that can afford to fund them, such as Germany or France, but Surender pointed out: “If you look at Brazil or India, I don’t know how likely that is.”

While the technical aspects of building an urban on-demand mobility service are certainly challenging, building a proper regulatory framework for the service may be even more difficult because of the many stakeholders with conflicting interests. For example, there has already been pushback from the private sector to the EC’s Data Act. The Allied for Startups advocacy network complained on its website that, with the Data Act: “The European Commission wants this data to stay within the EU so it can be processed by EU industrial actors to create new European products and champions. Such an idea is at odds with current international trade conventions.”

The US-based Computer & Communications Industry Association has also raised objections to the proposal.  Surender suggests that building a uniform regulatory structure across Europe is “a question mark” because of “too many different countries, too many different stakeholder groups, a very diverse ecosystem, very diverse needs”. At the same time, she is hopeful that regulation will be the factor that ultimately drives MaaS market growth. “Until it happens,” she cautioned, “the market will be a lot more fragmented than we are seeing and what we would like to see.”