Risks from Public Monopolies in the Transport Data Market

By Roma Nazarov

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28th May 2021

Launches of Russian state-owned integrated mobility platforms have given city councils a clear advantage over independent providers.

Late last year, I attended a panel at Urban Mobility Forum in Moscow discussing the potential negative effects of joining the transport modes into a city-wide digital marketplace as a business environment. However, because formation of such marketplaces is still in infancy, it remains unclear which direction the majority of cities will head in. While some of them chose to establish a single front- and back-end public provider, others might secure control over the back-end services while passing front-end operations to independent providers. The third possible option is full open competition at both ends. “We’re seeing a variety of schemes globally, defined, first and foremost, by the local authorities’ position,” said Artem Malkov, partner at Arthur D. Little.

However, it can be seen that cities are gravitating to state-owned platforms, vertically integrated from a data marketplace to services for city’s residents such as navigation and payments. City authorities think of the urban mobility platforms in a paradigm of an even larger system, an all-in-one digital mirror of services of living, transit, education, communications and more, said Konstantin Trofimenko, director of center for research of urban transport problems of HSE University.

For example, Moscow’s Department of Transport (DoT) sees public transport as a natural backbone of its multi-modal digital platform, according to Valeria Matyukhina, deputy head of payments division at Moscow Metro. Independent providers in the car-sharing, taxi, micro-mobility and other modalities join the system via a marketplace.

What concerned some of the panelists was that, in such a situation, city administrations enjoy an unheard of level of control over the mobility market. They regulate prices, routes, licensing and now are also taking data and end user services away from the commercial providers. “Particularly, technological evolution have come to the point of potential monopoly on transport-related data,”  said Alexander Gurko, co-director of national technological initiative Autonet. “Are there opportunities left for the commercial players or the city administrations become the prime beneficiaries?”

He believes a scheme featuring a unified back-end provider and a marketplace in the front-end would set the stage for a price war in the latter with a draining effect on profitability. He asks: “Consumers benefit from a fares war but who would like to invest in that kind of business?” The issue was evident last year when some of the ride-hailing providers were reluctant to join the Moscow DoT’s mobility app fearing harm to their commercial performance.

Competition

A popular opinion among the panelists was that, in order to resolve the concerns, the authorities must restrict their influence in the data market to regulating turnover of personal data and providing ground-level data services. “The authorities’ duty is to produce comprehensive regulation understood by all sides in order to facilitate integration of disjointed businesses,” said Denis Lipatkin, head of peripheral equipment division of Directorate for traffic management of St Petersburg. “Cities should not compete with commercial operators.”

Also, securing competition is essential for prevention of possible imbalances, believes Andrey Vasilevskiy, CEO at Sber Automotive Technologies: “I feel worried thinking that someone takes full responsibility for such a large task. At first glance, tying together cars, roadside infrastructure, public transport and taxi services is easy. On a deeper look, many [relevant] building blocks can emerge. Success, including industry attractiveness, relies on them.” His sentiment was supported by Lipatkin. In many regions, projects of intelligent transport systems failed to properly address the issues of interaction, he said: “St Petersburg as well faces difficulties of tying everything in joint architecture.”

The Moscow DoT was aware of the issue, said Matyukhina. To offset it, the authorities extensively allied with the market players in the process of development of their mobility platform. They also praised the emergence of rivaling multi-modal mobility platforms. In general, the city itself benefits if consumers can buy a subscription on mobility services from a range of places because it improves chances that they discontinue using privately owned cars. She said: “I think that Moscow will feature more than one platform. It’s a totally competitive situation.”

Competition is a vitamin that gives the market players, whether public or private entities, a flexible mindset and energy to sustain pace of improvements. Competition was what prompted Yandex, the Moscow’s DoT’s main rival in mobility apps, to partner with S7 Airlines and offer customers “shared use” A319 jet travel through its car-sharing app. It’s an anecdotal situation but who knows if we’re witnessing another step towards your one-click trip from the doorstep in London to a table in a Bangkok restaurant?