Europe Is Looking to Make Public Transport Free. Where Would That Leave Taxi Companies?

Written by DDS Wireless

November 16, 2018

The concept of free transit is nothing new. Whether providing trips to the polls during an election or eliminating transit fares for military veterans as part of remembrance services, many transit agencies have experience offering free transportation under special circumstances. But what happens when a transit agency takes these initiatives a step further? Cities across Europe are currently experimenting with making transit free for everyone, all the time. If this practice were to become widespread, what would it mean for the taxi industry?

A Free Ride: Eliminating Transit Fares

The first European city to have made transit (virtually) free is Tallinn, Estonia. Since 2013, residents in Tallinn have had the opportunity to purchase a €2 “green card” that entitles them to unlimited trips on the city’s transit system. So far, the scheme appears to have been both successful and profitable: the transit authority even sees a €20 million profit each year thanks to a €1,000 cut the city receives from every registered resident’s tax money each year. Unsurprisingly, many other Estonian cities are eager to enjoy similar incentives, which is why free bus services were rolled out across the country in 2018.

Other cities across Europe are also following Tallinn’s example and eliminating transit fares. The city of Dunkirk, for example, has recently made transit free for residents and visitors alike. Germany is currently testing free transit in several cities across the country, including Bonn, Essen and Mannheim. While each municipality’s approach differs, the trend is clear: more cities are thinking about and implementing free transit. But why would an agency consider free transit in the first place?

Why Make Transit Free?

The most common reason why cities are making transit free is to reduce the amount of cars on the road. Taking cars off the road means better air quality, less congestion and a reduction in the emissions that contribute to climate change. But does free transit actually accomplish this goal?

There is limited data available to prove that free transit actually takes cars off the road. A 2016 study of Estonia’s free transit experiment found that while there was a 14% increase in transit ridership, vehicle usage did not actually decline. Despite this fact, offering free transit still provides Tallinn with the income mentioned above, so it’s committed to the initiative, for now. However, in the absence of government funding, free transit would be much harder to provide.

It’s also worth mentioning that many European cities are now looking at banning private cars to give residents no other option but to make increased use of public transport. Cities like Oslo and Madrid have already taken steps to get cars off the road.  

Taxis vs. Free Transit

So, where does this all leave taxis? While they’re both in the transportation business, taxis and public transit offer fundamentally different services. Taxis are an on-demand service for individuals needing to travel between precise destinations as quickly as possible. Transit is designed to satisfy the entire public and move as many people as possible at the lowest cost. So far, there is no data that shows any impact on taxi ridership as result of free transit, but given the totally different nature of each service, it’s interesting to speculate. The convenience and affordability of Uber has impacted both traditional taxis and public transit in cities around the world; free transit may be a push in the other direction.

Public transit is a service that should be available to all. People who take taxis do so for specific reasons—taxis can be faster, more convenient, less crowded—so they are unlikely to be swayed by free transit. In fact, in Tallinn’s case, people who walked as their main mode of transportation accounted for the largest shift to transit after it was made free. While it could differ from one city to the next, the outright banning of cars is also unlikely to apply to taxis—in the case of Madrid, for instance, taxis can still operate where private cars are banned—which might actually result in increased business.   

While taxi companies may not be in immediate trouble due to the emergence of free transit, this is yet another example of innovation in the mobility space. Clearly, transit agencies are pushing the boundaries of what’s traditional and accepted. Taxi companies need to do the same by offering a technology-driven experience that extends the convenience riders already associate with a taxi even further.   

DDS offers a range of services that are designed to help your fleet respond to the changing nature of mobility. Contact us to ensure your company remains relevant in a dynamic industry.

Image: Shutterstock / Attapon Thana

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