Mobility-as-an-Amenity

Transportation can be affordable, even free, if we get beyond our limiting beliefs.

We have limiting beliefs about how transportation systems can be paid for.

• Personal cars must be paid in full by each person. 

• Roads must be paid in full by the government. 

• Transit must be subsidized.

• Electric vehicles must be subsidized. 

• Bike share must be subsidized. 

The accepted wisdom is that individuals must pay directly for their personal cars, but all infrastructure and shared systems must be paid almost entirely by government agencies. Products and services have capital and operational costs associated with them. Obviously, a bus and its driver don’t just appear free of charge. 

There’s no reason to insist that the only way for travelers to cover transportation costs is by directly paying for what they use. 

Road subsidies are an example of massive costs that get distributed across the traveling public. Just one small stretch of road costs millions to plan, design, construct, and maintain. I pay indirectly for the “free” interstate when I visit family through taxes and other fees that are detached from the actual drive. In fact, I pay indirectly for roads that I’ll never use. 

Every day we experience some form of this business model that either distributes costs across many customers, or passes the costs to someone else. Some items are cheap, some are expensive, but the principle is the same. 

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When cell phone companies offer you a "free" phone, they’re financing the cost of the phone over the length of a contract. The cost of the phone is built into the monthly service fees that customers pay over the course of their contract. This financing model allows cell phone companies to make a profit on both the phone and the service. In fact, cell phone companies often make more profit on the service than they do on the phone itself because the service fees are recurring and continue long after the cost of the phone has been paid off.

T-Mobile offers a new Samsung Galaxy for "free" with a two-year contract. The full price of the Samsung Galaxy might be $1,000. T-Mobile finances the cost of the phone over the two-year contract, so the customer would pay a monthly service fee of, let's say, $70, for the duration of the contract.

Over the two years, the customer would end up paying $1,680 in service fees ($70/month x 24 months). T-Mobile, in turn, would use a portion of those service fees to pay for the cost of the Samsung Galaxy. They get discounts from Samsung for purchasing in bulk, so maybe they only pay $800 for the phone. By the end of the two-year contract, one customer paid T-Mobile $1,680 in service fees, while T-Mobile only paid $800 for the Samsung Galaxy. T-Mobile has made a profit of $880 on one customer deal ($1,680 - $800). 

Obviously T-Mobile has its own corporate expenses, and they aren’t just a middleman for “free” phones. But you get the point. A customer has access to whatever the phone unlocks for them, without paying directly for the phone. What if that same customer had access to whatever destinations a bus, car, or e-bike could take them without ever paying directly for the bus, car, or e-bike?

When airports offer train or tram services between concourses, they use a similar financing model to cover the capital and operational costs. They’ve got to cover equipment maintenance, fuel or electricity costs, and personnel expenses. That stuff adds up fast, especially for large airports with multiple concourses.

The cost of the transportation is built into the fees and charges that airlines, concessionaires, and other businesses at the airport pay to operate at the airport. Airports can afford to build, operate, and maintain massive infrastructure because they don’t isolate every single product and service the way we expect in “the real world.” 

Airlines pay fees to rent gate space. Concessionaires and other businesses pay fees, just like they would pay the landlord at a local shopping center. Airports also generate revenue from advertising and sponsorships. There’s a long list of ways they can distribute the capital and operating costs of massive transportation infrastructure and services.

Mobility can be offered as an amenity, and it does not have to be government-run. 

The Price is Right and The Oprah Winfrey Show should have cleared this up years ago. These two famous shows had large and dedicated followings, and made a fortune from TV advertising. They both famously gave away cars to audience members who didn’t pay to watch the shows. Bob Barker asked a contestant to come on down, rearrange some numbers, and ta-da—a new car! It happened all the time.

In 2004, 276 people in Oprah’s audience won a brand new Pontiac G6 sedan. At a value of $28,500 each, GM gave away almost $8 million in free cars. And that was just a publicity stunt, not a “free” car in exchange for a customer’s data.

Government subsidies are certainly one way that transportation is made affordable, but it’s not the only way. And considering the enormous debt of the federal government, I wouldn’t want to make long-term bets on them. Even state and local agencies struggle to fund basic maintenance. 

“Free” or discounted transportation is possible once we get beyond our limiting beliefs. A natural follow-up question is “how could you possibly scale free transportation?” That’s an important question, but the first step is admitting that it’s possible to make mobility an amenity that isn’t paid in full by the customer at the time of sale or use.