An opportunity for digital platforms?
Good day to all, wherever you are.
As you may be aware, I was a guest on Episode 54 of the ICT Pulse podcast where I discussed the opportunity for ride-hailing services as an extension to public transport in the Caribbean. At the time I was researching and writing notes for an article I was going to publish on a blog, but I thought it fitted better here.
It's an ongoing discussion as the landscape is changing rapidly, so these are just thoughts and results of some of that research. I hope you enjoy it.
Just a a quick house-keeping note before we move on… If this email was forwarded to you, I’d love to see you onboard. You can sign up here:
On to this week’s issue:
Could new tech platforms provide the missing link in Public Transport in the Caribbean?
If we look at the context of public transportation in the Caribbean, I would not be alone in summarising that it is, at best, subpar and at worst, totally inadequate. Many, if not most, services have grown sporadically or organically in response to highly localised demands. In many islands, getting from one place to another is a bit of a crap shoot, where in some instances there is an excellent service, often efficient and timely in peak demand periods and others with literally no service. They are often one-man operations or a collective of sole traders that are free to set their working schedule, their holidays and consequently their prices. Some Islands have tried to implement standardised tariffs but with limited success.
Regulation is an equally fractured situation, where inherited and historically acquired “rights” have been allowed to flourish. This came painfully visible when in Martinique, a year’s long project to put in place a standardised, subsidised, regular tram service serving the central conurbation of the Island (Fort-de-France and Lamentin), was started. This zone was historically covered with sole traders running what are locally known as Taxi Collectif, or Taxico.
Source: Martinique Transport — The tramline in Martinique
Source: antillesexception.com
Taxicos are a pure cash business with some drivers making concessions for ‘seasonal’ tickets to well-known riders, but most simply printed out and pinned up inside their minibuses their pricing schedule.
Their “right” to run their businesses had been passed down from generation to generation for many years, so when the local government tried to implement the tram system, thereby forcing the Taxicos outside the designated zones, there was much wrangling by drivers who foresaw a significant drop in revenue. Today, the system is up and running and the Taxicos are still running their services in the same area and the issue has not as yet been fully resolved.
Out of town
Like in other Islands, when you get outside of the populous areas, getting around on public transport is a hit and miss situation. Take Barbados for example, if you are in Bridgetown and want to go to Oistins Market Friday night, there are a plethora of buses to take you there. Getting to the north of the island is a different matter however, often involving long waits — sometimes between connections — and a relatively high cost to the user.
This concentration of services is quite natural, businesses, even sole traders, have costs to run their business and will quite sensibly target where the easy money is. In fact, if we look at this from a more removed point of view, we see pretty much the same setup in large countries such as the UK where urban areas are well served, and rural domains virtually ignored by public transport. In the Caribbean it is exactly the same, but on a smaller scale. The only difference is that in the Caribbean the distances involved are also much shorter. And that affords and merits discussion on potential for developing services that are better for the users and profitable for suppliers based on the fact that they shouldn’t involve high costs to the operators.
Analysing the forces acting on the system as a whole
When we look at the end users and their relative power in the value chain of the public transportation business, and I'm specifically talking about the Caribbean as I know its not the same in London or New York, we see that they are relatively powerless — essentially they are in a take it or leave it situation. With no powerful central public transportation organisation with a solid offer, users are powerless to exercise pressure upon that organisation in order to obtain better service. With no organisation of users as lobby, they relinquish the right to exercise pressure on abusive pricing of poor to bad services. Yes, they can just choose not to use the buses and Taxicos, but what alternative do they have?
Source: pixabay.com
Well, there are a few, and herein lies the opportunity for businesses to develop aligned offers. Let’s look at the basic alternatives, walking, hitchhiking are obvious ones, but clearly not practical when you have things to carry or the weather is inclement, as it can be here sometimes. Pure-player Taxi services exists throughout the Caribbean but are pretty much in the situation of monopoly like taxis in London before Uber arrived — very expensive and poor service… (the amount of times I got surly and aggressive Black Cab drivers in South London 15 to 20 years ago, was phenomenal! But that’s another story).
Source: martinique.org
Other alternatives like boat taxis exist in some islands, but are few and far between, with environmental difficulties affecting their viability and profitability. Running a boat for a quantity of people equivalent to a large-ish bus is much more expensive; the cost of the boat, the safety equipment required, the inefficiency of the engines compared to road going vehicles, the requirement to have crew members, the list goes on.
There are possibilities to enter these markets, and indeed we are seeing some foray in to this across the Caribbean. There has, however, not been much success so far, but the signs of change are there. Ride sharing platforms, the obvious ones like Uber and Lyft, seem to be uninterested in the Caribbean so far. In fact, Uber had a brief foray in to Trinidad, but had to suspend and eventually close down operations, despite having over 5000 active users. Safety concerns and economic issues were the problem that Uber couldn’t quite figure out. With enough effort and time, they may have been able to overcome most, if not all of the barriers, but it didn’t seem worth it to Uber at the time.
Source: ridecaribbean.com
There are many local start-ups currently vying for attention and a start in this greenfield race to build out ride-sharing in the Caribbean. Take Saint Lucia for example, where RIDE Caribbean is a start-up specialising in on-demand taxi services for not just enabling people to get around the island, but also courier services, home delivery for groceries and retail purchases, thereby mutualising the types services a user can request, all this enabled by a blockchain-based currency to enable the unbanked use cashless systems that are a focus of development for many Caribbean nations. Putting it bluntly, less cash = less fraud.
It's not going to be easy in the Caribbean for purely economic reasons, and I think the idea RIDE Caribbean is an interesting one, whereby the use cases are extended beyond simple get person A to place B, which with limited movement of persons would prove difficult to earn a living. I would suggest two things going forward; a detailed and deep investigation of the challenges and operating costs of the Uber experiment in Trinidad, and a detailed market research plan that provides proper statistics on the quantity of potential clients per use case — ride hailing, deliveries, courier services , etc. Remember Digital Transformation requires data!
Up until recently, public transport services have been largely left to their own devices, aside from ensuring that safety standards are met, and despite this, in some cases the safety record is still dubious. A status quo, if you will, prevails over public transport services in the Caribbean. The risk for new entrants is immediate and stifling government regulation. Taking a look at the FWI, which is in Europe and still a French colony, there are legal precedents already established that would make an entrant like Uber in to the local market have to absorb large costs, not forgetting the local government’s ability to make life difficult — Martinique operates under a certain autonomy, akin to the Welsh Assembly (I’m hugely simplifying this for brevity). In the territories that are independent, there is even more of an incentive to protect local businesses from the potentially predatory entrants I’ve mentioned above.
Opportunities
The real opportunity lies in locally developed and run businesses, perhaps with outside backing (financial and operational), that are seen as contributing to the economy and not taking away from it, whether that be in reality or perception to those that govern. They should look at the specifics of each island and develop the value proposition directly to those markets, as they are in the ideal place to better understand and operate in the constraints that exist.
Up to this point I have only talked about public transport in the collective, i.e., buses, trains and taxis (that are more profitable with multiple riders). But there is a growing movement in the personal mobility scene, defined by one of my favourite analysts, Horace Dediu, as Micromobility. Micromobility is concerned with small, lightweight and generally slow vehicles like electric scooters, electric bikes and other more exotic contraptions.
These are cheap to purchase, cheap-ish to run and offer a huge opportunity to help solve the last mile problem. Take a look at this stunning graph:
Source: MicroMobility.io
The first to third quintile is made up of rides of between 1 and 7 Kilometres, easily in the range of the types of vehicles served by the Micromobility industry. If the majority of movement is made between 1 to 7 Kilometres and it is currently done with cars with on average less than 2 passengers per ride, we quickly see that traditional cars and certainly fuel powered ones, are an extremely inefficient way to move people around.
I guess that these new types of vehicles can essentially replace cars and the traditional ownership requirements, that are not only expensive — remember in the Caribbean, car import duties are often high, making car owning an expensive proposition for most people in countries with low incomes and small GDPs —, but like their use day-to-day very inefficient because of the simple fact that they stay stationary for more than 90% of their time — taxis and other professional uses excepted.
"... there are about 25 billion car trips per year, and with some 27 million cars, this suggests an average of just under 18 trips per car every week. Since the duration of the average car trip is about 20 minutes, the typical car is only on the move for 6 hours in the week: for the remaining 162 hours it is stationary – parked." - RAC Study on Parking Policy in the UK
Any company that invests in owning a fleet of different types of vehicles, from 2 to 4 wheels, putting them out for hire via digital platforms, could not only help reduce inefficiencies, but also reduce costs for people that would otherwise own a car.
Nothing exists in a vacuum
Of course, an action in a particular market would provoke a reaction. Looking at the authorities, clearly the risks for any business of this type would be regulation and safety concerns. But if handled properly and in good time of any proposed launch, this would give local government an opportunity to prove they are forward thinking, environmentally friendly and innovative — something Generation Z absolutely requires from any service it interacts with.
Not only that, but existing car import and sales businesses would not just lie down and take it on the chin either, and just like local authorities could invest and be part of the movement and change. We know that all the big car building companies are going all-electric sometime in the near future, it’s just a matter of time. Some have publicly revealed it (VW), others have merely outlined their intentions, but as we’re seeing in increasingly densely populated areas, cars will become less and less of the correct tool for the job to be done, moving one person over a short distance, quickly and efficiently.
And mass public transportation systems more and more difficult to implement for the reasons we saw in Martinique, where the grand TCSP (Transport Collectif en Site Propre) took over a decade from start to finish with ballooning costs, much of which was attributed to displacement of communities and homes to make way for the extra space required to create the dedicated lanes for the trams.
Classic Uber doesn’t seem to the answer either, and in fact some studies have shown how Uber has actually increased congestion in some cities. We need to think of better answers and the Caribbean is well placed to do just that.
Next week I'll be getting back on to more practical matters. After meeting with several executives, it is clear that Digital Transformation is still very much misunderstood. I'm hoping to aid in the demystification over the coming months. I hope you come alone and share it to those that need to know, but I’m getting ahead of myself. See you next week.
Reading List
Source: André François McKenzie on Unsplash
Congress Demands Facebook Put Brakes on Libra Cryptocurrency - Gizmodo
As a follow-up to last week’s issue on Cryptocurrencies and Blockchain, this article in Gizmodo rather proves the point I've just outlined above about products and services not existing in a vacuum and being subject to scrutiny and even competition, sometimes before they’re even released to the public at large. Whether you think the product is good, bad or are ambivalent to Libra, it’s clear that it will not be allowed to just walk in established markets.
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