Subsidies, monetary incentives for success, and a safety net for losses: government ministries are laying out the red carpet for public transport operators taking part in a new experiment in microtransit - ridesharing on demand. The trial will begin in March in Tel Aviv and Ramat Gan. Dan Bus Company will operate a fleet of 100 minibuses on flexible routes with the help of Israeli company Via's system. "Globes" is revealing for the first time the trial's estimated cost and the state's financial support for it.
According to estimates presented to a joint prices committee of the Ministry of Transport and the Ministry of Finance, the cost of operating the first 100 minibuses will be over NIS 45 million a year. The cost per passenger will be NIS 30. The Ministry of Transport believes that each minibus will operate 10 hours per day and cover an average distance of 203 kilometers.
The subsidy set by the prices committee will be similar to the current subsidiary for public transport: 55-60%. This means that the passenger will pay between one half and one third of the NIS 30 cost, while the state will pay the rest. The price of a ride will be NIS 15 at peak hours (6:30-9:30am and 3:00-6:30pm) and NIS 12.50 at other times. If occupancy of the vehicles is less than 50% however, the price will be further reduced to NIS 10.
In contrast to public transport, almost no passenger discounts will be granted. The only discounts will be for senior citizens, who will pay half price, and for purchasers of multi-entry tickets, who can purchase 10 rides for NIS 120. All payment will be through apps; use of Rav Kav public transportation cards will not be allowed.
In addition to the subsidy, the state will provide a safety net for losses from the service, and will provide monetary incentives if the service outperforms expectations, with the number of passengers exceeding the 1.5 million forecast. The operator will have to share any profits with the state. The total cost of supporting the experiment is believed to be in the tens of millions of shekels. Sources familiar with the trial assert that the cost is marginal in comparison with the NIS 6.9 billion in annual public transportation subsidies.
State subsidies for a trial are not a general worldwide practice. In most of the US cities where Via operates, it does so without support from the authorities, and bears all the risk of losses. In Israel and in several European countries, the service is operated in cooperation with public transportation companies, with the state paying part of the cost.
One of the questions is why such a service has not been operated before. The answer is that in Israel, it is illegal to operate a private transportation line without a license. The prices committee is therefore showing special flexibility in approving the new routes. "The Ministry of Transport's position is that the pilot in question is not a conventional journey on a service line. At this stage of trial operating at least, it should be regarded as a licensed route, and requires a license to operate a service route," the Ministry of Transport wrote.
In other words, the Ministry of Transport is trying to grant these lines what amounts to a temporary license, thereby setting the prices on it in the framework of the Commodities and Services Price Control Law. The Ministry of Finance's legal department is not sure that the travel rates in the trial should not be included in this law, but agreed to discuss the matter later - when the trial is finished.
The trial in Tel Aviv will be the first of four trials of this type that will begin in the coming months. In addition, Egged will operate 50 ridesharing minibuses in Jerusalem, which will be ordered and managed by the Via Israel's demand and routes management system, plus 50 more in Haifa that will be managed by Moovit's new system.
"Globes" reveals here for the first time that a fourth trial area is planned: cities in the southern Sharon area - Kfar Saba, Ra'anana, and Herzliya - where the Metropolitan company will operate a similar service. In contrast to Dan and Egged, Metropolitan has not yet selected an operating service for the 50 minibuses that will serve the public. At the same time, the state has not yet signed agreements for the trial with Egged and Metropolitan.
Measure of success: Fewer cars on the road
In a document submitted to the prices committee, the Ministry of Transport for the first time defines what will be considered success in a trial - inducing owners of private vehicles to use public transportation. The aim is to reduce the number of cars on the road and reduce congestion.
The Ministry of Transport says, "The passengers in question are those unwilling to use public transportation in its current format, but the Ministry of Transport believes that they will want to switch to more advanced services." This is an important statement that sets a clear success target: if most of the passengers using the new transportation service will switch to it from buses or the railway, the trial will be regarded as a failure.
One of the main complaints against such services is that they increase road congestion. The concern is that drivers will be in no hurry to change their habits, but that public transportation users will be willing to pay a little more in order to travel comfortably. If that happens, instead of getting cars off the roads, the number of vehicles on the roads will actually increase in traffic congested areas.
Other objectives of the pilot are an examination of the operating costs of flexible service, its integration in the public transportation system, consideration of the necessary regulation, its economic benefit, and examination of passenger satisfaction.
How the service will work
Microtransit is shared public transportation based on orders from passengers. Apps like Via's suit timetables and routes to passenger demand, so that the route will be the most efficient possible for all of the passengers. Microtransit is an intermediate solution between taxis, which travel exactly according to individual passengers, and inflexible public transportation, which has routes and timetables set in advance. Passengers will order a minibus through an app and share the ride with other passengers. The route will not be direct, but it is designed to be quicker than bus travel.
The first routes will take passengers between employment centers and their homes. They will stop at the closest bus stops to the passengers' destination. In order to attract new passengers, the operators of the trial will buy new and more luxurious minibuses than the vehicles used for ordinary public transportation.
Published by Globes, Israel business news - en.globes.co.il - on February 21, 2019
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