TRAGEDY OF THE COMMONS 2.0: DARK SIDE OF COLLABORATIVE CONSUMPTION

Last week I read a blog by Australian Tosh Szatow criticising Collaborative Consumption  as an enabler of more mass consumption.  Though I don’t agree wholly with Tosh, I think there is some truth in his view. After developing and running YourJobDone in London for three years, I have spent a while experiencing and reflecting on some of those challenges.

Collaborative Consumption is broadly a phenomenon with positive outcomes. The social, mobile web is enabling connectedness- including connectedness of human needs and the fulfillment of them- in a way that was unimaginable even five years ago. But there is also a dark side to collaborative consumption businesses, some of which enable utilisation of assets (like apartments, cars and driveways) beyond conventional norms. This has the power to enable a Tragedy of the Commons 2.0 whereby every shared or public asset is exploited to the limit of its capacity.

Earling warnings are already in the mass media. Regulation in governments, councils, strata-boards and rental contracts are going to have to catch-up to deal with a new wave of exploitation of the common resources that enable our urban areas.

Background

Collaborative Consumption (also known as CollCons) is an umbrella term devised by Rachel Botsman, co-author of “What’s Mine is Yours”, encompassing web-based marketplaces that have two components:

• A targeted online-marketplace platform and 
• sharing, community, social or trust framework for that platform.

A common example of such a marketplace is eBay. The fundamentals are an auction or listing platform with geographic filters and a feedback-driven trust system.

The same principle can be applied to buying, selling or borrowing anything: skills, a ride in a car, a short sublet, etc. The focus of the startup I co-founded, YourJobDone, was low skilled odd-jobs around London. Stuff like “assemble my Ikea cupboards” or “clean up my garden and mow my lawn”. YourJobDone was all about connecting geographic and temporal coincidence of mutually-fulfillable needs, in real time.

Collaborative Consumption: connecting needs in real time

We focussed on connecting people where we could deliver a genuine win-win. Where we could connect keen underemployed or unemployed people to jobs in their local area. We had great successes like this one. In that example, not only did an underemployed person get a job, cash, and a sense of satisfaction, the job got done very well at  great price, with very little travel and all tools carried on public transport (one less handyman’s van in Shoreditch, London!).

Many similar startups have followed, like Zaarly and TaskRabbit in the US, Milk.ly in the UK and AirTasker in Australia. You can check out current startups in different verticals here

CollCons has an aura of green values about it, because it is seen as a means to utilise existing resources better through sharing, and therefore reduce waste. It is a concept which has support from organisations like the UK’s NESTA.

With the rise of smart-phones and the social web, the foundations were laid for a new generation of web-based marketplaces, including CollCons, with vastly improved efficiency, reliability and trust facilitation.

Such is the existing and potential efficiency of these new marketplaces, whole new markets will be created where previously the friction of pursuing a transaction made  the transaction unworthwhile. Take a moment to look through the jobs currently posted on Zaarly, TaskRabbit or AirTasker and you’ll see what I mean. Ron Conway, the Silicon Valley superangel, early investor in Twitter and founding partner of Y-Combinator had this to say in November 2011:

“this whole concept of collaborative consumption is a multi-billion dollar brand new market”

 (From 1’16” here )

Putting aside concerns about safety and trust (problems which are solvable through engineering), there is a sinister side to Collaborative Consumption. Along with enabling true win-win transactions, CollCons also enables some resources to be consumed beyond normal or acceptable limits.

Who cares about the norm?

The norm, often perceived in startup and innovation circles as some stodgy, backward barrier to human development, I think is actually important to many people’s lives. It’s important to my life. For example, having other 8AM-to-5PM professionals living in the flat above me, rather than some back-packing Europeans on a holiday of regular all-night parties, is important to the amenity and sleep I enjoy.

We have as a society imposed on ourselves many laws and regulations to enforce a norm. There is an expectation of how capital (including space, tools, road capacity etc) will be utilised. Let’s delve into two specific examples on which there has been some recent discussion.

Short term lets

Platforms for short term lets, amongst which Airbnb is a pioneer, initially came under criticism for issues related to trustworthiness.

Can you trust the person whose place you’re staying at? is it safe? Paul Carr famously thought not, and defended New York City’s early move to try and limit Airbnb.

Can you trust the person who’s staying in your flat or house? Evidently not always. The trashing of one Airbnb user’s house was so bad and so mishandled that it came to be known by the tech press as “Ransackgate”.

These are surmountable problems. Though even eBay still has challenges with community trustworthiness after more than ten years of operation, it is clear that the foundations for comprehensive  inter-platform trust management are now being laid. Trust rating will no doubt become as significant as financial credit rating. The online world will become ever safer and more transparent, and I would venture, with the exception of first generation platforms that lack a trust framework (like Craigslist and Gumtree), are already safer and more reliable than offline market mechanisms.

Breaches of trust  have brought sensational  news headlines, but I think that is really a sideshow. What will matter in the long-haul is how these new, low friction, efficient web marketplaces enable a kind of asset utilisation that was not possible in the past. When you’re short of cash you can now put a bed in the sunroom and let it out, without the hassles of 2008.

But this is not just exploiting your own asset (your floor space). It’s also exploiting other people’s in a small way. That itinerant tennant, who isn’t too concerned about maintaining the amenity of the apartment block, also has a bike and isn’t too worried about leaving tyre marks on the walls of the stairs. That 2AM party meant the doctor next door lost sleep and later concentration during surgery the next day. That extra person living in the sunroom is wearing out the carpet and bathroom fittings 50% faster than the two people who the landlord thinks are living in there.

The impact is real, and as the New York Times recently reported, there are even vigilantes scouring the pages of airbnb for people subletting in their appartment blocks.

Driveways and parking

Offering up your home garage or parking space seems superficially like the an ideal application for Collaborative Consumption. Unlike say having a stranger stay in your house, the potential for a personal property or safety risk seems very low. It looks like a victimless win-win. My driveway is free while I’m at work, you need a parking spot, you give me money to use it. Easy.

But if we dig a little deeper, we realise the money that comes from leasing out a driveway is not just about using something that wasn’t used, it can be about using something more than it was intended to be used.

Parking availability control is often used by town planners to indirectly regulate the cost to the individual driving. Limiting parking spaces in cities and nearby areas is a key control to limiting driving by making its cost greater (whether direct,  like parking station costs, or indirect like more difficulty and time spent looking for a park). Cities like London and Sydney strictly regulate the availability of parking, as a proxy to control traffic congestion. Even municipalities in suburbs outside cities can ban new additional parking- like the Municipality of Waverly in Sydney. If you buy a house in Bondi  (in that municipality) with no driveway or garage, you cannot build a new driveway or garage.

The existing relationship between parking availability and traffic regulation is a consequence of historical norms. A typical suburban driveway has one car leaving in the morning and returning at night. If, as a consequence of the new market enabled by web-based marketplaces, now a second person (car) can use that driveway during the day, that is, C.p., double the utilisation of the road system for that single driveway.

The act of leasing a home driveway during the day, where parking is otherwise unavailable, does not just enable the utilisation of the driveway, but the whole road network from origin to destination, at the cost of everyone to some imperceptible extent. It bypasses society’s efforts, realised through town planners appointed by democratically elected officials, to manage road utilisation and traffic congestion. If you want to know more about why traffic is regulated by restricting availability of parking there are many resources on the web, but I would also recommend getting a copy of the seminal town-planning work “Traffic in Towns”, authored by Collin Buchanan and others.

Many people in the Australian startup scene have rushed to the defence of parking space letting platform ParkingMadeEasy, recently criticised by a mayor of an Australian municipality. It is clear however that this is an area in which Collaborative Consumption platforms are enabling more consumption, more fuel burned, more traffic congestion. Importantly, it is more consumption at the expense of external parties, through the increased utilisation of The Commons, not just the driveway.

Though they haven’t done a great job expressing why this is a problem, as with the short-lets, the affliction motivating the vigilantes and community complaints is utilisation of assets beyond long-established norms, with a flow-on impact on The Commons and amenity.

Imperceptible Increments Amount to a Dire Whole

At the moment while these platforms remain in the “early adopter“ stage, these are issues are on the fringe. Resistance to this utilisation of driveways beyond established norms is, as with short lets, as nascent as the collaborative consumption movement itself.

It is much like automobile traffic congestion on the fringe in the 1930s. No one can perceive the impact of their one extra car in a traffic jam of 20,000 cars. Yet somehow over the decades each of those imperceptible increments adds up to a crippling whole. No one can perceive the impact of that one little bit of marginal utilisation, but somehow it will always add up.

Always room for a bit more utilisation: San Francisco Bay Bridge morning peak c-1959 (Source GE) 

Conclusion

Collaborative Consumption is having a positive transformational impact, enabling superior allocation of resources and less waste. But it also has a sinister side, enabling a market for utilisation of personal and collective assets beyond established norms, thereby enabling some to profit from disproportionate exploitation of common assets.

Startup warriors have become accustomed to disrupting and battling inefficient incumbent businesses in all spheres of human enterprise.  Anyone who has ever worked on a startup is eager to offer their support to "The Man in the Arena”. But I think when the protest is coming from the community (not from incumbent businesses defending their turf), it’s time to pause, listen to the objections, and consider whether we are doing the right thing.

SYDNEY'S OPAL CARD TO LACK LUSTRE?

The new New South Wales (NSW) Government has taken on the challenges of Sydney’s public transport fare collection with fresh vigour after two decades of mismanagement. In September 2011, the NSW Transport Minister unveiled a new integrated ticketing project, Opal, which she explained will cost over one-billion dollars. Make no mistake: this is a very big technology project.

There is a new perspective and renewed energy, but there are strategic gaps that will stop Opal delivering its intended benefit. Significant hardware roll-out is already complete in Sydney’s rail network, and the newly franchised Sydney Ferries is set to be the first to switch over to Opal revenue collection in November this year. Fare structure reform accompanying the technology should be well advanced. And yet it seems key strategic and operational issues are yet to be treated:

• What the structure of pricing will be for users,
• How revenue will be divided from integrated multi-modal journeys amongst operators,
• What the demand-side competitive price-drivers will be for newly franchised ferry and bus services will be under a centralised pricing model and clearing house.

Simply overlaying a smart-card system on the existing pricing framework will not create integrated ticketing e.g. of the kind that exists with London’s Oyster.

London's Oyster card in use, often used as a role model for Sydney (Source: Guardian)

Development of frameworks for revenue division, performance contracts, and pricing structures for users is critical for a system like Opal to deliver meaningful benefits.

Background

The Sydney Integrated Ticketing project was first announced in 1998 for completion before the 2000 Sydney Olympics. Perth-based ERG was awarded the contract. According to the former NSW Transport Coordination Authority, the User Requirement and contract that stood 2m high when printed on A4 paper.

In 2003, with the project still far from delivery, I anticipated in a contrarian Transit Australia feature article that fare complexity would lead to an unworkable basis for integrated ticketing. I put the case that the technology was the means, and that the end- revenue collection- had to be sorted out by Government and operators first.

In 2008, the $250m+ integrated ticketing project failed, delivering nothing except for ERG’s near-bankruptcy. ERG cited challenging relationships with disparate operating groups and “complexity of fare structures” as core problems.

Later in 2008 I wrote in Transit Australia on a proposal to progress integrated ticketing in Sydney. This went on to be part of Dr Grarry Glazebrook’s 2009 “Thirty Year Public Transport Plan for Sydney” (pp38-39). This formed part of the Sydney Morning Herald’s campaign on Sydney’s public transport.

Subsequently, two of these recommendations (then adopted as opposition policy) were belatedly adopted by the Keneally government just before losing office in March 2011:

• Private bus services were rolled into the MyZone revenue sharing framework
• Mode specific zone-based fares (blue TravelPass etc) were rolled into full multi-modal fares

And a third was acted on upon the new Government coming to power:

• Sydney’s Trams were rolled into MyZone revenue sharing framework

Despite these advances, Sydney’s zone system remains poorly defined and inconsistent with present and future land use. It is entirely independent of the predominant distance-based fares on both trains and buses. It only applies to periodical usage over periods of one week or more; it is not possible, for example, to get a daily or two-hourly zone fare. There is no geographic discrimination in zone fares for buses and ferries resulting in significant inequity for short multi-modal journeys (e.g whether you use a zone ticket to go 5km on two buses or commute from Manly on an ocean-going ferry you pay the same).

There is a realisation that integrated zone-based ticketing is good, but there seems to be little practical action or understanding of how it might be realised. Though former Premier Keneally seems to have believed she was signing off on a new zone-based fare system in 2011, it is demonstrably not the case. Base fares for bus, rail and ferry remain based on distance travelled on a single mode, not on zone or time.

Even though the multi-ride tickets have been rebranded as “my zone”, they are not zone-based at all, but rather remain nothing more than ride-based tickets! 

Spot the imposter: A Sydney MyZone ticket (2012), A London mag-stripe TravelCard (2009) and an Aahrus, Denmark (2012) zone ticket. The Sydney MyZone ticket is actually not a zone ticket at all, but rather a single trip multi-ride ticket based on 1-2 mile sections developed in the 1940s.

For confirmation of the marginalisation of integrated revenue collection and distribution, one need look no further than the discussion paper recently issued by the NSW Independent Pricing and Regulatory Tribunal (IPART) for pricing determination on Sydney Ferries.

Sydney Ferries is the first privately operated franchise within NSW Government controlled public transport network, and is to be the first system switched over to the new Opal smart-card late this year. Despite this, there is no mention of how revenue share will be determined from integrated multi-modal journeys under Opal. In fact, in the current cycle of price and price-structure determinations, the last before the implementation of Opal, IPART indicates that new integrated price structures for ferries are out of scope, a matter for later rail fare reviews (see s7.4 p38 here).

Further steps are required now to make Sydney’s public transport revenue collection integrated and sustainable before implementing Opal.

Example of how it’s been done before

Starting off with an international example of how integrated transport systems and pricing successfully evolve, I’ll come back to Sydney.

There are some great international examples of how to do things really well when it comes to public transport service and fare integration. London, until around 2003, was not such an example. Partially because it took a long time for London to “get it right”, and partially because of London’s familiarity to many Sydneysiders, it is actually an informative case study.

What we’ll see as we walk through the timeline, is that the technology, though an enabler, is only a small part of what brings an integrated ticket pricing framework to fruition.

Her Majesty the Queen tries out Cubic’s revolutionary ticket barriers at the 1969 opening of the Victoria Line in London

• 1969: The start of modern revenue control in London. Cubic’s high performance pneumatically-powered ticket barriers were essential to getting large number of people into and out-of the new Victoria Line stations quickly. Coupled with electronic ticket machines and a computerised back-office, it became possible to track revenue and protect revenue as never before.
• 1981: Greater London Council implemented zone-based ticketing, covering both Tube and Buses across two zones. Passengers could now seamlessly transfer between buses and tube trains on periodical tickets (weeklies, monthlies, etc)
• 1983: TravelCard launched across five London zones. The bus/ tube zone pricing now had higher granularity and greater geographic scope.
• 1985: Revenue sharing agreement concluded between British Rail and London Transport, enabling full multi-modal CapitalCard. Now the foundation for full multi-modal integrated ticketing was enabled for across bus, tube and train.
• 1989: CapitalCard merged into TravelCard. 
• 1998: Prestige Private Finance Initiative (PFI) initiated between the Government Transport for London (TfL) and TranSys consortium to take over revenue collection management and implement Oyster smart card. 
• 2003: Oyster card rolled out, zone TravelCard system shifted onto Oyster and new “pay as you go” stored value overlay introduced for one-off trips. Crucially, the “pay as you go” stored value fare-cost does not exceed the equivalent daily TravelCard cost. The zone-based TravelCard model defines the upper-limit.
• 2008: Tfl Purchased Tramtrack Croydon Ltd PFI (Croydon Tramlink) in part due to an increasing shortfall in revenue as a consequence of the 2006 inclusion of TCL in the TravelCard revenue sharing framework
• 2008: Prestige PFI terminated seven years early, TfL assumed TranSys assets (brand, equipment etc) and established direct maintenance with Cubic
• 2010: Oyster Pay As You Go valid on National Rail lines across greater London

Over this 40-year history, technology was an enabler, but only a small part of what delivered the seamless, integrated-pricing Oyster system we know today. There are two key developments here: pricing by geographic zone and complimentary revenue distribution agreements. I’ll just flesh these out a little more, and then I’ll come back to Sydney’s progress on the timeline.

Geographic Zones Critical

The establishment of geographic London’s zones in 1981 as a basis for pricing (as distinct from individual rides on individual buses etc) was the first big step. This meant pricing was no longer a function of how many times you got on-and-off the bus or tube, but rather a generalised approximation of usage of a geographic area and time period.

This is the fundamental enabler of flexibility in urban transportation that users have come to expect from their cars. In urban planner parlance, this step represented the removal of flag-fall “fare penalties” on multi-modal chained trips or broken journeys within the zones.

Just to give a specific example of the kind of difference this makes, it means that a passenger can take a break in their journey, say to pick up some groceries at a shop on Oxford Street (be it London or Sydney!), and not pay an additional fare. This does not cost the operator any more, and zone and time based ticketing means that it doesn’t cost the passenger any more either.

It is not broadly understood (and was ignored in Sydney’s previous attempts at a smart card system) that the zone system is the foundation of today’s Oyster card. The “electronic purse” or “Pay as you Go” provides trip-based fares for occasional usage, but this is only up to the envelope defined by the underlying zone TravelCard system.

Fare Zone map for the Zurich Verkehrsverbundes (ZVV) . Zurich, like Hamburg, was an early adopter of integrated multi-modal zone-based ticketing.

On an aside, though TfL are often cited as an example in Australia, the credit for this move towards zone fares and the broader movement to integrated transit planning and management does not go to London Transport or TfL. Credit goes to Hamburg: the Hamburger Hochbahn Aktiengesellschaft zone system implemented in 1963, which was incorporated into the Hamburger Verkehrsverbunes (HVV) in 1967.

The rationale for zone fares and integrated revenue distribution, as now exists in London, Melbourne, Brisbane, Perth, etc, can be found on pp 11-15 of this 1967 UITP paper I scanned.

Revenue Division Challenging

It took eight years to get London’s BR heavy rail system into the integrated TravelCard System for a very good reason: it’s tough getting the different operators with sometimes opposing interests to agree with one-another on revenue division. It took another seven years after the implementation of Oyster on TfL to extend “pay as you go” to the Network Rail operators (who have replaced the former state-run BR). Dividing revenue from a single multi-modal clearing house is complex and fraught with challenges.

Agreeing how operators are to be remunerated, in return for delivering what, also overlaps with performance incentives and penalties which are important parts of Government’s interaction with privately operated and/or financed operations including those delivered through a concession, a franchise agreement or PPP/ PFI. If existing or new services are to be delivered by the private sector, knowing exactly from where and why the cash comes in is essential. Every dollar of uncertainty is reflected as a dollar of increased operating cost.

The failure of the Tramtrack Croydon Ltd PFI is particularly illustrative of the complexity. Initially operating on its own independent non-integrated revenue collection framework, Transport for London (or more specifically the Mayor of London) sought to role TCL into the Oyster fare collection system, which necessitated adopting the TravelCard revenue distribution framework. Because there was a gap between what TCL thought it could have earned under its independent price structure and what it got from oyster users, TfL had to pay penalties to TCL.

This unsustainable position compelled TfL to buy out the TCL PFI, as the Mayor’s office explained:

“The current contract requires TfL to make compensation payments to Tramtrack Croydon Ltd for changes to the fares and ticketing policy introduced since 1996.
[In 2007], that payment was £4m, and the rate is increasing annually.
Taking control of Tramtrack Croydon Ltd means that TfL will no longer have to make those payments and will be able to concentrate on improving the network.”

Action required now

In comparative terms, Sydney is approximately where London was in the mid 80s: there are integrated multi-modal zone fares, but they are marginal and yet to be rolled out as a universal, underlying foundation for new technology. Unfortunately Sydney, as with the previous failed ERG contract, remains steadfastly obsessed with technology, rather than addressing fundamental economic, engineering and business challenges that underpin integrated ticketing and revenue sharing.

The current NSW Government came to power with a mandate both to increase private sector involvement in Sydney public transport operation, and to integrate public transport ticketing into a TfL Oyster style system.

Without fare-structure and revenue-source transparency, private franchisees and PFI-style operators are left at considerable revenue risk, of the kind that forced TfL’s purchase of the Croydon Tramlink PFI (CTL). This will invariably lead to forecasting conservatism and loss of economic benefit from private sector participation.

Without expansion of zone-based pricing principles there is no general pricing framework to enable “integrated ticketing” of the kind that enables multi-modal linked trips and broken journeys. Though London’s Oyster card is an enabler of an electronic purse, it is underpinned by a zone-based revenue sharing framework that took more than ten years to develop.

The present agenda of the NSW government pricing tribunal, IPART, responsible for setting fares and structure of fares, shows no progress whatsoever towards addressing either of these principles. Fast policy action is needed if value is to be derived from a $1bn investment in Opal.

UPDATE 27/8/2012

The Government agency responsible for public transport (including Opal), Transport for New South Wales, has this to say in their current submission to the Government's Independent Pricing and Regulatory Tribunal:

Opal CardThe Opal Card and electronic ticketing system will be rolled out on CityRail services during 2013-14. Opal will be a pay-as-you go system which will automatically deduct the correct fare from stored value on a customer’s Opal Card. The system is being designed so that passengers do not have to decide which ticket or tickets that they need to buy before they travel. Instead, they will be able to travel across the public transport network using one card and, regardless of whether they are using a bus, train or ferry – or where their journey starts and finishes – the Opal Card system will work out the fare for their trip combination.The Government will make further announcements about how the Opal Card will operate before the roll out commences in late 2012. 

This seem to confirm hardware role-out will indeed precede development of the mechanisms necessary to deliver integrated ticketing.

UPDATE 22/9/2012

The New South Wales Government authority which sets prices for transport, The Independent Pricing and Regulatory Tribunal (IPART), has recommended that Sydney Ferries be removed from integrated multi-modal fare system, currently known as "MyZone1". IPART says on page 4 of their fact sheet:

we recommend that the additional subsidy for ferry travel offered by MyMulti1 tickets be removed and that these tickets are no longer valid for travel on Sydney Ferries.

The methodology by which IPART ascertained or quantified this "additional subsidy" to which they refer is not clear. This is not to mention the loaded terminology of "subsidy" for multi modal journeys. I suspect these numbers are generated from a methodology similar to that of the former Total Value of Travel study or TVT used on the former TravelPass revenue sharing framework. This methodology is seriously flawed, as per my 2004 IPART submission (Section 2, p13). I'll be looking further into this over the coming weeks and will write another post when more information becomes available in a final determination.

The proposed removal of Sydney Ferries from intermodal penalty-free commuter fares, on the eve of implementation of the planned Opal smart card, is a dark irony indeed; and one in diametric contrast to the example of TfL's approach to Croydon Tramlink and integrated ticketing in London.