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Bad Regulations and Worse Responses: Part 2 - The Rise, Fall and Transformation of Supershuttle

As Originally published by National Bus Trader, July 2015.

By: Ned Einstein
Tel: 212-766-1121
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Mitchell Rouse! In the 1980s, a strapping, 6'4"-inch-tall visionary who had inherited a 50-vehicle taxicab company and, within a few years, expanded it into a 350-vehicle leviathan, along with eight small paratransit operations. With a heavily-computerized operation a decade before Windows took over the World, his dispatch office still answered every call with a live Earthling. Wilmington/Checker Cab was all about decency, respect and efficiency. And at a time when most of Los Angeles County was beginning to deteriorate rapidly into lines, menus, incompetence and traffic. Yet, as a brilliant manager with an expanding corporate mentality, Rouse was also a rabid supporter of Unionism, and embraced his Teamster's affiliation with pride.

In early 1983, after I had evolved from Rouse's consultant to one of his then-closest friends, my girlfriend and I had dinner with Mitchell and his wife. After dinner, my girlfriend exploded: "My God! This was like having dinner with Fess Parker" (the actor playing 1950's cultural icon Davy Crockett in movies and TV). She continued, almost breathless, "This guy is the last of the pioneers!"

By 1980, I had just moved West after completing my direction of USDOT's first nationwide study of specialized transportation systems for the Elderly and Disabled, examining 30 systems in 18 cities - three of whose stunning efficiency stemmed largely from their brilliantly-designed service concepts. (See the essay on this on my website titled "Principles of Paratransit System Design" on the Homepage of my website.) From these three systems, particularly that of Tulsa, Oklahoma), I figured out the six genuine principles that governed shared-ride transportation efficiency - the most important variable being the "Service Concept," reflecting the long-dead discipline of "system design." In 1980, USDOT published a three-volume manual of my findings - only to completely ignore them a decade later when it promulgated the Americans with Disabilities Act - without giving transit agencies and municipalities a clue about operating their "complementary paratransit systems (an "unfunded mandate") efficiently.

When I relocated to Los Angeles in 1980, I instantly became of the king of managing time and space, while Rouse was the middle-aged master of the U.S. taxicab universe. What ensued was our years-long debate about the benefits and trade-offs of exclusive ride service (i.e., taxis) versus shared- ride service (i.e., paratransit). To some degree likely influenced by this dialog, Rouse dreamed up and created (with practically no help from me) a brand-new, highly profitable transportation mode a mere six years after 50 percent of the newly-revitalized U.S. fixed route bus industry grew to require a 50 percent taxpayer-supported subsidy. Out of this morass of ignorance and inefficiency emerged the highly-profitable and customer-discounted wonder of the original SuperShuttle.

Principles of System Design and the SuperShuttle Service Concept

At this point in time, Los Angeles County had become the hotbed of paratransit system design, much of it mine. Half a dozen of my colleagues completely understood these dynamics, and ran extraordinarily-efficient systems. In contrast, our local competitors and most paratransit systems throughout the country operated at a fraction of our efficiencies. Less than a decade later, bolstered by the introduction of scheduling software that coincided with the promulgation of the Americans with Disabilities Act and its requirement for "complementary paratransit systems," system design was a distant memory. This software was the answer to every bureaucrat's dream: "I'm sorry about our service's enormous costs, Mr. Councilman, but I don't know what else to do: We already have computers designing the routes!" Hello Digital Madness (see the article titled "The Price of Digital Madness in the August, 2001 issue of NATIONAL BUS TRADER) and good-bye to system design and service concepts - along with their stunning efficiencies.

But not by me. And not by Mitchell Rouse. The original Supershuttle was based on the most important and fundamental principal in all of transportation: "A trip on the way to an already-existing trip costs nothing." So Rouse configured the original SuperShuttle, serving Los Angeles International Airport (LAX), by dividing the semicircle south, west and north of it into about 20 sectors, each about 10 degrees wide. (about 160 degrees of the entire circle lay practically on the Pacific Ocean). So even 50 miles from LAX, the edges of these sectors lay only 8.72 miles apart. Close to the airport, where the heart of SuperShuttle's trips lay, these edges were only a long stone's throw apart - naturally increasing gradually with their distance from the airport.

In each sector Rouse chose to begin service with four to six vehicles (depending on the sector's user density). Each vehicle then weaved its way to and from the airport, deviating slightly from each pickup or drop-off to serve the next one not far from the centerline of each sector. The goal, quickly reached, was to pick up or drop off perhaps three passengers on each inbound or outbound run. Their ride times would be roughly 1 times that of a direct taxi ride to or from the airport, while they would pay roughly half the taxi fare for the same trip, and SuperShuttle would earn 1 times the revenue that a taxi would providing it. Win. Win. The passengers paid half as much for a ride only 1 times as long as a direct taxi ride. And SuperShuttle would earn 1 times what a taxi would providing one trip at a time. As Gershwin penned nearly a century ago, "Who could ask for anything more?"

Missing the Details

Naturally, this entity had to be registered with Los Angeles County's Public Utilities Commission (LACPUC) before any actual vehicles could be purchased, and drivers, reservation clerks, dispatchers and other management hired and trained. Well familiar with the service concept, I actually prepared the two-page PUC application, squeezing in information about the sector-orientation and other elements of the mode's service concept where I could. SuperShuttle eventually hit the pavement - with CNG-powered engines "from the get-go" (as Rouse typically put it).

Dispatchers would accommodate inbound passengers and many outbound passengers, while those wanting to travel outbound without reservations could simply wait at the SuperShuttle platform at each of the airport's seven terminals. Each Supershuttle vehicle passed by these platforms with their exterior "headers" identifying the furthest major city in its sector. The average headway between vehicles in each sector was about 20 minutes. So one SuperShuttle or so stopped at the platform almost every minute. So most passengers had to wait a few minutes (around 20 at worst) for their sector's vehicle to arrive. Of course, as passenger volumes grew, Rouse added more vehicles to those sectors needing them, and in those sectors, the headways (and maximum passenger wait-times) decreased.

Not surprisingly, SuperShuttle quickly began earning profits hand-over-fist. However, a year or two later, a competitor sprung up (the first, which grew into the largest, was named Prime Ticket), applied to the same PUC for licenses, and was granted licenses - without any requirement that its vehicles operate in sectors. Perhaps with some sloppily trying to group trips to avoid eight-hour ride times for the third passenger, these competitors ignored the sector principle, about which they could have learned by standing at a SuperShuttle platform for a single hour. So the third outbound passengers' ride time was often three hours or longer. So too was that of the first of three inbound passengers - when these competitors could even pick up that many. And it was unrealistic to transport passengers to or from more than three stops - whereas Supershuttle could practically fill its eight-passenger vans (including some couples, threesomes or foursomes) to serve four or five stops.

Bad Responses and Smart Ones

The PUC's misunderstanding of, or indifference to, the original SuperShuttle's sector-based service concept was clearly bad, and eventually destroyed the SuperShuttle concept. But they were not bad for Mitchell Rouse. Seeing the "handwriting on the wall," he immediately began opening up franchises all over the country, operating them according to his system design principles, quickly earning and demonstrating huge profits. Then, as quickly as he could, he sold them - with their licenses granted, of course, with no requirement to follow the original SuperShuttle's sector-based service concept. Ignoring this, every SuperShuttle that changed hands immediately abandoned the service concept, as did all the non-blue SuperShuttle's competitors.

So now, all the passengers received was a chaotic trip whose ride time was unpredictable and often seemed endless. (The first one picked up or last one dropped-off were usually lucky enough to experience a reasonably short ride time). And the mode's owners eked out a "living" from the inefficiency of their operations and thimbleful of trips from their failure to employ the mode's service concept - often including huge deadhead time and mileage from the last outbound drop-off to the next inbound pickup. Lose, lose. Surprise, surprise. And away went a brilliant new transportation mode that not only filled a niche that had previously not existed, but which was of significant benefit to both its owner and its passengers.

As a footnote, Uber, Lyft and other Transportation National Companies (TNCs) now exploding into the market. In contrast, SuperShuttle barely dented, much less thinned, the density of exclusive-ride taxi services - especially now that the "spaghetti-routing" of nearly all the post-Rouse SuperShuttles thinned the demand for this service, compared to the explosion of it from the first Rouse-established models. Otherwise, if this mode had any impact on the taxi industry, it made the common taxi driver's practice of "playing the airport" - deadheading back to it after dropping off a passenger - less attractive (since SuperShuttle did not have to do this).

So as a consequence, SuperShuttle (particularly in its original form) reduced a foolish taxi industry practice that did nothing but waste fuel and maintenance, and further fatigued an often, already-exhausted taxi driver typically operating on a 12-hour shift, six days a week. Otherwise, the nanosecond the service concept that led to this mode's original superb efficiency and bargain-rate fares to its riders vanished. Rouse sold off dozens of franchises, and those who bought them instantly lost most of SuperShuttle's former profits, began deploying gasoline-powered vehicles, and doomed most of their riders to unpredictable and significantly longer ride times. In this form, the mode's growth soon became somewhat static.

Lessons for the Rest of Us

For those in charge of any mode of transportation, including motorcoach service, the service concept is still everything. Regrettably, of course, few motorcoach operators' systems have one, much less their owners evening knowing that this notion is, much less how critical it is to profitability and passenger satisfaction. This fails to mention that a creative, efficient and effective service concept trans-lates into a mode far less chaotic and, as a consequence, far more safe. And, of course, it fails to mention how vulnerable the motorcoach industry is to an invasion by TNCs providing charter and tour service at the touch of an "app" on their passengers' cell-phones, after entering in a few follow-up answers and a credit card number.

As noted, Rouse's response to the LACPUC's almost-immediate destruction of SuperShuttle operated by anyone but him was practical, and he followed the only path that made economic sense. If he could not persuade his local PUC to adhere to his mode's service concept, trying to do this across the country was like jousting at windmills. So without these constraints, Rouse still operated his new franchises efficiently, in sectors, to earn and demonstrate their profits, and soon thereafter, jettisoned them to operators who were allowed to, and almost always, abandoned the service concept.

Had Rouse had the resources of Uber or Google, one of its principal supporters, he might have created SuperShuttles everywhere, and operated them efficiently. But this would have been impossible in most places, because the various PUCs - just as they did in Los Angeles County - allowed competitors into the market without any adherence to SuperShuttle's original service concept. And to some degree, they would have thinned the density of even a properly-operated SuperShuttle, especially since the public was as ignorant about the sector approach as were their new buyer-owners.

Sensibly, SuperShuttle should have been granted exclusive rights in each of its newly-acquired service area. But this did not happen even in Los Angeles County. Otherwise, because the mode was not subsidized, and the need to minimize taxpayer's subsidy dollars not an issue, SuperShuttle was never granted the rights which transit and complementary paratransit systems enjoy automatically throughout the country.

Both the PUCs' responses to the original SuperShuttle concept, and the ignorance of it employed by every franchise buyer and copy-cat competitor was not merely a bad response to regulations. Their receipt of PUC licenses hardly prohibited them from employing the mode's efficient provision and wallet-friendly configuration as SuperShuttle was originally designed. It was a terrible and harmful response that frittered away all the mode's original benefits, in the process reducing owners' profits, ruining the passengers' reliability, significantly lengthening most of their ride times, and pouring countless unneeded pollutants and noxious oxides into the atmosphere.

The Rise and Mediocrity of Supershuttle is only one example of bad regulations and worse responses. In the next batch of installments in this series, I will introduce NATIONAL BUS TRADER readers to the invasion of TNCs - including one that already began providing charter service in large, body-on-chassis minibus conversions. If you thought our traditional taxi services and their marginal regulation were problematic, just wait until you hear about TNCs - especially in New York City where, in less than a year, they devalued taxicab vehicle entry fees by roughly 50 percent, and led to a just-filed law suit against the City. So, with a TNC pilot-program already providing charter service withmedium-sized vehicles, guess what will likely come next for the motorcoach industry? Stay tuned. And be afraid. Be very afraid.

Of course, in theory, there is no need to be afraid. Our industry can adjust, and possibly even expand, by creating new service concepts. I am full of ideas about this. Are you? Rouse was not the only one who understood these principles. Every single paratransit system I designed or operated 30-plus years ago achieved roughly double the efficiency of those operating today, all of the latter governed by scheduling software. And I hope you do not think that the folks that brought us Today's paratransit mediocrity by their reliance on digital technology - just as most TNC's are - are going to suddenly learn how to think, and rely on the gifts God gave us. But we can.

Ned Einstein is the President of Transportation Alternatives, a passenger transportation and automotive consortium engaged in consulting and forensic accident investigation and analysis (more than 600 cases). Specializes in elderly, disabled, schoolchildren. Mr. Einstein has been qualified as an Expert Witness in accident analysis, testimony and mediation in vehicle and pedestrian accidents involving transit, paratransit, schoolbus, motorcoach, special education, non-emergency medical transportation, taxi, shuttle, child transport systems and services...

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