How the private sector can ride the next transit revolution.
Oregon used to receive kudos for its forward-looking sustainable transportation solutions. From early light rail to bike lanes and bicycle commuting, Portland and surrounding regions were urban mobility innovators.
Recently, those plaudits have slowed, with Portland slipping behind cities like Austin, Texas and Boston in terms of adopting more advanced transportation solutions. Yet the entire state has a unique opportunity to shape the future of mobility — if private companies and public agencies can work more symbiotically and if companies can attract the kind of funding necessary to scale and build market share.
According to a February 2015 ranking by the research partnership U.S. PIRG/Frontier Group, the Portland region comes in 7th in a list of the top most innovative transportation cities in the country. Portland’s rank is reduced by its lack of ride sharing and bike sharing; first-ranked Austin has both.
In fast-growth urban regions, Frontier says, transportation technology options like car sharing, ride sharing, bike sharing and transit navigation apps enable more people to live without cars, in turn generating environmental, livability and economic benefits.
Oregon already has a thriving sector of software companies. A similarly rich cluster in transport is nascent, with mobile transit ticketing company GlobeSherpa achieving success, and newcomer Open Bike trying hard to innovate in bike share systems.
The state also continues to build out and experiment with innovative infrastructure, including installing new urban cycling amenities and supporting public/private bus options.
“Oregon is in a very interesting niche,” says John MacArthur of TREC, the Transportation Research and Education Center at Portland State University (formerly OTREC). “We see transport a little more holistically and not as formulaically as some states. We’ve got some segments — transit apps, for example — that could potentially be quite strong.”
But what is needed, according to MacArthur and others, is complex. Shepherding good ideas and start-ups from conception to maturity is not the province of transportation agencies, whose employees aren’t generally tasked with or rewarded for innovation.
On the other hand, private companies can move into markets swiftly yet need some of the regulatory and safety expertise, and data, generated by the public sector.
“There are opportunities to be nimble here. Are we taking them?” asks MacArthur.
The life and death of the Grease Bus
To understand the challenges facing a new generation of private transportation companies, start with a story about a business model that doesn’t sound so sexy or new — and doesn’t depend on jazzy digital technology for its innovative approach.
A few years ago, an enterprising millennial and dedicated snowboarder named Mike Parziale had a good transportation idea. To ease gridlock up to Mount. Hood, Parziale started driving a mini-bus running on used vegetable oil to the mountain every weekday. He charged riders just $10, and eliminated scores of private cars from the roads and emissions from the skies.
Parziale called it the Grease Bus. It wasn’t revolutionary, but considering the dearth of public transit from Portland to the mountain, the entry of a private company in the transit landscape was certainly a step forward.
“I had the marketing background to promote the Grease Bus to a certain demographic,” he says. The Grease Bus quickly added riders and drivers, and Parziale could see he was filling a need.
“But what set the wheels of government in motion was all the press I got for taking the Grease Bus up to the  Olympics in Vancouver.”
Suddenly, it felt to Parziale like city, state and federal branches of government were imposing regulations he hadn’t known about — like drug testing drivers and classifying his fry-oil biodiesel — onto operations. He strove to comply.
Then the city of Portland put the Grease Bus in the same category as a taxi — and Parziale’s good idea began to flounder.
“Over four years, my insurance dues quadrupled,” he says. That insurers classified his Grease Bus as a risk increased his anxiety levels. Every time the clean-fuel Grease Bus left the lot, Parziale would fret at how any collision — not uncommon on the snowy corridors of Highways 26 and 35 — could send his livelihood spiraling downward.
“That’s when I could see the glory days of the Grease Bus were behind us.” The Bus shut down in 2012.
Parziale’s experience is emblematic of a particular economic moment in which 21st-century companies are stymied by regulation as they try to introduce a novel service into a transportation system based on early 20th-century models.
The Grease Bus may not appear to have a lot in common with the ride-sharing companies that have captured the headlines in the past couple of years. But Uber’s attempt to skirt the city of Portland’s taxi-service rules is a similar tale, although its fire power lends it far more resources than the Grease Bus in negotiating with government regulators.
Portland has appointed a task force to revamp the taxi-service regulations — on a tight three-month deadline, by April 9. But the work of rewriting a regulatory framework nearly 100 years old is almost impossible, one member of the task force told Oregon Business, under condition of anonymity. There is a “Pandora’s box” of issues to work through, the representative said.
GlobeSherpa and TriMet
In countless industries, technology is outpacing the regulatory structures that once contained it. So it’s not surprising that tech companies are disrupting long-standing rules around transportation options.
And yet the transit industry is uniquely situated, especially in Portland, where much of the innovation has been driven by the public sector: bike lanes, light rail, the streetcar.
As new mobility services move in on regulated territory, government continues to play a crucial, albeit changing, role.
Portland-headquartered GlobeSherpa is a prime example of how a new collaboration has created a successful new business model for transport companies. The company’s mobile ticketing app — TriMet Tickets — is wildly popular amongst commuters, with two million tickets sold to bus and light-rail riders since it debuted in September 2013.
TriMet Tickets hasn’t just enabled Portland to be one of the first in the nation to offer mobile transit ticketing. The app has also positioned GlobeSherpa solidly in the successful startup realm, with 25 employees, $2 million in financing, a new mobile ticketing deal with the Los Angeles Department of Transportation and a pilot project with San Francisco’s Muni.
GlobeSherpa’s success didn’t arise in a vacuum, says communications director Mac Brown. Instead, it’s a direct result of transit agency TriMet’s opening its route and GPS data to developers and the public.
“We built our app to use their data to give users a better experience,” Brown says.
The company now has an expanded partnership with TriMet to create the next-generation “contactless” version of electronic payments on buses and trains by 2017. A rider may be able, for example, to simply position a smartphone with GlobeSherpa technology next to a streetcar fare reader to purchase a ticket.
GlobeSherpa’s revenue model is robust, too, with the company getting a percentage of each ticket sale. TriMet gets an electronic fare system that it says is cheaper than the ticket vending machines.
From Portland to Mt. Hood
GlobeSherpa’s partnership with TriMet was key to its success. Similar collaborations are needed to grow all kinds of new transportation services — not just mobile apps, and not just in the city.
The Mt. Hood Multimodal Transportation Plan (MHMTP) is one such venture. The public private partnership corralled Oregon DOT, Clackamas and Hood Counties and Forest Service civil servants, with business interests from Timberline, Skibowl and Resort at the Mountain. The objective is to improve safety and increase travel options to Mount Hood.
The MHMTP finalized a year ago after identifying a laundry list of projects: rumble strips along Highway 26, shoulder widening for bicyclist safety and more bus services and park-and-ride lots. One ambitious proposal envisions an aerial tram connecting Skibowl, Government Camp and Timberline.
At one point during the MHMTP process, Parziale thought there might be help available to save the Grease Bus.
“There was lots of interesting talk — ideas about grants for more buses,” he says. It didn’t happen fast enough to make continuing the business feasible to Parziale. However, an offshoot group of the MHMTP did realize improved bus service was low-hanging fruit.
Under the guidance of Clackamas County administrative services manager Teresa Christopherson, a limping-along shuttle service called Mountain Express — which didn’t go to the ski areas, and whose subsidizing business tax credits ended in 2013 — was transformed by the public-private effort.
“It was serendipitous,” Christopherson says of changing the Mountain Express into an updated, everyday bus service now called Mt. Hood Express.
“Yet I can’t emphasize enough the importance of the honesty of communications in the process,” she says. “It’s always easy to get stuck on the question of who is going to pay for what. In this case, it was having the right people in the room and also the full participation of everyone financially, as well as with marketing and outreach. Everyone really put their cards on the table.”
Jon Tullis, director of public affairs for Timberline Lodge, credits Christopherson as the leader, and the ski and resort operators as the critical cash infusers (along with federal funds) for revamping the Express with modernized buses and better routes for local and recreational riders.
The long term goal, Tullis says, is to sustain that gung-ho spirit as more aspirational and pricy MHTMP projects like the aerial tram come up for consideration. For the record: As fanciful as it seems, a Mt. Hood gondola is not a new idea. In the 1950s, an aerial tram of sorts, the Mount. Hood SkiWay, consisting of a Trailways bus suspended from wire cables, transported skiers up and down the mountain.
“Working on the [MHMTP] Multimodal Plan was one of the things that allowed us to all come together,” Tullis says. “Now the Mt. Hood Transportation Alliance will be working on sustainable governance, long term funding and expanding operations. I’m glad to say we have good momentum.”
Open Bike: car2go for the bike share crowd
Funding, of course, is the elephant in the living room. Portland’s much anticipated bikeshare program, for example, has languished for want of a $4 million sponsor to pay for the kiosk-based design from local Alta Bicycle Share, which was sold last year to a New York-based group of investors.
“There’s not a lot of big companies here; we don’t have a Citibank,” says Rob Sadowsky, executive director of the Bicycle Transportation Alliance, a Portland-based advocacy group. Sadowsky is referring to Citibank’s $41 million sponsorship of New York City’s “Citibike” share program, which launched in May 2013. The few big companies that are based in Oregon — the Nikes and the Intels — “don’t see the local market driving their business.
Brad Biddle, founder of Open Bike Inc. is trying to chart a new and perhaps less expensive course. Historically, bike-share programs have been publicly funded services contracted through a private provider. Biddle, a former senior counsel with Intel, is creating a model based on open hardware — i.e. any bikes — a “smart” lock and open-source software.
“Kiosk-based bike share systems are relatively inflexible and expensive,” he says. “You have to make a huge commitment, buy the bikes from one vendor. And what if the vendor doesn’t perform? Your only option is to rip it out.”
Under the Open Bike model, users could park and access a variety of bikes with mobile phones anywhere within a designated area. It’s a platform that resembles Car2Go, the popular car sharing service, but for bicycles.
“I’m trying to create a new ecosystem, in which Open Bike defines the interfaces and does the interoperability testing but is not the ‘one’ owner,” Biddle says. “My hope is the new ecosystem creates a big pie with lots of new entrants, and Oregon companies well positioned to get slices of the pie.”
Biddle has already worked with metro companies, including Axiom Electronics in Beaverton, in designing the smart locks. He hopes developers will be interested in innovating on the software side and adding user-friendly functionality to the system, such as GPS feedback that improves the bike rider’s routes and apps that integrate with other transportation options.
Biddle did an early pilot at Intel of the lock-based bike share, and has a prospective partner for a new pilot based on his next-generation version of the smart lock. (The current task, he says, is to debug everything.)
In the future integration with other players and other transportation options like buses, MAX and the streetcar will be the big challenge.
“Here in Portland, we are actually well positioned to do something amazing,” says Biddle. “Perhaps instead of being city number 50 to do third-generation kiosk bike sharing we should be doing something innovative and cool, and implement open-standards bike share.”
Other bike-share companies agree — and may beat Biddle to the punch. Global peer-to-peer bike-sharing company Spinlister announced in March it would launch service in Portland next summer.
Outdated regulations and the inevitable lack of funds may have hindered some of Oregon’s capacity for mobility innovation. These challenges also help explain why a city and region known for innovation in public transportation may be lagging as the burden of new developments falls increasingly on the private sector.
Yet the key to clearing those roadblocks may simply be an increased willingness of all parties to share more – ideas, data, and costs – and stay open to enhanced collaboration. The data that TriMet provides has spawned many more applications in addition to GlobeSherpa’s – 68 different ones at last count. Mostly, these apps use “General Transit Feed Specification” — a format TriMet created in partnership with Google back in 2005 — to deliver trip planning and scheduling information.
More promising small businesses might evolve if there was more opportunity for private/public projects and collaboration, says Bibiana McHugh, TrimMet’s IT Manager of Geographic Information Systems.
Nurturing this kind of collaboration requires adopting an outlook that innovation is possible, not just in the deliverables, but also in the way things are done, says Tim McHugh, chief technology officer at TriMet.
“Yes, when it comes to procurement of products [for TriMet], you have to be open and fair and competitive,” he says. “That doesn’t mean you can’t do innovative projects, however. If there’s something we see that we can do to the benefit of customers that innovates, then that’s what we should go after.”
A version of this article appears in the April 2015 issue of Oregon Business magazine.