(Bloomberg) —
Just before dawn on an autumn morning, Anne Watson, mayor of Montpelier, Vermont, is standing outside in the cold, waiting for a bus that could help to remake rural America. In January 2021, Montpelier, a state capital of 7,500 people, became an early adopter of a transportation system that advocates hope will breathe new life into the nation’s small towns, where residents are more auto-dependent, more apt to be disabled, and poorer and older than in cities.
On-demand buses eschew set schedules and routes. Instead, users summon a ride on their own timetable using an app on their phone. It looks a lot like Uber and Lyft, except that ride pooling is paramount and the entrepreneurs looking to cash in usually only provide the software, not the vehicles or drivers.
This on-demand model, also called microtransit, existed as Dial-a-Ride long before there were smartphones. Now, it’s surging. About 450 companies currently offer the service worldwide, according to Lukas Foljanty, a German transportation analyst focused on microtransit. Of those, roughly 150 sprang up in 2021. One in particular has wowed investors. Since its inception in 2012, the nation’s leading microtransit provider, Via, has landed $800 million in capital investment, enough to employ over 900 people.
Via, which boasts about four times as many on-demand deployments as its closest global competitor, has myriad urban clients, including New York City’s public schools. The company has a presence in about 25 U.S. communities of less than 50,000 people. Chief executive officer Daniel Ramot is intent on growing Via’s rural footprint. “Doing this in rural America feels important,” says Ramot. “Microtransit gets people out of their homes. It allows low-income people to get to their jobs. It helps drive local economies.”
As she boards her bus, Mayor Watson likewise sees hope in Vermont’s decision to supplant Montpelier’s funding for three fixed routes with a two-year on-demand pilot project, MyRide, run by Green Mountain Transit, a regional public transit agency.
“As a community, we hope to be net zero by 2050,” says Watson, who is en route to Montpelier High School, where she teaches physics and coaches Ultimate Frisbee. “And fossil fuel is the biggest portion of the carbon pie in rural areas.”
Watson and her husband lease a Nissan Leaf. They recently got rid of a second car and are hopeful that other Montpelierites likewise can shed their wheels. Sixty percent of the city’s downtown land mass is now devoted to parking lots. Still, it’s not quite clear how green Watson’s bus ride really is: She and I are the only passengers aboard our 12-seat Ford E450 bus, which gets about seven miles per gallon.
“We never have more than two people on the bus at the same time,” driver Philip Ballou tells me later. “All day long, I’m running around like a chicken with its head cut off. Nobody’s going in the same direction.”
MyRide currently is fare-free given the Covid pandemic. An average trip in Montpelier is 3.3 miles long and costs taxpayers $16.75, according to Green Mountain Transit. In another Via-served town, Wilson, North Carolina, the cost per ride is about $11, and similar costs prevail in other communities running microtransit on Via — in Lone Tree, Colorado, for instance, and on the Blackfeet Indian Reservation, in Montana.
If the numbers sound astronomical, consider the alternative. In the American countryside, fixed route buses are rarely popular. There typically aren’t enough riders to justify running them more than once an hour, and who wants to schedule their day around hourly bus service? In Montpelier, the buses were so often empty that they earned the name “ghost buses.”
Mass transit is always dependent on public funding — riders’ fares just aren’t sufficient to cover expenses. Pre-pandemic in the U.S., the average rate of fare recovery — the fraction of operating expenses met by fares — was about 20-30%. Remote Blackfalds, Alberta, lost its fixed route service after one local official complained of “low ridership.” Blackfalds just launched a microtransit pilot project.
Whether or not on-demand is the solution to this conundrum is an open question that likely won’t be answered for a while. Via’s Ramot says his company’s software is early in its evolution. Meanwhile on-demand faces numerous challenges. Sometimes, for instance, Via’s apps don’t work in remote locations where cell service is weak.
Microtransit can also be inconvenient. During my visit to Montpelier, I summoned MyRide six times. In the early morning, the bus, which services a 12.5 square mile area, arrived almost instantly. Then three times at midday my phone told me that I had to wait over half an hour. Montpelier’s three drivers were busy proffering custom service to others. So I just hoofed it.
There’s also an efficiency problem. Jarrett Walker, a Portland, Oregon-based transit consultant says, “Even in rural places like downtown Montpelier, fixed route buses can pick up 10 people an hour. Demand response can’t possibly do that. You’re looking at two or three pickups an hour.” In Walker’s view, if small towns indiscriminately adopt on-demand transit, they could still end up running ghost buses. Microtransit is, he says, “successful in areas where there is very low demand.”
Walker adds, “Like everything else funded by venture capital, demand-response is massively overhyped. I don’t think anyone’s actually making money on it yet,” he says, referencing Uber and Translock, two other microtransit companies that are tapping venture capital in hopes of transcending a mid-2010s jinx – several startups, including mini-bus operator Chariot, were shuttered largely due to lower ridership.
Ramot counters that Via, recently valued at $3.3 billion (the company confidentially filed documents with the Securities and Exchange Commission in December for an initial public offering), now has an annualized run rate revenue of over $100 million a year. His company is tapping into a deeply endowed client base, he said. “Nations and municipalities have very large budgets for public transportation, and even if you’re talking about communities like Montpelier, there are thousands of them around the U.S. Working with them is, in its own right, a big business.”
In Ramot’s view, microtransit is a noble business worthy of growth. “If you care about providing transportation to folks who don’t have a car or have mobility challenges, I think the solution we’re providing is the only solution.”
In Vermont, microtransit took root four years ago when a group named the Sustainable Montpelier Coalition proposed it as a tool for reducing the town’s need for vast parking lots.
One morning I met up with SMC’s public engagement director, Elizabeth Parker, for a downtown tour considering Montpelier’s problems and potential. Parker arrived at Bohemian Bakery, on Main Street, with her miniature dachshund, Cece, stowed in a battered 30-year-old monogrammed L.L. Bean tote bag. Parker described herself as having been “car-liberated” for nine years. “When you walk everywhere, it changes the way you relate to your community,” she said.
We strolled down to the banks of the Winooski River, into a mostly vacant parking lot built for the Vermont state employees who, pre-Covid, helped swell Montpelier’s daytime population to 15,000. Parker believes that MyRide can lure 1,000 Montpelier-based commuters out of their cars and land can be freed up for affordable housing. “We are an aware community that gets that there is an environmental crisis,” she said, giving voice to a scheme still more hope than solid plan.
Sustainable Montpelier is pitching MyRide to what some transit experts call “choice riders.” Like Parker, these are people who could drive but might be leery of the hassles of traditional bus travel — the long waits, for example, and the milk-run slowness of fixed-route travel. The group’s website touts MyRide as “quick, direct and works with your schedule.”
But the service frequently doesn’t work for fixed route’s most loyal constituencies, senior citizens and disabled people, who are often relatively poor and technologically challenged. When I visited Montpelier’s Pioneer Apartments, a public housing complex, building manager Lorna Swann had nothing but disdain for MyRide. “We have physically disabled people here, and also mentally disabled,” Swann said, “and when you take away their routines, it’s very disturbing. They’re confused.”
Resident Judy Taplin, a 71-year-old retired Walmart clerk, told me that she doesn’t have a smartphone and added, “Once when I called MyRide to arrange a pickup, they told me, ‘We have 72 other riders ahead of you. You’ll have to wait.’ I refuse to go through that crap again. Now I just walk to the grocery store.”
Citywide, MyRide is attracting about 2,700 riders a month — about half the pre-pandemic average for the fixed routes it replaced.
As Jarrett Walker, the consultant, points out, if finances are finite, on-demand transit cannot scale. “If ridership goes up,” he says, “the whole system falls apart. Either you have to keep moving riders closer to a fixed route, or you have to put out more buses, which won’t be possible if you’ve already eaten up your budget.”
Vermont is going to keep trying, in any case. The tiny state, with a population of just over 600,000 people, spends almost 10 times as much on transit, per capita, as the average U.S. state with a heavy rural population, according to its 2020 Public Transit Policy Plan. It’s now poised to study the feasibility of on-demand buses in 12 more communities scattered across the state.
Just before leaving Montpelier, I met up with a man involved in producing a study looking at the possibility of having microtransit in a remote tri-town nexus where 12,000 people live amid cow pastures and sub developments northeast of Burlington. Stephen Falbel is the president of Montpelier-based Steadman Hill Consulting and a Harvard grad with a humble New Englander’s pride. He walked to our meeting at Montpelier’s transit center in a Red Sox windbreaker, then told me that in the tri-towns the buses would be driven by 30 on-call volunteers — and would look for inspiration to the islands on Lake Champlain, which divides Vermont and New York State. There, he explained, a robust community group provides seniors rides and builds them gratis wheelchair ramps. “On the islands,” Falbel said, “there’s a sense that, ‘We’re alone here. We need to take care of each other,’ and Vermont considers itself an island in the country.”
A MyRide bus roared by outside, and I pointed out to Falbel that it was empty. “Look, it remains to be seen whether microtransit will work in a place with a population as low as Montpelier’s,” he said. “There has to be a massive cultural change for people to start taking the bus. It’s called a pilot project for a reason. We’re just trying it out.”
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