Monday, December 17, 2007

Anti-competitive or Too Successful?

As reported in French newspaper, Les Echos, and Thomson Financial, Clear Channel's French subsidiary has sued the City of Paris and JCDecaux calling its practices anti-competitive. Paris has suggested expanding Velib' to its suburbs with 300 stations and 4,500 bikes, for a cost of about $10 million per year. Clear Channel's concern is that the expansion of the bike-sharing program would put them at a disadvantage because JCDecaux's Velib' is already in-use in the region. So is the problem anti-competitive or Velib' is too successful? This may be first lawsuit of its kind and undoubtedly won't be the last.

Once an advertising company provides a successful bike-sharing program in the core of a region, regardless of the region, they will have a de facto monopoly on that region. Folks from the region will come to associate the name of the bike-sharing program with the concept itself and request its expansion into their jurisdictions. As a public policy it makes most sense to have the bike-sharing network all of the same technology, rather than localized technologies that are incompatible. So there will be a political push for this as well. It would be foolish to have a small program run by Clear Channel in the Paris suburbs with a highly successful JCDecaux program in the city.

I see this as another reason governments should demand that bike-sharing be provided as a singular service, unbundled from the other services any company, especially advertisers, such as Clear Channel and JCDecaux, provide. (Barcelona did and got Clear Channel to provide Bicing. JCDecaux provides the advertising.) The two services are totally unrelated and should remain so. Advertisers are good at just that and should remain focused. Bike-sharing is a transit service and, I believe, should be provided by an organization that can keep this as their focus. There are examples of advertisers adeptly running bike-sharing programs, however, there shouldn't be any question in the future about their priority and therefore separating advertising from bike-sharing would ensure this.


Anonymous said...

An interesting problem, because it seems to me that at the same time the city is selling their advertising space at the cost of bicycles rather than euros.

But, I suppose that given the fact that jcdecaux probably has some sort of rights to their specific design, clear channel could never take over the system. Perhaps Paris should have implemented their own system, and had the company with the best service run it.

Or perhaps I have completely misunderstood the backstory.

Anonymous said...

Separating bike-sharing from advertising contracts is all well and good, but how are municipalities to pay for a system without it? Maybe when there is bike sharing in the US other cities will see it as a needed amenity, but for now I can't imagine any city dropping several hundreds of thousands of dollars on a program that is unlikely to even break even, let alone generate revenue. How is Arlington addressing this?

Paul DeMaio said...

Excellent question. One way to do this is to have advertising and bike-sharing unbundled and use the revenue brought in from the advertising contract to pay for the bike-sharing service. This will ensure the jurisdiction is getting the best deal on both components.

A second model is to pay for the bike-sharing with outside sources. If one jurisdiction is unable to pay for a bike-sharing service, making it regional and having two or more jurisdictions share the cost would make the price tag more reasonable. Cost-sharing for bike-sharing.

Bus and rail services are offered by jurisdictions at-cost and no profit is made. It would be nice for bike-sharing to be profitable, but there is no mandate that it must be as other forms of public transit are not.

Paul DeMaio

Anonymous said...

Interesting, my advice is that needs a de facto standard for BS systems in order to allow competition between the different operators

Paul DeMaio said...

Interesting idea on the de facto standard. Would you explain more about what you'd like to see?

Nic McPhee said...

I can't speak to what anonymous was thinking, but I had a similar thought when I first read the post. If there was money in it (which is a big rub I don't immediately know how to get around), it would make sense to create some sort of standard that both the bikes and the stations would need to follow. Then different people could create stations, and different people could purchase groups of bikes and add them to the system without any concerns about interoperability.

Since most parties don't see this as a money making concern, however, it's not clear why people would want to just "jump in".