Housing Complex

Competition Sucks

Much has been made over the last few months about the District's decision to auction off spaces to car-sharing companies, rather than allow the market's first mover—Zipcar—have them all for free. The argument for doing so is that charging market prices for the use of curbside parking spaces will raise cash for the city, and that competition will lead to better services and lower prices for consumers.

Some observers complain that forcing car-sharing companies to pay a lot more than an individual car owner would for their space is a tax on something that the government should instead be encouraging. Others point out that companies won't necessarily lower their prices that much to attract customers.

The bigger question, it seems to me, is whether we need competition at all. The inaugural auction led to Zipcar losing 80 percent of its curbside parking spaces. That doesn't dramatically impact the total number of spaces available to Zipcar users, since most of them are on private land. But it definitely lessens the utility of the service. Furthermore, I presume that the new players in the market will be going after private spaces as well, which will confine Zipcar's ability to expand, and likely drive up the prices of those spaces.

The thing is, car-sharing isn't like many other markets, where you're free to choose between a bunch of options that have equal access to resources. There's a finite number of spaces, so the convenience of belonging to any one service—and let's face it, nobody wants to pay membership fees for more than one—decreases with the number of companies they're split between.

Sure, it's never a good idea to allow one company to have a complete monopoly. But governments have long coped with this problem by creating regulated monopolies, like power utilities, that are subject to price restrictions and have an obligation to provide equal access to services.

This makes most sense in systems where greater scale conveys direct benefits to users. Think of it in terms of Capital Bikeshare: The city awarded one contract, and sets prices, and is helping the contractor build out more infrastructure as quickly as possible. If the city allowed multiple competitors into the bikesharing market, consumers would likely lose out.

It's water under the bridge now, but I'm surprised more thought wasn't given to the idea of awarding Zipcar an exclusive contract for public parking spaces in return for certain concessions, like say expanding its reach in underserved areas and keeping prices at reasonable levels. Now, I just have to walk further to pick up a car.

  • Native American JD

    Because that would be socialism and lord knows that when socialism works, capitalist thieves lose!

  • http://twitter.com/elcolin Colin

    Regulated monopolies suck -- the last thing we need is another Comcast.

    As a Zipcar customer I am glad that they will finally face some competition. If history is any guide that will only provide benefits.

    Oh, and the supply of parking is only finite in the same sense that food or anything else is finite. More parking spaces can always be built or rented out for the right price.

  • http://fluff.info/blog b

    It's still early. Maybe you'll find that the spot nearest your house is taken up by somebody with lower prices or better service. Maybe whatever new competitor and Zipcar will arrange cross-service sharing arrangements. Maybe the new companies will flop out of business quickly and sell their parking-rights asset to Zipcar anyway. Maybe one of the new competitors will win out and you'll cancel your Zipcar membership in two years.

    You're right that car sharing is a bit like other geographically-based monopolies, because lots of people only care about the car closest to their house, but it's also open competition, because users find themselves needing a car on other blocks of the city pretty regularly, and often have a real choice as to which spot to walk/transit to.

  • Really?

    Boo-Hoo! Zip car had the instead track when ole boy Gabe was in charge of transpo and who happens to be a part owner. They were able to corner the market and brand themselves in the DC area

    What you didn't share is that zipcar also runs the fleet for DC Gov't.

    So they won't be hurtin if they get a little competition.

  • CP

    Competition is good. IMHO -- Zipcar has lots of customer service issues. Having lived in NYC, other car sharing companies can be much more customer friendly. (i.e., giving you time credits for filling up the car, crediting you time you don't use). And cheaper rates to boot! I can't wait for more choices here in DC.

  • Eli

    I'm not following your argument wrt Capital Bikeshare. Isn't it profitable? In theory, then, they would have an incentive to expand even without the city's help.

    Your point about the limited number of parking spaces is well taken--more competition might lead to a rise in prices (assuming efficiencies aren't found elsewhere, as they probably will be). But the response is no different from what smart-growth people tell drivers who complain about the high cost of car ownership all the time: Take public transportation. Why should driving be cheap?

  • Tom M.

    I always try to agree with Lydia. After all, shouldn't the same argument hold for rental car companies as for Zip Cars? Wouldn't we all be better off with "wasteful competition" of multiple choices at the airport with multiple parking lots, shuttle buses, rental desks? It would be "more efficient" with a government regulated monopoly. Also, the same argument might hold for airlines -- too many of those bastards flying only partly full planes. Let's cut down the competition and set a rate of return over costs. They will manage costs very efficiently the. Come to think of it, competition is generally a bad idea. Too many choices. Too many variations of price, costs, convenience. Let's have government pick the winners. Government, after all, is doing such a good job for us in their core areas of public safety, education, environmental protection, DMV services, etc.....

  • DCUnionGuy

    One of the problems with regulated monopolies is the issue of regulatory capture. Staff move between industry and government and back again. One company gets in good with politcians, builds relationships with regulators etc and it all can go south pretty quickly.
    Not that such a thing could ever happen in our fair City of course :)

  • Paul S

    Gotta agree with the others. Private parking spaces really aren't so scarce that for-profit companies can't afford them. The competition may lead to marginally higher prices but not to the extreme that the answer is to create a regulated monopoly.

  • yup

    Private lots are useless when I have to jump through hoops to get in & out. It's called ZIPcar, people: what's the point of renting for an hour when I have to wait for someone to let me into the building, have to walk around 5 minutes looking for the car, then have to find the keycard to get me out of the lot? Street parking was soooo much easier :/

  • Anon

    I love your article Lydia. It really highlights a bit of raging hypocrisy on your part. You were elated with the demise of the tourmobile and its exclusive contract but somehow believe that DC should given an exclusive contract that stifles competition in a DIFFERENT area. Why? Because you wont have to walk as far.

    Sweet.

  • drez

    I have to agree with Lydia. When carsharing first came to dc there was zipcar and flexcar, and it was a pain in the ass to pay redundant fees to belong to both.
    People benefit from the standardization.

  • http://blog.robpitingolo.org Rob

    Like it or not, markets like this trend toward monopoly. Already, we once had two competitors that folded into one. I can see a future with several competitors eventually becoming fewer competitors.

    Look at airlines for cues. There are fewer and fewer airlines these days because companies take advantage of economies of scale and operate more efficiently.

    I've had great customer service with Zipcar. They've gone above and beyond for me on several occasions. I don't expect everyone will have had the same good experience, but I do think that what people hate aren't monopolies, per se, but rather "bad monopolists".

  • Christine

    I agree with Lydia too. Zipcar got only 12 of the 200 spaces they had access to previously. The remainder of the spaces are going to be split among three vendors. I'm not going to belong to four car sharing services, so this means my access to on-street car sharing has been reduced by 80%. I don't know what effect this will have on Zipcar, but it's bad for me as a customer.

  • Anon

    Your real gripe is with Zipcar who was too cheap to bid for the rest of the parking spots. Dont start getting mad at the invisible hand because Zipcar chose to do something different.

  • Scoot

    Zipcar estimated that less than 10% of its fleet would be impacted by the loss of those 74 on-street spaces, and it plans to acquire private parking spaces to offset the loss. If you divide the percentage of impacted vehicles by the number of Zipcar members in the immediate vicinity of the public spaces , you end up with an incredibly small chance that any one customer will be severely impacted by the change.

    But principally, The District of Columbia does not really have a demonstrated interest in forgoing hundreds of thousands or even millions of dollars in revenue so that a handful of residents in specific neighborhoods won't have to walk an extra few minutes to access a private car sharing service.

  • Scoot

    @ Christine "Zipcar got only 12 of the 200 spaces they had access to previously."

    That's not true -- Zipcar got access to 12 of the 84 spaces they had access to previously.

  • please

    Yeah, even at a base bid of $3,600 bucks a year, Zipcar got off easy.

    For those of you whining that Zipcar pays more for their spots than do individuals who won private cars, you are 100% wrong because you are comparing apples to oranges.

    Comparing residental street parking to high cost metered downtown street parking is just dumb. Zipcar had free spots for years (then highly subsized ones) in high traffic commercial metered areas like 14th st, K street, 15th st etc. Places where the rest of us feed meters 2 bucks an hour, 12 hours a day 6 days a week for the privlige to park.

    So lets see, assuming $3,600 bucks a year, spread over 6 days a week (Sundays are free for everyone) that means Zipcar is paying $11.50 a day per spot. Since these spots would otherwise be earning the city $2 bucks an hour, that means Zipcar pays the market rate to lease these spots for 6 hours a day, getting them for free for the other 6 hours.

    Seems to me that Zipcar (and the others) are still getting a substantial subsidy to have dedicated 24/7 parking in the most high traffic and expensive areas in the city.

  • http://urbanplacesandspaces.blogspot.com Richard Layman

    please -- so how much "substantial subsidy" is gained by car owners with residential parking permits? Thousands of dollars. Why should they, car owners, be subsidized, and not me, a "car user" albeit of Zipcar. But by using Zipcar we help reduce the demand for parking inventory by 10-15 spaces per car, which is a good thing for the city.

  • Anon

    Richard - you're missing the point. No one is arguing that car sharing shouldnt be subsidized. Rather, the DC government shouldnt be picking the best company to get hte subsidy. They should set a subsidized price and open the market to any qualified car sharing company that wants to purchase them. There should be no favorites and there should be stiff competition in order to force car sharing companies to excel.

  • Pingback: Should Government Regulate the Car Sharing Industry? « Spatial Orientation

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  • JW

    "If the city allowed multiple competitors into the bikesharing market, consumers would likely lose out."

    Lydia, dear, got to school; learn something.

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