Jump to section
Transportation Network Companies
TNCs create additional demand for curb space to load passengers and delivery food and app-based point-to-point services offer car access without ownership.
Transport network companies (TNCs), also known as ride-hailing companies, provide on-demand transportation services for passengers. In contrast to taxis and other more traditional for-hire transportation services, TNCs typically do not maintain their own vehicle fleets or operate conventional dispatch centers. Instead, passengers request rides directly from private drivers under contract with a TNC, usually through the use of a smartphone app. Noteworthy examples of TNCs include Uber and Lyft.
Variables to consider
Ride Types – Individual vs. Shared
Typically, TNCs offer two distinct types of ride requests: private and shared. Private rides allow one person or a group traveling together to request a ride from origin to destination, similar to how taxis have generally worked. In contrast, the shared ride option allows for multiple unrelated parties with pickup and dropoff locations along a similar route to share a vehicle, usually at a discount from private ride rates. Both Lyft and Uber have shared ride options integrated into their platforms, but the availability of a shared ride depends on the local context and the relative density of origins and destinations in an area. While shared rides align better to city goals of more efficient vehicle travel, both drivers passengers often chafe at added time and uncertainty that shared rides create.
Dynamic Pricing
Unlike more conventional transportation services such as taxis and shuttles, which typically charge fixed rates based on destination and distance travelled, TNCs may dynamically adjust their pricing, which is also known as surge pricing, based on ride request volume and driver availability. This can result in rates that are considerably lower than taxis, particularly during periods of low demand. However, the opposite can prove true during periods of high demand, with TNC rates sometimes far outstripping those of taxi or shuttle services operating during the same time period.
Innovation Drivers
TNCs can provide greater convenience than personal vehicles by providing point-to-point service without the need to park at the destination, which has proven especially popular at airports and areas with concentrated nightlife. When surveyed, the top reasons riders have cited for taking a TNC are to avoid drinking and driving, difficulties finding parking at their destination, and the price of parking. They can also be more convenient than conventional taxis and shuttle services by offering app-based ride requests and payments, upfront pricing and route previews, and often shorter wait times due to the more flexible nature of their ad hoc driver network.
TNC service areas may be more extensive than those of taxi and shuttle services, allowing for greater mobility options across all geographies. A study conducted in Los Angeles, for instance, found that Lyft served 99.8% of neighborhoods in Los Angeles County. Additionally, TNCs are not limited to individual metropolitan areas, allowing users to request rides from the service even when travelling.
TNCs have low barriers to entry for drivers and are generally easy for riders to access. Driver requirements are fairly minimal, with most TNCs only requiring a car manufactured within the last decade in good condition, a basic background check, and a standard non-commercial driving license for most baseline positions. Professional insurance is usually not required. Drivers are also able to work a self-set flexible schedule. In general, riders only need access to the app and a credit or debit card in order to request a ride.
Photo by Afif Kusuma on Unsplash
Barriers
Legislation governing the operation of TNCs varies from place to place, with some state, regional, and local governments have specific requirements, such as special licensure for transportation services, that TNCs have not always met. This has resulted in TNCs sometimes operating illegally and has sparked public and governmental backlash against TNCs based on safety concerns, questions about TNC reputability, and other issues related to incompatibility with existing regulations. TNC fees vary considerably and fund a wide range of city or state initiatives.
TNC services can be inaccessible to people with special travel requirements, such as people in wheelchairs, as well as people without app-capable devices or credit/debit cards. TNCs can also be expensive compared to options such as public mass transit, making affordability a potential barrier for lower-income populations. While many people earning low incomes use TNCs to fill existing gaps in the transportation network, price volatility also creates uncertainty and stress.
TNCs have shifted from financial uncertainty to relative stability in the past decade. Uber first announced profitability in 202 and Lyft in 2024.
Politically, many cities consider TNCs as challenging, and see them as contributors to pollution, congestion, and an erosion of active transportation. Some cities dedicate TNC fees to fund wheelchair accessible vehicles (WAVs) and set service standards for WAV wait times and and cancellation rates. Questions about the classification of drivers as independent contractors have also come up, especially since California’s passage of AB-5 in September 2019, which reclassify contractors as employees. That law was upended in 2020 with the passage of Prop 22 which gave workers limited benefits but prevented them from being considered employees. In August of 2021, a judge found this law unconstitutional extending uncertainty about the long-term classification of drivers.
Key players
Uber Technologies, Inc. is one of the largest TNCs in the world and one of the first to find widespread success. In addition to ridehailing, Uber offers an app-based food delivery service, UberEats. Uber launched as UberCab in 2009.
DiDi Chuxing Technology Co. (滴滴出行) is the largest TNC in the world by number of users, and the main TNC used in the People's Republic of China. DiDi has branched out into automotive maintenance, insurance, financing, and even vehicle design and production. Didi's continued growth has come into question due to pressure from the government in China. DiDi launched as Didi Dache in 2012.
Lyft, Inc. is the second-largest TNC in the United States, after Uber. Lyft provides standard ridehailing services but has also expanded its operations to include docked bikeshare. Lyft launched in 2012.
Grab Holdings Inc. is one of the largest TNCs operating out of Southeast Asia. Grab primarily focuses on ridehailing, ridesharing, and food delivery services, but has also invested heavily in research and development. In 2015 it opened a research center in Singapore, and in 2016 it opened a tech hub in Seattle in a bid to attract additional talent. Grab launched as GrabTaxi Holdings Inc. in 2012.
Other locality-specific TNCs can also have a significant presence in their particular areas of operation, often by offering services tailored to the specific needs and economic conditions of their locality in a way that a much larger organization such as Uber or DiDi might struggle to match. Some examples of locality-specific TNCs include Pathao (India) and Gokada (Nigeria).
Use case examples
People use TNCs for convenience and to save time. By using a TNC, a traveller can avoid the hassle of driving to and from an event or a location, finding and paying for parking, etc. TNCs can also be faster than some forms of transportation, such as public transit, or more cost-effective than rental cars if they only have limited transit needs when travelling.
TNCs can provide expanded mobility options for those who cannot or choose not to drive for a variety of reasons. Having access to a driver and car may expand transportation options for people with physical disabilities, seniors, and people without driver’s licenses. Illness, fatigue, or intoxication are also cases where TNCs can provide a safer transportation option.
TNCs can fill gaps in public transit. For people who live outside of public transit service areas or who travel during times when public transit is not running or is running on a limited basis, TNCs can either complement public transit by providing first-mile/last-mile connections, or completely replace it. TNCs may also often be preferred to other transit options depending on the time of day and general perceptions of safety.
Pilots & developments
March 2009 – TNC giant Uber first launches in San Francisco, California.
July 2010 – The first trip is taken using the Uber platform.
June 2012 – Lyft, the second largest TNC, launches in San Francisco.
September 2013 – California becomes the first state to define and regulate TNCs when the California Public Utilities Commission votes on Decision 13-09-045. The definition of a TNC according to the California lawmakers is: “an organization whether a corporation, partnership, sole proprietor, or other form, operating in California that provides pre-arranged transportation services for compensation using an online-enabled application (app) or platform to connect passengers with drivers using their personal vehicles.”
March 2014 – Seattle City Council votes to cap the number of TNCs operating in the city and the number of drivers each TNC can have
April 2014 – Uber’s operations spreads to 100 cities around the globe.
June 2014 – Colorado becomes the first state to enact a law regulating TNCs.
December 2015 – Uber announces that they have provided 1 billion trips since their launch.
February 2016 – The first public-private partnership between a TNC and public agency begins when Uber and Pinellas Suncoast County Transit Authority (PSTA) launches the Direct Connect program, a program allowing users to book Uber trips to local transit stops.
August 2016 – The first class-action lawsuit against a TNC is filed in California when a group of Uber drivers sue the company, arguing that California’s labor laws dictate that drivers should not be classified as independent contractors, but instead as employees and subject to reimbursement of business expenses.
May 2016 – Uber and Lyft cease operations in Austin, Texas when voters in Austin approve a ballot measure that increases the rules and regulations for TNC operations, including a fingerprinting database for drivers and increased data sharing requirements.
May 2017 – Innisfil, Ontario, Canada becomes the first town to use a TNC as a public transportation service, subsidizing all Uber rides within city limits.
June 2018 – Uber announces that they have provided 10 billion trips since launching.
August 2018 – The New York City Council votes to cap the number of licenses for TNC vehicles for one year, making it the first major U.S. city to do so.
November 2019 – Statista publishes statistics about Uber and Lyft’s market share, finding that in 2017 Uber accounted for 74% of all ridehail trips and Lyft accounted for 22%.
December 2019 – Uber releases their first safety report outlining safety precautions and the number of fatal crashes, sexual assaults, and murders associated with the Uber platform.
March 2020 – COVID pandemic severely reduces TNC use, bringing US trips down by more than 70%.
August 2021 – Judge finds Prop 22 unconstitutional. Prop 22 was a California ballot initiative that became law in the state in 2020 and ensured drivers were not classified as employees.
Related Impacts
Parking & Urban Form
How will the reduced need for parking caused by the proliferation of new mobility technologies impact urban form?
Transit
Transit is the most efficient way of moving people, but many transit systems are facing challenges. What happens when AVs arrive?
Street Design
As new transportation modes emerge and demands for street space increase, how can the needs of all modes be met?
See something that should be here that isn't? Have a suggestion to make?