Contact Us


Disruptive Competition Project

655 15th St., NW

Suite 410


Washington, D.C. 20005

Phone: (202) 783-0070
Fax: (202) 783-0534

Contact Us

Please fill out this form and we will get in touch with you shortly.
Close

Dockless Bike Sharing Companies Encounter Regulatory Speed Bumps

· October 27, 2017

Dockless bikes are being hailed as the next big ride sharing trend.

Already popular in many Asian cities, stationless bike sharing is trying to expand into U.S. and European cities. However, the same companies that saw meteoric popularity in China are encountering pushback from the public, regulators, and incumbents in new markets. This may stall plans for expansion or, at least, prompt companies to adapt their strategies.

Dockless bike sharing leverages the power of smartphones to make acquiring a bike more convenient than ever. Customers can unlock the bikes with an app or code available on their phone and after their trip, instead of returning them to designated bike racks, the bikes lock themselves and therefore can be left anywhere in a city.

Dockless bikes first came on the scene in China a couple years ago and quickly became a staple form of transportation for commuters. They are now hailed as having “revolutionized urban transport” in China, where there are currently more than 16 million dockless bikes from over 70 companies.

Xue Huang, head of communications for Mobike, one of China’s leading bike sharing companies, attributes their fast expansion to dockless bikes’ low upkeep (they do not have gears or a chain), the convenience of being able to park them anywhere, and their cheapness (they cost about $1.30 per hour).

As Asian-based bike sharing companies now set their sights on the U.S., many predict they will thrive here as well. Specifically, they’re optimistic because these companies have already “figured out basics like how to enter a market, how to build internet-connected bikes that lock themselves, and how much to charge.”

What’s more, “dockless companies can [reportedly] enter a market without asking permission.” That is, investors assert that they’re poised to expand quickly because “they only need to leave some bikes around the city, and anyone with the app can start riding.”

However, in recent months such strategies have increasingly been met with public ire and regulatory red tape, perhaps signaling a bumpier ride may be in store.

Technically dockless bikesharing companies do not need permission to enter a market; however, as the industry becomes increasingly crowded, so can cities, which has prompted some regulators to act.

In recent months Paris has seen the introduction of Chinese bike sharing companies Ofo and Mobike, in addition to the Singaporean startup oBike. In response, Jean-Louis Missika, Paris’ deputy mayor for urban planning, revealed plans to “ask the government to give the city the power to regulate [dockless bikes] under the form of a license.”

Missika’s plan to (somewhat) preemptively regulate the dockless bike sharing industry reportedly stems from Uber and Airbnb’s “break into an unregulated Paris market… in recent years.”

In response Paris passed legislation requiring Airbnb rentals to be registered, and has been in talks about regulating Uber as a transport company, which may significantly impact their standard business practices. It’s not yet clear what regulation Paris has in store for dockless bikes, however.

Similarly, Brussels’ mobility minister, Pascal Smet, is expected to establish a legal framework in response to the entry of dockless bikes “without contacting region authorities.”

Meanwhile London authorities have already confiscated more than 130 oBikes that were blocking necessary sidewalks and pathways. In response, oBike issued a statement in which it asserted that it is “committed to working with city officials to make sure its bikes don’t get in people’s way, which has been a problem back in China, where clusters of bikes have clogged subway entrances and storefronts.”

Many Chinese citizens attribute these congestion problems to the competitiveness of the market, which has led “the supply of bicycles [to] far exceed demand, bringing chaos to sidewalks, bus stops and intersections.”

In some cities thousands of bikes have already been removed, parking restrictions have been imposed, and bike vandalism has soared — causing some startups to shut down completely.

Although some attribute vandalism to public frustration over clogged streets and sidewalks, police have also pointed to “disgruntled rickshaw and taxi drivers upset that bike-sharing has sapped their business.”

Although there is no evidence of incumbents resorting to vandalism in U.S. cities, stationed bike sharing companies have been resistant to permitting dockless bike sharing companies to operate in cities in which they are present.

San Francisco was planning to issue its first permit to Jump, an electric station-less bike sharing company, however, Ford GoBike, and its administrator Motivate, lobbied against granting this permit, claiming they have an exclusive contract to operate in San Francisco — specifically, an agreement to “offer steeply discounted programs for low-income communities” in return for an exclusive market position.

Jump’s entry into the market with cheaper, more convenient bikes, potentially threatens this agreement.

Although Ford/Motivate has not taken legal action, the disagreement prompted the Metropolitan Transportation Commission to start a “dispute resolution process.

Regardless of the outcome, stationless bike companies will have to comply with newly passed legislation in San Francisco that “requires companies to ensure that their bikes meet safety standards and are accessible to everyone, especially in disadvantaged communities.”

The legislation was reportedly prompted by Bluegogo — another stationless bike startup that drew ire and prompted safety concerns for dropping bikes throughout the city, the strategy they had employed in China, and for violating city zoning laws.

New entrants received similar pushback in New York where the bike sharing company Spin canceled a demonstration in Queens after receiving a cease-and-desist letter from the city’s transportation authority.

The letter was reportedly prompted by safety concerns; for example, Eric L. Adams, Brooklyn’s borough president, asserted he wants to avoid the “bike sharing on steroids” he experienced in Beijing and Shanghai. “It was like bike sharing on steroids… some were lined up but others were just dropped off and piled up like the riders were in a race to catch a train,” Adams noted.

However, Spin may be appealing because while Citi Bike (which has an exclusive contract to operate in the city) offers 10,000 stationed bikes in Manhattan and Brooklyn, it does not operate in other boroughs, including Queens.

Motivate, which operates Citi Bike, perhaps in response, expressed interest in expanding “to all five boroughs.”

Acquiring the necessary approvals and installing bike stations, however, may be a more significant regulatory burden than the dockless bike model.

Competition

Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.

Innovation

New technologies are constantly emerging that promise to change our lives for the better. These disruptive technologies give us an increase in choice, make technologies more accessible, make things more affordable, and give consumers a voice. And the pace of innovation has only quickened in recent years, as the Internet has enabled a wave of new, inter-connected devices that have benefited consumers around the world, seemingly in all aspects of their lives. Preserving an innovation-friendly market is, therefore, tantamount not only to businesses but society at large.