One of the most intriguing developments in urban transit this last decade has been the emergence of “microtransit.” It’s best defined as combining “fixed-route” transit, like your local bus that drives on the same route every day, with the more dynamic features of ride-hailing, often using smartphone applications to facilitate rides.

Recently, rideshare provider Via and the city of Arlington, Texas announced a partnership wherein the city and the federal government will finance the cost of its service in that city. Via operates by grouping rides requested through a smartphone into single vehicles on every trip. Several transit agencies are looking to partner with Uber and Lyft to provide direct service for disabled constituents, in lieu of internal paratransit services, which are costly and inefficient. L.A.’s Metro is going a step further and attempting to operate its own demand-response service.

Not all of this microtransit expansion is dependent on new government subsidies: San Francisco-based Chariot is expanding into the New York City market, as well as into Austin and Seattle. Via, which calls New York home, has independently expanded into Chicago and Washington, D.C. Just this week, ride-hailing pioneer Uber announced its new ExpressPOOL program, which will assign pick-up points to riders and serve multiple passengers in one vehicle.

The Arlington development, however, is most intriguing. As CityLab reports, Arlington has little mass transit, save a single bus line which will be eliminated once the Via program goes into effect. This makes Arlington the first American city to host a de facto private transit system, and raises questions about market forces providing transit, particularly if it were to become independently profitable.

Critics of such for-profit options fear the creation of an unequal system, in which lower-income riders would be shut out. Via has a notable advantage here - even when unsubsidized, it runs on a flat fee ($5 in the New York market and $2.95 in Washington), unlike Uber and Lyft, which assess fares based on distance and demand. In Arlington the subsidy will decrease the fare to $3 - around the same price as many public transit fares elsewhere. Another concern is the smartphone-centric nature of such services. Like most microtransit, Via customers must use an app (and by extension, have a bank account or credit card to link it to). This practice emerged not just from customer convenience, but as a way to classify microtransit separately from taxi service, which is subject to prohibitive barriers to entry. Arlington should examine its regulatory approach to such services and allow Via to experiment with a variety of payment options.

During this public-private transit experiment, the real test for Arlington will be if it allows for competition, or reverts to a restrictive covenant wherein Via is insulated from competition, and remains the sole operator. If the latter occurs, then private transit really will remain dependent on subsidies to keep fares low. In some cases, competition between private providers has not had the effect of decreasing fares because of parasitic competition. One possible way to facilitate a competitive market which would not end in cannibalization would be to auction “curb rights,” enabling Via and potential future market entrants to guarantee an exclusive space to board passengers without fear that a competitor could just pull into the same stop minutes before its vehicle arrived.

In order to fully explore microtransit’s potential to provide mass transit, Arlington and other cities will have to lean towards a more, not less, diverse market with free entry.

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