III Platforms in the Transport Industries

Transport provides vivid examples of the transformation of the network industries, as digital platforms build a new network - a digital network - on top of the traditional transport infrastructures and services.

Over the past two centuries, most transport modes have evolved into network industries by connecting originally scattered assets and exploiting them as coordinated large-scale networks. Highly efficient networks have emerged in maritime transport, with huge container ships connecting a global network of mega-ports, aviation, with hub-and spoke intercontinental networks, and railways, regional, long-distance, and high-speed. However, transport modes still work mostly in silos, with little coordination between them. Coordination is left to passengers and shippers, with the support of expensive and often unreliable intermediaries.

Platforms have the potential to create network effects inside a transport mode by facilitating the interaction between a fragmented supply and an even more fragmented demand. In aviation, platforms such as the Sabre and Amadeus booking systems provide good examples, both of which are discussed in greater depth below.

Furthermore, platforms can also build new networks in previously fragmented markets such as road transportation. This is the case of Uber in urban mobility and BlaBlaCar in long-distance services.

The ultimate frontier for transport platforms is to transform all the transport industries into a multi-sided market, a network of networks with digital platforms coordinating transport modes to provide a seamless door-to-door experience for passengers and shippers. Massive new direct, indirect, and algorithmic network effects enabled by platforms are indeed transforming transportation.

Consequently, traditional transport providers have started to be disrupted. Some are being substituted, sometimes in a quite drastic way (such as taxis), sometimes at a slower pace (railways, for instances). Nevertheless, the most transformative disruption is the more subtle evolution of transport into a global multi-sided market. Traditional services become mere commodities, intermediated by platforms. Traditional players are increasingly working for an invisible algorithm that determines their fate.

The regulatory implications of such transformation are evident. Transport is a general interest service. Over decades, a convoluted mesh of rules and procedures has been built to protect the general interest, but existing regulations were not designed for the new market structure. The regulations sometimes obstruct the efficiencies generated by platforms and sometimes benefit platforms, as legacy players are artificially fragmented. However, the existing framework cannot meet the traditional general interest objectives in a completely new environment.

Chapter I I

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