Vélib’ – Freedom Bikes – Definitely NOT Free, But Worth It!

 

 

I recently returned from Paris where I got a glimpse at the future of urban transportation. No, I didn’t see any Segway Personal Transporters, nor did I spot a carbon fiber, electric Tesla Roadster, but what I did experience was far more powerful: widespread, on-demand, free biking. An urban bike revolution has taken Paris by storm and is beginning to sweep Europe, if not the world. After many years of failed or only trial-scale community bicycle programs, a perfect storm is fueling their renaissance. The missing pieces that have come together are:

1. an off-the-budget advertising-subsidized funding model allowing grand scale projects to sail through city bureaucracies, bypassing the traditional “no tax” roadblocks
2. city leaders finally serious about reducing car congestion and related pollution
3. green-aware citizens and politicians wanting to reduce greenhouse gases and to be part of the green movement
4. a subscription plan that makes the majority of the rides seem “free”
5. a commitment to implement on sufficient scale that the program is reliably convenient for short one way trips
6. a more health conscious public in search of more regular exercise

Leading this effort are socialist French Mayors Gérard Collomb in Lyon and Bertrand Delanoë in Paris (pictured above on a Vélib’ bike), who together with French media giant JCDecaux, put together the two largest and most successful urban bike programs in the world. Paris’ high profile Vélib’ (play on words “vélo libre”, in English free bike, freedom bike) program has rapidly installed 14,000 bikes at 1,000 stations throughout Paris since the program began July 15^th and they’re adding 500/week until the end of the year. The resulting 20,600 bikes at 1,451 stations will approximate 1 rental bike for every 100 Parisians. For the most accurate details on Vélib’, I highly recommend the 31 page Vélib press kit (PDF) put out by JCDecaux and the Marie de Paris. While all the kinks are still being worked out of the system, JCDecaux seems to be doing a decent job maintaining the bikes in good clean working order and load balancing supply to meet demand by shuttling bikes from full stations to empty ones. Before renting a Velib bike, you must purchase a subscription for €1 ($1.40)/day, €5 ($7)/week, or €29 ($40.60)/year paid by microchip-equipped credit card (which are used pretty much everywhere in the world EXCEPT the U.S. Some people said their U.S.-issued American Express card was accepted, others said theirs wasn’t. My VISA, sans puce, could not be read by the kiosk.) After that, the first 30 minutes of every rental is “free”. Taking a longer trip? Pay €1 ($1.40) for the 2^nd half hour, €2 ($2.80) for the 3^rd, or €4 ($5.60) for each 30 min block after that. The program is structured to encourage short commutes, not daily vacation rentals. The desire is to keep the bikes in constant circulation. In fact, Paris’ bikes get used almost 10 times a day; that’s 100,000 rides a day in total. Though I did witness a couple of Parisians legally gaming the system: before their 30 free minutes were up, they simply docked the bike at a nearby stand, waited a couple minutes for their account to clear in the central computer, then re-rented the same or a different bike for another 30 free minutes. I believe the cycle-time (no pun intended) between rentals is more like 10 minutes for a similar program in Barcelona operated by ClearChannel Adshel.

Over 10% of the entire Paris population is expected to ante up €29 for an annual subscription to the immensely popular program by year-end. The 10% figure is significant since only 1.6% of Paris’ transportation mix was by bike before July 15^th this year. In a few short months, bike mode share has more than doubled to 3.6% and is set to climb further from there. (For reference, bikes represent a 4% transportation share in hilly, but relatively bike friendly San Francisco.) Such fast scaling numbers will go a long way to create the “cultural shift” intended by Paris officials who hope Vélib’ will become a critical part of their plan to reduce auto congestion and pollution, provide exercise, and further reinforce Paris’ position as a leading demonstration city for innovation and quality of urban life – not to mention almost ensure the 2008 re-election of Messrs. Collomb and Delanoë for another 6 years. The Paris program was modeled on the smaller Velo’v program in Lyon which Mayor Collomb and JCDecaux started in May 2005 with 1,000 bikes and is now set to scale to 4,000 by year-end. In both cases, JCDecaux paid all of the costs for the bicycle program in exchange for rights to advertise on thousands of ad panels on street furniture. U.S.-based ClearChannel Adshel (CCA) had won a similar, much smaller bike rental program in Rennes, France as early as 1998, but seemed to lack the ad-subsidized financial modeling expertise and European political relationships to take the concept to other cities until recently. CCA did win the popular Bicing program in Barcelona and similar deals throughout Norway and Sweden. Interestingly, Barcelona awarded JCDecaux a 10-year street furniture advertising contract in 2006 covering 3,500 ad panels with no bike program quid pro quo. Separately, the city awarded a bicycle rental contract to CCA in early 2007. An urban-area parking tax and €24 annual subscription fee covers CCA’s €2.2M annual fee to run the program, and CCA augments that payment with revenue from ads sold at the bike rental kiosks. Though only slightly smaller than Lyon, Barcelona started with a modest 200 bikes in March 2007 (versus Lyon’s 1,000 in May 2005), but after phenomenal success and not to be outdone by the French, they scaled rapidly to 1,500 bikes on July 1, and now they have shifted into high gear and are under contract to have 6,000 by March 2008. Both JCDecaux and ClearChannel Adshel executives are on a tear throughout the world inking similar deals from Seoul, Korea to Washington, DC. (FYI, I plan to post here a global index to the various bicycle rental programs in a few days.)

Since many other bike sharing or rental schemes have never gone to scale for lack of funding, you must be wondering, how did Paris justify spending €90M ($120M) to implement Vélib’ on such a massive scale? If the Paris press releases and hundreds of articles and blog posts are to be believed, the simple answer is that Paris didn’t spend anything for Vélib’; media giant JCDecaux agreed to pay all of the costs for Vélib’ in exchange for a 10-year contract to control advertising rights on 1,628 bus shelters, newsstands, public toilets, and other so called “street furniture”. In addition, JCDecaux will pay Paris €3.5M ($4.3M) per year or possibly more if ad sales surpass certain targets. On the surface, it sounds like “WOW- we get this great free bike program and $4.3M/year!” If you really believe Vélib’ was free, then I have some swamp land in Florida I’d like to sell you. The bikes, custom-designed for durability and theft deterrence are reported to cost about $1,300 each, but it seems to me that JCDecaux’s announcement that their initial €90M investment to install and run a system for 14,100 bikes equates to an all-in price of nearly $9,000 per bike. Of course, there’s a substantial investment required to build/run the subscription system, the sturdy and high-tech bike rental stations, the staff required to maintain the bikes, and reserve to replace stolen/damaged bikes, however, that number still sounds high. To help offset the reduction of advertising revenue, Paris will instead be receiving 100% of the Vélib’ subscription fees, which thanks to the programs popularity could bring in a whooping €30M starting next year. Could it be that this is more revenue than Paris would have received from JCDecaux or ClearChannel for simply the advertising rights without a bicycle program? Add to this the indirect windfall of lower health care costs for a healthier citizenry and 400 quasi-green collar jobs that maintain and operate Vélib’, and it looks like the Parisian government just might have hit the lottery jackpot of the century.

The undeniable fact is, Paris has traded hundreds of millions of euros worth of future advertising income for Vélib’. JCDecaux and their competitors, namely CCA and Viacom/CBS Outdoor, are typically required to provide attractive, durable transit shelters, kiosks, and toilets, AND pay large sums to the host city. Clear Channel recently offered to pay the city of San Francisco between $306M and $381M for a 20-year transit advertising pact. In exchange for 5,820 ad faces, JCDecaux guaranteed Los Angeles minimum payments of $150M over their 20-year contract term starting in 2001. If those deals aren’t big enough to get your attention, take note of this: the Spanish firm Cemusa agreed to pay New York City $1B over 20 years for a comprehensive street furniture advertising contract in 2005. While the details of each of these agreements make them difficult to compare, I hope you are getting the idea that street furniture advertising is big business, and that the Parisians are paying more for their “free bikes” than they think. JCDecaux is telling the investment community that their Paris revenue should handily double next year to €60M. With 40+% operating margins, that’s an extra €12M annual operating profit. Note that the JCDecaux/Paris contract has already been substantially expanded in order to further increase the scale of Vélib’, and now encompasses rights to 5,900 backlit ad faces according to financial documents on the JCDecaux website. It’s not clear how this 5,900 figure maps to the earlier announced number of 1,628. In a similar fashion, Lyon is rapidly scaling up Velo’v, their successful 2 year old bike program from 1,000 starting bikes to 4,000 by the end of 2007. The cost? 5,400 ad faces. That’s 11,300 backlit ad faces for just these two programs.

Just for kicks, I did a quick look around to estimate the carbon footprint of a typical backlit ad display, assuming they were on dawn to dusk. Believe it or not, “each” display could generate as much CO2 as one typical European car/year. Carmanah Technologies, who makes a solar-powered transit shelter, claims a typical ad display transit shelter generates as much as 3.5 tons of CO2/year and European cars emit an average 4 tons of CO2/year. I came up with a similar footprint after looking at the technical data for state-of-the-art (but non-Solar) ad displays designed by Primalex. Just when I thought I had stumbled across a dirty little secret, I took the time to adjust my calculations for France’s unique electricity mix which is nuke-heavy and ultra low carbon (95% nuclear, hydro, and conventional thermal), and that completely deflated my smoking gun. It does seem appropriate, however, for municipalities in other countries to consider the fact that these giant street furniture advertising programs carry a large carbon footprint, and it seems especially egregious to put in a green-friendly biking program paid for with much-less-than-green advertising dollars. Perhaps ClearChannel and JCDecaux are way ahead of me and are buying renewable energy through carbon offsets, but I’m not aware of any such activity. At the other end of the carbon spectrum, with 95% coal-based electricity, Chicago, in particular, should think twice about the need to offset all the CO2 emitted by all the additional electricity-hungry ad sites that they’re tempted to offer JCDecaux in exchange for their nifty bikes.

Vélib’– Part of a model green program

Vélib’ was no lucky accident. Paris underwent a 16 month bike sharing study of user requirements before awarding the large 10-year contract to JCDecaux earlier this spring. What’s amazing is that this planning process gave Paris the bold confidence to contract a bike sharing program that was 10 times bigger than anything any other city had attempted to-date.

It looks like Bertrand Delanoë is well on his way to meeting his 2001 campaign promise to double the number of cycle lanes in the French capital by 2008 and reduce car traffic by 40 percent by 2020. Proving his green commitment way beyond campaign promises, this week Delanoë unveiled the start of a comprehensive plan unanimously endorsed by both left- and right-wing district mayors to cut Paris emissions by 30% by 2020. Mayor Delanoë’s eco credentials seem impeccable, as his many projects have already helped cut NO2 by 32% and CO2 by 9% during his term in office, according to Paris air-quality agency Airparif. Ahead of the new plan’s adoption, Delanoë said “the environmental emergency is the greatest challenge of this century”. To all the political leaders of the world — I hope you are taking notes.

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