The Boston Globe has a story about the region's transit agency, the MBTA, launching a pilot program with local taxis to provide paratransit service. This is worth watching because of the potential to unlock resources for fixed route transit services.
Paratransit, in the strictest sense, is door-to-door service for people with disabilities who cannot use fixed route transit. In the United States, the Americans with Disabilities mandates that transit agencies provide paratransit wherever and whenever they run fixed route service, and charge no more than double the fixed route fare.
In the agency budget, this mandated service competes with the services that everyone else uses. It's common for over 30% of a transit agency's operating budget to be paratransit.
Subsidizing taxis has always been an option to meet the paratransit requirement, but in big cities the routine solution has been paratransit van services. These vans can theoretically serve multiple people at once, but the sparseness of paratransit demand means they often carry just one person, or zero between runs. So paratransit operating cost is often over $30/passenger trip, as compared to more like $5 for an effective fixed route service.
MBTA is now testing using taxis — or in the future, taxi competitors like Uber and Lyft — in the same way that small towns often do. It will encourage some customers to use taxis instead of paratransit vans — which is not hard to do, since taxi service is much more flexible. (Paratransit vans must be booked 24 hours in advance, but these taxis can be called spontaneously.) The customer will pay a reasonable transit fare, $2, and MBTA will add an average of $13/trip to round out a typical average taxi fare of $15.
That's $13 per ride for the transit agency instead of (usually) over $30. For service that is more useful to the paratransit customer.
Remember, paratransit expenditures by US transit agencies often exceed 30% of the operating budget. Cut that in half, and you can expand fixed route service dramatically.