Taxi industry inquiry
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Final recommendations1.1 A new approach to taxi licensing should be adopted statewide whereby new licences are available at any time to approved applicants at a set price. The restrictive public interest test currently applying to the issue process for country taxi licences should be removed. All new licences in Victoria should be granted ‘as of right’ to approved applicants who wish to purchase them. 1.2 The new taxi licences should have a uniform set of conditions set in regulation, including that they are: Annual but automatically renewable unless challenged by the regulator Transferable Non-assignable (the rights to operate the vehicle cannot be given to another party) Payable upfront annually via a price fixed in perpetuity (not indexed) Able to be handed back (upfront payments will not be refundable) Not subject to the current ‘continuous operation’ licence condition so that they can determine their own hours of operation. 1.3 In transitioning to these new licences, holders of the 10-year Metropolitan Wheelchair Accessible Taxi (WAT) licences issued throughout 2010 and 2011, and the restricted peak service ‘green top’ licences issued between 2003 and 2009 that operate in metropolitan Melbourne, should be offered the option to convert to the new annual licence (including the new terms, conditions, payment prices and method of issue). Additionally, the holders of the 200 Greater Melbourne Taxi Licence Release (GMTLR) fixed term conventional licences should be converted to the new annual licence (including the new terms, conditions, payment prices and method of issue), with the effect of no further licence fee payment being charged for a total of 15 years (of holding the licence). 1.4 The Taxi Services Commission should monitor the number of licensed and operating WATs to ensure that demand and government incentives are sufficient to ensure an adequate supply of WATs for people with a disability. 1.5 The restriction on limiting the assignment period for assignable licences to no more than three years should be removed. 1.6 New and existing taxi licences should be authorised to operate in a four tier system of zones, with corresponding prices for new licences established for each zone (as outlined below): Zone 1: Metropolitan - Metropolitan Melbourne (largely consistent with the Melbourne Urban Growth Boundary) Licence price: Conventional: $20,000 per year, WAT vehicles: $16,400 per year Zone 2: Urban and large regional - This zone should include the current Outer Suburban zone (Frankston and Dandenong), the Mornington Peninsula, other zones adjacent to the Metropolitan zone and the regional cities of Ballarat, Bendigo and Geelong, Licence price: Conventional: $16,000 per year, WAT vehicles: $12,400 per year Zone 3: Regional - This zone should comprise service areas of population sizes around 10,000 – 20,000 such as the Latrobe Valley, Shepparton, Swan Hill, Echuca, Horsham, Colac, Ocean Grove and Warragul Licence prices: Conventional and WAT vehicles: $10,000 per year Zone 4: Country - This zone should comprise all other parts of the State not covered by Zones 1, 2 and 3 Licence prices: Conventional and WAT vehicles: $3,000 per year The Taxi Services Commission should designate an overlapping boundary zone of no less than five kilometres on either side of the actual boundary between the Metropolitan and Urban zones, allowing for taxis that are licensed to operate in the Metropolitan and Urban zones to operate normally anywhere within this overlapping area. 1.7 A shared Metropolitan and Urban zone should be defined at Avalon Airport to allow Metropolitan zoned taxis (and, potentially, other Urban zoned taxis) to service the airport for customers who are bound for Melbourne. Separate Melbourne (or other destination) and Geelong ranks will need to be established at the airport to support this shared zone. 1.8 The Taxi Services Commission should have the power to review zones, through a public process, in response to emerging issues and changed market conditions and, if necessary, to extend zones or create overlapping zones. This may be particularly relevant for areas adjacent to Melbourne that are growing rapidly, as well as other areas of significant growth across Victoria such as the Bellarine Peninsula bordering Geelong. The Commission’s longer term objective should be to further rationalise and relax zone regulation in light of changes in market structure and market forces that will ensure adequate service coverage. Figure 3 Proposed Victorian Taxi and hire car zones 
Hire cars
The inquiry found that hire cars in Victoria provide a high level of service at the luxury and premium end of the commercial passenger vehicle market. Generally, hire car customers have higher levels of satisfaction and experience fewer problems with these services than taxi customers, particularly in the metropolitan area. However, the ability for hire car services to grow, compete with taxis and be more accessible to Victorians is hampered by a number of regulatory restrictions. The costs of these regulations are borne by both the consumers and providers of hire car services. The current licensing regime for hire cars in Victoria provides for categories of licences with fees ranging from zero to around $60,500 (GST inclusive73) depending upon vehicle type, the location of the operator and the vehicle’s function. A number of different operating conditions are in place across a broad range of licences. The inquiry’s economic analysis of this regime found that the price-based restriction on entry to the metropolitan hire car market delivered significant benefits compared to the quantity-based policy in place for taxis the major benefit being that it does not require the licensing authority to determine whether there is a ‘need’ for more vehicles. Operators are free to make commercial judgements about whether there is sufficient demand to support another vehicle and will do so where the expected commercial benefits are sufficient to offset the licence fee. However, the inquiry also found that some detriment from restricted entry remains. Primarily, this comes from higher than necessary fixed costs creating constraints in dealing with demand at peak times. The inquiry heard anecdotal evidence that this has led some operators to illegally substitute private or other licensed vehicles (such as SV category licensed vehicles) when demand for their services is particularly high. Further, the licence fee limits the development of new business models. In contrast, the inquiry noted the vastly greater role of hire car services in cities such as London and New York where hire car licences are issued at lower prices. In assessing the impact of hire car regulations, the inquiry found that licence categories and conditions, operator requirements and vehicle restrictions are overly complex, outdated and burdensome, act as barriers to entry and are difficult to enforce. The inquiry noted that value and age restrictions on hire car vehicles effectively limit the hire car sector to ‘high end’, long wheel-based vehicles that are not necessarily appropriate to servicing a wider customer base and do not reflect valid public interest objectives, such as those relating to safety. The inquiry found that easing these restrictions while still protecting customer safety could encourage competition and innovation within the entire commercial passenger vehicle industry. The inquiry identified a strong theoretical and practical basis for promoting more effective competition in the pre-booked commercial vehicle market. This market has very different characteristics from the rank and hail markets, with consumers having greater ability to choose between competing companies and hire car companies having a much greater reliance on repeat business. Competition can keep service standards higher in this market than in situations where the probability of repeat business is low (for example, the likelihood of catching the same taxi). The inquiry noted that there is considerable potential for greater competition between taxis and hire cars. Indeed, the inquiry observed that the primary goal of many hire car regulations appears to be to constrain hire cars from competing with taxis in particular, by requiring hire cars to provide a superior or luxury service charging ‘appreciably’ higher fares than taxis. The inquiry’s investigation of overseas jurisdictions found that in markets where there are fewer restrictions on licences and vehicles, hire car services have flourished. Accordingly, the Draft Report included recommendations designed to reduce restrictions placed on the hire car industry, open up competition in the pre-booked point-to-point market and tackle touting more rigorously. The inquiry indicated that, over time, it expected these changes to increase service availability and lead to the emergence of more diverse pre-booked services, ranging from the premium, ‘high end’ market to more affordable and/or specialised services. These developments should give consumers a much greater choice in point-to-point travel options.
The inquiry’s draft recommendations provided the basis for a simpler and more competitive licensing and regulatory regime for hire cars through the consolidation of licence types into Pre-Booked Only (PBO) and Restricted Hire (RH) licences. The inquiry found no convincing rationale for restricting hire car licence numbers, but noted that moving immediately to an open market would result in significant loss of licence value. As noted earlier in relation to taxis, the inquiry’s draft reform package was based on no compensation being available. Accordingly, the inquiry set the new PBO licence price at a level that would relax, but not remove, the limitation on licence numbers. The inquiry made 14 draft recommendations covering hire cars: The policy of hire car licences being available for purchase at any time to approved applicants in the metropolitan hire car area should be extended to the country hire car area. The restrictive public interest test currently applying to the issue of country hire car licences should be removed. All new hire car licences – to be known as Pre-Booked Only cabs – should be granted ‘as of right’ to approved applicants who wish to purchase them at set prices. Separate metropolitan and country hire car zones should be abolished and new and existing licences should be authorised to operate a pre-booked service anywhere in the state. A consolidated, uniform Pre-Booked Only cab licence should be adopted statewide and applied to all existing and newly issued licences. The licence should have a uniform set of conditions set in regulation, including that they are: Of no fixed term Transferable Non-assignable (the rights to operate the vehicle cannot be given to another party) Restricted to pre-booked operation only. Pre-Booked Only cab licences should be available for purchase by approved applicants at a one-off set price of $40,000. The Essential Services Commission, with input from the Taxi Services Commission, should undertake a review of this price point after three years. The current requirement for hire car licence holders to purchase a vehicle meeting the value of the luxury vehicle tax threshold should be removed. All Pre-Booked Only cab drivers should continue to be required to be accredited and a new requirement added that they display their accredited driver ID prominently inside the vehicle. Pre-Booked Only cabs should be easily identifiable to the public and regulators by a specific number plate prefix and a highly visible, prominent permanent sticker on the windscreen. Restricted Hire vehicles should remain a separate category and continue to be issued ‘as of right’ to approved applicants for a set fee. All existing Special Purpose vehicles should be reclassified as Restricted Hire vehicles and therefore subject to the same licence terms and conditions. Restricted Hire vehicle standards should remain unchanged. The new Restricted Hire licence should be subject to a one-off fee of $2,000. Restricted Hire licence holders should be registered with the Taxi Services Commission upon having satisfied basic entry requirements of proof of identity and a police check. Acknowledging significant concerns about touting by hire car operators, the inquiry also recommended: A more orderly approach should be adopted at Melbourne Airport to provide a smoother process of pick up and drop off of customers and to deal with the problem of touting, including: Making available rental space to a third party to provide a Pre-Booked Only cab booking kiosk Adequate parking facilities for Pre-Booked Only cabs A designated pick up area for drivers to meet customers. The Taxi Service Commission should be given adequate powers to deal with unlicensed operators and vehicles touting for work. Penalties for touting should be reviewed to ensure they provide sufficient deterrence to prevent illegal touting (touting by unlicensed, illegal operators) as well as touting by licensed Pre-Booked Only cabs who are operating outside of the conditions of their licence.
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