Taxi industry inquiry
Inquiry’s response to submissions
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- General approach to determining zones
- Proposed zone boundaries
- Proposed Metropolitan Melbourne / Urban boundary and shared zone
- Avalon airport
Inquiry’s response to submissionsThe inquiry is not surprised by the general response of the industry to the relaxation of zoning regulations. Zoning provides protection for licence values and also protects existing networks from new competitors. The current zoning and licensing arrangements mean that many Victorian towns are ‘stuck’ with their taxi networks, regardless of the quality of their service performance. The inquiry’s view is that concerns that service levels will fall would only be relevant if existing zones were merged that had distinctly different profitability (which can be measured in licence values) and if the restrictions on the numbers of licences were maintained. This is why it is important for zoning changes to be introduced at the same time as new licences are made available, as this will reduce costs for new operators and improve availability more generally. The inquiry accepts that its draft approach of relying solely on past licence prices may be insufficient to determine appropriate zones, given that many recorded licence sales will also include an element of goodwill.70 This appears particularly relevant in regional and country areas. Therefore, the inquiry has considered further how a revised zoning approach could work, based on including other relevant measures of market similarity. The inquiry notes there was some recognition from bodies such as the VTA and users of taxi services that zoning regulation could be significantly ‘softened’ to improve service in areas that have existing identified problems. In the following sections, the inquiry sets out its final proposals to establish new zones in Victoria, together with some specific proposals for dealing with existing zone boundary issues.
The inquiry’s two principles to reduce costs to consumers from zoning restrictions are: Zones should be simplified and broadened where existing zones are: no longer necessary to ensure adequate service; or causing significant efficiency losses and poor service due to dead running. Opportunities for inter-operability within zones should be encouraged where zones are necessary to assure service, but are causing significant efficiency losses and poor service. The inquiry maintains its view that an approach based on issuing licences at a fixed price is consistent with a broader set of zones than currently applies. By linking areas with similar levels of taxi demand and availability, there will be no (or very limited and temporary) adverse service impacts and greater potential for competition between networks located in different towns (but in the same zone). The inquiry does not consider it appropriate or possible to use demand-driven formulas to determine licence release in country areas, either as a whole or for particular zones. Such approaches place a heavy burden on the regulator to gather data on the demand for, and supply of, taxi service in each service area, which will inevitably be imperfect. The specific allocation of towns or service areas to zones is a difficult exercise, requiring a degree of judgement. The inquiry accepts that the last traded price for a licence is an imperfect indicator for determining market value. A number of licence owners wrote to the inquiry suggesting their classification into a particular zone was incorrect. Licences were sometimes purchased a number of years ago and often included not just the licence, but also vehicles and network infrastructure. The VTA also suggested that the success of the business is reflected in the licence value. Notwithstanding these issues, the inquiry remains of the view that licence value must be an important criterion in classifying different zones. Amalgamating service areas with very different licence values creates a real risk that, unless licences are subsequently issued for a very low price, service in areas with lower-priced licences will be reduced. The inquiry has further considered its draft groupings of service areas and has allocated areas to zones using a combination of geographical proximity, population and licence price data. This should provide for a reasonable balance of treating similar areas similarly, while being equitable among different groups of licence holders. The inquiry accepts that some anomalies may remain in the proposed zoning approach. The best way to handle these anomalies is to give the TSC some discretion to re-zone certain areas. This discretion should be exercised in accordance with the two principles noted above. In particular, existing or potential new networks should be allowed to seek a re-zoning of their service area to a different zone as this could facilitate benefits including cheaper licences, greater fare flexibility or access to WAT subsidies. Further, if zone changes or other factors such as changing demographics cause a loss of service in an area (for example, an operator moves taxis from a relatively poor-performing part of a zone to a part that is more profitable), there should be flexibility to re-zone the area that has lost service into a zone with cheaper licence prices and greater fare flexibility, thereby enhancing the prospects of a continued service.
The inquiry considers that the VTA’s proposed model of an Urban ’fringe’ zone, and continuation of the Country zone for the majority of Victoria, has some merit. However, in maintaining its recommendation around licence release, the inquiry’s assessment is that it is necessary to maintain two zones outside metropolitan/urban areas, reflecting the different service characteristics between larger and smaller towns and geographical proximity. The inquiry understands that the VTA’s proposed Urban zone would contain the existing Outer Suburban zone (rather than, as the inquiry initially proposed, merging the Melbourne zone with the Outer Suburban zone) and that this is supported by both Frankston and Dandenong taxi networks. The details of how VTA’s ‘urban fringe’ zone would work in practice were not entirely clear. The inquiry considers that a shared zone on the Melbourne and urban fringe could produce a considerable lift in service standards in areas currently experiencing poor service availability. Such a zone would allow incumbent operators in both zones to move their vehicles across a broader area and, in the case of the Urban zone, encourage more competition between urban networks. Specifically in relation to the Outer Suburban zone, the inquiry considers that, for the reasons set out in chapter 10 of its Draft Report, there are some strong reasons to incorporate Frankston and Dandenong within a Metropolitan or Greater Melbourne zone. However, the inquiry’s concerns about maintaining this zone separately from Melbourne would be lessened by the development of a new Urban zone and the introduction of a shared zone between metropolitan and urban areas. This should reduce the efficiency costs of the existing zoning arrangements significantly. Further, it would assuage the concerns of Frankston and Dandenong networks that their vehicles would service the metropolitan area only.71 The benefits of this shared zone approach would be felt particularly in areas that currently receive a relatively poor service, such as areas that are on the edge of the existing Metropolitan zone boundary such as Werribee, Lilydale, Ringwood and Whittlesea, as well as those in zones close to the other side of the boundary. Certainly in the Mornington Peninsula, where service availability was reported as a serious problem, residents would be able to book a taxi from a broader range of networks, including the Frankston network. After further consideration of geography, population and licence price data, the inquiry’s revised approach proposes four zones, with some revisions to the specific allocation of service areas: A Metropolitan Melbourne zone An Urban zone, incorporating the existing Outer Suburban zone, Ballarat, Bendigo, Geelong and other service areas adjacent to the Metropolitan Melbourne zone A Regional zone, which includes larger service areas with a population of more than 10,000 A Country zone, which includes all service areas not covered under the other zones (service areas with less than 10,000 people). The inquiry has also considered whether operators on the Bellarine peninsula (in places such as Ocean Grove) could fit within the new Urban zone. In principle, there could be some advantages to this for taxi users if there are regular trips between the greater Geelong area and these other zones. However, the inquiry is concerned that amalgamating these zones could cause some service issues due to the significant difference in licence prices and hence profitability of operating solely in Geelong. The inquiry supports a review of this arrangement by the TSC within the first few years following the implementation of the new zoning arrangements. Similar issues apply to smaller services within the proposed Urban zone and the TSC will need to monitor developments in these service areas. The revised listing of service areas is set out in Figure 2. Figure 2 Revised zone areas Metropolitan: Melbourne Urban: Ballarat, Bendigo, Broadford, Emerald, Garfield, Geelong, Gisborne, Kilmore, Koo Wee Rup-Tooradin-Lang Lang, Macedon, Melton-Bacchus Marsh. Outer Suburban: Pakenham, Port Phillip, Riddells Creek, Romsey, Sunbury, Wallan, Wandong, Wesburn, Warburton, Westernport, Whittlesea, Yarra Valley Regional: Bairnsdale, Castlemaine, Colac, Drouin, Drysdale-Portarlington, Echuca, Hamilton, Horsham, Latrobe Valley, Leongatha-Korumburra, Merbein, Moe, Newborough, Ocean Grove, Point Lonsdale, Portland, Sale-Maffra, Shepparton, Sunraysia, Swan Hill, Torquay, Wangaratta, Warragul, Warrnambool, Wodonga Country: Alexandra, Anglesea, Apollo Bay, Ararat, Ballan, Bannockburn, Beechworth, Benalla, Bright, Camperdown, Casterton, Cobden, Cobram, Cohuna, Corryong, Cowes, Creswick, Daylesford, Dimboola, Dunolly, Euroa, Foster, Grantville, Halls Gap, Heathcote, Inverloch, Kerang, Koondrock, Kyabram, Kyneton, Lakes Entrance, Loch Sport, Lorne, Mansfield, Maryborough, Metung, Mount Beauty, Myrtleford, Negambie, Neerim South, Numurkah, Orbost, Ouyen, Paynesville, Port Fairy, Red Cliffs, Robinvale, Rochester, Rushworth, Seymour, St Arnaud, Stawell, Tatura, Timboon, Trafalgar, Wahgunyah, Warracknabeal, Wedderburn, Welshpool, Winchelsea, Wonthaggi, Woodend, Yackandandah, Yarram, Yarrawonga Proposed Metropolitan Melbourne / Urban boundary and shared zoneIrrespective of how zones are established, there are always boundary issues. The inquiry has given further consideration to how an urban boundary might be drawn, the overlap between the Metropolitan Melbourne and Urban zones and the operational rules that may apply for vehicles operating within the shared zone: The Metropolitan Melbourne / Urban boundary should largely be consistent with the Melbourne Urban Growth Boundary (this is largely consistent with current practice but should be made explicit). The width of the boundary should be around five kilometres either side of the existing zone boundary for the Metropolitan zone. This boundary should be determined by the TSC with specific references to roads or other natural boundaries and whether there are particular activity centres that might fall just outside of these boundaries. The operating rules for taxis in the shared zone should be that taxis from either the Metropolitan or Urban zone can work entirely within the shared zone. Taxis can take a fare from the Urban or Metropolitan zone into the shared zone and a fare from the shared zone to either of the other two zones. However, Urban-zoned vehicles that finish a journey in the Metropolitan zone have to return to the shared zone before accepting another fare. The proposed shared zone is shown in Figure 3 at the end of this chapter.
Avalon Airport agreed with the inquiry that the current zoning arrangements were costly for both Melbourne and Geelong taxis, and that a shared zone offers a number of benefits. As noted previously, the airport also requested that the inquiry recommend a fixed fare between the airport and Melbourne. The inquiry sees some merit in the concept of fixed fares between Melbourne’s airports and major destinations. This is because of the relatively high proportion of visitors to Melbourne using taxi services and because of the current distortions associated with fares for long journeys.72 Nonetheless, the inquiry does not recommend their introduction at this time because of the complexity of introducing fixed fare arrangements and because the inquiry wishes to see changes to the balance of fixed and variable fare components more generally (which will reduce the costs of longer journeys). However, the inquiry considers this matter should be kept under review by the TSC and the ESC in the event that more general changes to the fare structure do not produce the desired outcomes. The inquiry also notes that Avalon Airport could facilitate the greater use of hire cars (PBOs) from the airport through either direct contractual arrangements with existing operators (such as offering preferential access to those operators willing to charge a fixed fee acceptable to Avalon Airport) or introducing a kiosk at the airport to facilitate pre-bookings. The inquiry does not necessarily see the fixed fare measure and the changes to zoning as being linked. Nor is it obvious that the operational costs of supervising a multi-rank system at the airport would be costly or confusing for customers or drivers, provided adequate signage and separate ranks were in place. The inquiry is also not convinced by arguments raised by the Geelong Taxi Network that the problem is merely one of ‘naming’. Avalon Airport’s estimate that more than half of all outbound passengers are from Melbourne indicates that the zoning is an illogical and costly anomaly for Melbourne and Geelong taxi operators and, ultimately, customers, who must bear the higher operator costs through higher fares.
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