Taxi industry inquiry
Inquiry’s views in Draft Report
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Inquiry’s views in Draft ReportThe Draft Report examined in detail the significant role played by the more than 90 Primary Network Service Providers (NSPs) across Victoria. The inquiry noted that, in country Victoria, most taxi trips are booked through a local NSP often a small to mid-sized cooperative type organisation that provides and coordinates taxi services for a zoned area. In smaller towns, it is not uncommon to find one person owning a licence, carrying out the NSP role by handling bookings and also driving and operating the taxi as a small business. In Melbourne, most of the smaller cooperative networks have been aggregated over time into two large networks that service the metropolitan area. These large NSPs handle consumer bookings from fixed call centres that are staffed around the clock. In addition to taking bookings and monitoring vehicles in-service, NSPs are involved in other industry activities, including the management of licences and leases of taxi plates, cash handling, disbursement of electronic payments to operators, managing account customers, training drivers and providing and fitting taxi-specific equipment to vehicles. The inquiry identified several significant concerns with the operation of the large metropolitan NSPs, including: While NSPs can regulate their affiliated operators and drivers in various ways, they are not doing enough to ensure their operators and drivers provide good quality services for customers. NSP booking services are the subject of widespread consumer dissatisfaction, including concerns about unreliable services (with long wait times or taxis simply not turning up at all), a lack of accountability for services (with NSPs seen as unwilling to advise customers where their booked taxi is or how long it may take to arrive) and difficulties in contacting booking services during busy periods. High barriers to entry in becoming a new NSP prevent new competitors from emerging and give incumbent NSPs significant market power. There is considerable dissatisfaction amongst taxi operators with the affiliation fees charged by NSPs. These fees vary widely across Victoria, ranging from $7,000 per year in Melbourne up to $14,000 per year in regional areas. These fees appear to have increased whenever fares have increased. Many operators are dissatisfied with the service they receive from NSPs and feel they derive limited direct benefits from their NSP affiliation. Using industry data, the inquiry found that only 30 per cent of all metropolitan trips are booked, implying that the Melbourne NSPs are not involved in about 70 per cent of the work done by city-based taxis. The common industry view prior to this work by the inquiry was that around 50 per cent of metropolitan jobs were booked through the NSPs. The inquiry found high levels of satisfaction with the performance of secondary networks.108 Many regular taxi users told the inquiry they ‘bypass’ the large NSPs in favour of these networks, with the reported benefits including knowing which driver is coming and when; having access to regular and trusted drivers; and being able to negotiate fare ‘deals’. The inquiry heard that passengers with wheelchairs have largely abandoned the primary NSPs in favour of direct communication with preferred drivers due to concerns about poor service and the inability of the NSPs to guarantee a reasonable wait time.109 The Draft Report also discussed concerns with vertical integration and other vertical relationships in the taxi industry in particular, links between Cabcharge and one of the major metropolitan NSPs. The influence of NSPs over in-vehicle equipment supply was discussed (as the major metropolitan NSPs have subsidiary businesses that specialise in vehicle fit outs and the provision of in-vehicle equipment) and the inquiry noted the 2010 decision of the Federal Court that resulted in the highest ever penalty for misuse of market power being imposed on Cabcharge. The inquiry observed that major reform to regulation covering NSPs is required to introduce more competition to the market for taxi booking services, improve NSP performance and accountability, and give taxi operators greater bargaining power to obtain better value for money. The inquiry concluded that the requirement for operators to affiliate with an NSP is anti-competitive and inefficient, particularly given the industry’s current structure. The affiliation requirement now appears to be justified largely by the ability of NSPs to track vehicles and thus provide some assurance of safety to drivers. The inquiry concluded that, in the absence of mandatory network affiliation, there are other ways for operators to achieve safety outcomes. The inquiry noted that considerable confusion exists amongst customers, industry participants and the regulator about the role of NSPs in ensuring appropriate standards of service and safety. In this regard, industry accreditation appears to have failed, imposing costs and restrictions on NSPs with little demonstrable improvement in service quality. This failure further strengthens the argument for industry self-regulation. Under the inquiry’s proposed reforms, NSPs referred to as Authorised Taxi Organisations (ATOs) would have clear legal responsibility for services provided under their brands and be required to adopt measures to ensure appropriate performance standards are maintained. While the TSC would monitor and support ATOs in this endeavour, its primary regulatory focus would be on safety. The inquiry considered that its package of reforms would lead to stronger competitive pressures working in conjunction with targeted self-regulation to drive improvements in ATO services.110
The inquiry made six draft recommendations aimed at creating a more competitive environment around network services, while protecting driver safety. These recommendations are supported by others that move the industry towards self-regulation (see chapter 9). All taxi permit holders, regardless of whether or not they are affiliated to an Authorised Taxi Organisation, must ensure their taxis adhere to outcomes-based regulations relating to GPS tracking, safety monitoring and emergency response capability. Persons permitted to provide taxi and/or Pre-Booked Only cab services should be able to choose to operate independently or affiliate with one or more approved Authorised Taxi Organisations. Regardless of this decision, all permit holders should retain responsibility directly to consumers for the services they provide. Entry requirements and approval for Authorised Taxi Organisations should be minimal to reduce the regulatory burden and compliance costs on these organisations and encourage new entrants and competitors to existing networks. Approval criteria for Authorised Taxi Organisations should centre on:
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