Taxi industry inquiry
Inquiry’s views in Draft Report
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Inquiry’s views in Draft ReportZoning restricts where taxis can work. Generally, only cabs that are licensed to a particular zone can engage in rank (expressed as ‘stand at designated standing places’) and hail work in that zone. However, it is possible for taxis to undertake pre-booked work in other zones. The inquiry considered the current zoning policies in place across Victoria in Chapter 10 of the Draft Report and noted that zoning restrictions can cause three kinds of costs for consumers: They prevent the free movement of vehicles, restricting competition and choice They increase ‘dead running’ for vehicles, which increases costs for operators – and ultimately consumers They lead to poor service outcomes for consumers, as drivers refuse to take fares across zones (reflecting the increased cost of not being able to obtain a return fare to the originating zone). The second and third kinds of cost are particularly high where zone boundaries are no longer appropriate given population growth or other developments. A number of discrete issues about the effect of zoning regulations were raised with the inquiry, including: The designation of the Melbourne Metropolitan zone boundary Whether the Outer Suburban zones should be maintained or brought within the Metropolitan zone Service concerns in the Yarra Valley potentially caused by zoning restrictions The costs of Avalon Airport being in the Geelong taxi zone when much of the traffic from this destination is to or from Melbourne The impact of zoning regulations on competition between networks. The inquiry found that current zoning policies cause a number of issues across Victoria. However, the inquiry also found that it was not possible to consider zoning approaches without also considering restrictive licensing. Restrictive licensing creates artificial shortages of taxis and, given that taxis will naturally gravitate to where the most work is available, zones ensure that areas of relatively lower demand have a taxi service. In countries with minimal barriers to entry of new taxis, taxis are not confined to working in particular areas. Accordingly, the inquiry’s approach to zoning reform has been conditioned by its approach to licensing reform and it has dealt with these two issues in a complementary way. The inquiry’s Draft Report made recommendations around a new zoning classification for Victoria. The inquiry grouped service areas with similar characteristics, primarily based on licence transfer values. Where no licence value was available for a current service area, a value was inferred by grouping areas with similar service populations and numbers of licences. In conjunction, the inquiry recommended a new licence price for these groupings, based on the average price of licences across the group and allowing for a reduction in the annual price to balance the return to licence holders with higher payments to drivers. The inquiry also made recommendations to reduce the worst effect of zones, mainly through the use of ‘overlapping’ zones that allow some flexibility for operators and would reduce problems of fare refusal and dead running costs. The inquiry supported a four tier system to strike the best balance between consumer interests and existing industry interests. New and existing licences would be authorised to operate in a taxi zone, with corresponding prices for new licences (as set out in Table 5). Table 5 Draft recommendations on zoning service areas and licence prices
A large number of submissions responded to the recommendations proposing a new taxi zone system for Victoria. These responses focused on two main themes – concerns about the amalgamation of Outer Suburban and Metropolitan zones, and a second set of concerns around the new Urban, Regional and Country classifications.
Concerns were raised by outer suburban networks about the proposal for a consolidated Greater Melbourne zone. Networks, and to a lesser extent passengers, were worried that the new model would lead to a loss of local knowledge, as drivers would chase higher fares in the central city and at the airport. Some licence holders also expressed concern that incoming operators would not provide the same levels of customer service as the present fleets of taxis in these areas. If you include Dandenong and Frankston in Melbourne all that will happen is that the Dandenong and Frankston cars will come to Melbourne. There will be fewer taxis in Dandenong and Frankston and further overcrowding in Melbourne.62 The two networks operating in Dandenong and Frankston did not support the merging of their zones with a larger Greater Melbourne zone. The Dandenong network pointed to its higher level of service than Melbourne taxi networks and suggested that because local service providers were meeting certain levels of service, there should be no change to the zoning regulations. The Dandenong submission recommended further zoning be extended to outer suburban areas to cater for the growing regions of Melbourne, nothing that: The reason we have higher satisfaction levels are because the taxis in the outer suburban zone are dedicated to servicing the zone and return to the zone to ensure there are taxis available.63 Frankston Radio Cabs believed the outer suburban boundaries should remain and could be extended to take in the Mornington Peninsula. Their submission suggests that residents of the Mornington Peninsula would be better serviced under an Outer Suburban zone, particularly in the provision of WAT services. Submissions from licence holders disputed the need for change in outer suburban areas, arguing that the original justification for zone boundaries had not changed:
Only a small number of outer suburban user groups commented on the zone changes for metropolitan Melbourne. One disability organisation, Wallara, commented on its close relationship with Dandenong Taxis and its satisfaction with the service it receives: One important thing to consider is that the drivers who work in the outer suburban zone do a lot of local work. 90% of the bookings start and finish within the zone. This means that we service a lot of repeat customers. These customers are happy to see the same faces picking them up, as this gives them a sense of security. Also, the drivers feel more security as they know who they are picking up….66 However, another group working with disabled clients, Scope, saw the consolidated zoning as providing greater opportunity for the outer suburban drivers: Scope is particularly supportive of the proposed changes to Zone 1. We have experienced instances in which good Frankston drivers were restricted in the support they could offer outside their zone.67 Support for the recommendation also came from the RACV, which commented that it would reduce inefficiencies such as unnecessary dead running time across zone boundaries. The RACV also encouraged the immediate extension of the greater Metropolitan zone boundary to match the Melbourne Urban Growth Boundary, and stressed the need for a constant review of zone boundaries to keep in step with urban development and accessibility needs. The VTA presented a model for zoning recommending a consolidated Urban zone taking in Dandenong and Frankston, Ballarat, Bendigo and Geelong.
Country taxi networks made it clear that the inquiry’s zoning proposals were not favoured, although it is difficult to assess whether the responses were primarily concerned with the removal of the public interest test for licences. Country operators such as Morwell Taxis argued that the uniqueness of particular areas required that they be recognised as zones. Morwell Taxis and Riviera Taxis put forward the argument that under a new licence classification for an expanded ‘urban’ zone, many of the subsidy measures for country taxis, in particular the WAT vehicle subsidy and 80km rule, would be lost. The VTA and Riviera Taxis disputed the basis on which the zones had been decided. VTA suggested that taxi business values outside Melbourne reflect the value of the business associated with the licence, not the licence in isolation. Riviera Taxis argued that zones should be based on the location of a town, its population and demographics, rather than on a cost basis. The submission suggested reforms would lead to operators leaving the industry and incomers providing reduced access to transport services, with increased fares. Smaller networks, such as that operating in Creswick, expressed concerns that under the draft recommendations operators would be able to work over broader areas. They suggested this would ‘flood’ some areas with taxis, while other areas would suffer shortages. The recommendations on zoning also discussed the benefits of more flexible services and the opportunities for greater competition in country markets. Country operators disputed the fact that competition could lead to better service quality. Network submissions also argued that competition would lead to customer safety issues as drivers tried to out-compete each other and sought to cover their costs by adopting unsafe practices or undercutting fares, with the possibility of disputes occurring between drivers and between drivers and passengers. Changes to taxi zones (and licensing) were not welcomed by some user groups, including Westmont Aged Care Services in Wodonga, which were concerned that the changes may have an undesired effect as operators leave the industry for viability reasons. Westmont thought that elderly citizens could be ‘soft targets’ for more flexible fare arrangements and that newcomers to the industry may not provide the same levels of care for their clients. The Geelong Taxi Network suggested the consolidated zones may have undesirable effects if drivers chose to chase long fare jobs:
The VTA put forward an alternative proposal for zoning in Victoria that involved three zones in concentric circles around Melbourne. Under the model, there would also be an overlap of Metropolitan and Urban zones. This plan removes the Outer Suburban zone and expands the Urban zone, with the aim of better catering to demand on Melbourne’s fringe. Other submissions saw merit in more overlapping zones, such as that proposed for Avalon Airport. In particular, peri-urban areas where demand for taxi services is high and supply low were nominated as locations that could benefit from an overlapping arrangement. The concept of overlapping zones was elaborated in the submission from the Eastern Transport Coalition, representing seven municipalities. They argued that a joint zone should be in place where people access services such as employment, health, education, transport, shopping and entertainment. The Yarra Ranges Shire Council submission also supported better overlapping of zones:
The Avalon Airport suggestion for a dual zone was supported in many submissions, but was opposed by Geelong taxi operators who felt it would be unfair that Melbourne taxis could take the longer haul Melbourne jobs. Some thought this would act as disincentive for Geelong taxis to cater to the airport market. Geelong-based licence holder Murrell Group argued that a shared zone would lead to customer confusion and difficulty for drivers. Geelong Taxi Network did not believe there were sufficiently significant taxi problems at Avalon Airport to justify a joint zone. Rather, they believed the naming of Avalon Airport-Melbourne creates confusion, which promotes use of travel by taxi from Melbourne. The dual zone was supported by Avalon Airport for its ability to reduce dead running. However, the airport suggested that in providing this incentive for Melbourne-based taxis, there should also be a fixed fare at a reduced price to the meter. The airport suggested a fixed fare of $65 between Melbourne CBD and Avalon, with adjustments made for travel to other Melbourne suburbs. Their view was that this would enhance competition with Melbourne Airport, remove the risk of driver fraud and provide better customer information. The recommendation to allow the Taxi Services Commission to further consider rationalising zones received more broad support than any other zonal recommendation. However, operators raised the potential loss of licence value as a point of contention, with many suggesting the industry should be involved in the process.
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