taxi industry inquiry Setting the Scene How can I register my interest, provide a submission to the inquiry or find out more? The inquiry invites interested individuals and organisations to register their interest in the inquiry, make a submission or find out further information by: • sending an email to: [email protected] • visiting our website: www.taxiindustryinquiry.vic.gov.au • visiting us on Twitter: www.twitter.com/taxiinquiry • visiting us on Facebook: Taxi Industry Inquiry • mailing us at GPO Box 2797, Melbourne VIC 3001 Enquiries can be made by calling us on (03) 9655 2000. By registering your interest you will receive updates about the inquiry’s progress and key dates, and advance notice of public discussion opportunities. While there will be further opportunities to provide input to the inquiry, if you wish to provide a submission based on this paper we ask that you do so in writing by Friday 24 June 2011. Written submissions should ideally be kept to no more than 20 pages. Individuals and organisations should indicate if they wish their submission to be treated confidentially. Please note that freedom of information access requirements will apply to all submissions, even those treated as confidential. Taxi and hire car services are an essential part of Victoria’s transport system. They provide flexible “point to point” transport that gives people a level of mobility which is not offered by other services such as trains, trams and buses. They are critical to the business and social lives of Victorians and make an important contribution to Victoria’s overall liveability. Crucially, taxis and to a lesser extent hire cars provide a vital form of transport to groups which would otherwise be socially isolated, such as people with a disability, people who live in remote and rural communities, and a range of people who need to travel when alternative transport is not available. Taxis and hire cars also have a critical role to play in tourism, giving visitors their first and last impressions of our state. The quality and quantity of taxi and hire car services therefore has a major impact on the long term “brand” of Melbourne and Victoria. The community’s need for taxis and hire cars is serviced by a complex industry which has many players and which in some areas is subject to a high degree of government regulation. The fundamental structure of the industry in Victoria has remained largely unchanged for many decades. The Victorian Taxi Industry The inquiry should conduct broad ranging Inquiry – an introduction consultation to determine the views at all levels, including consultation with the general public and On 28 March 2011 the Victorian Government announced expert industry and other key stakeholders. a major independent inquiry into the Victorian taxi and The inquiry will report regularly to the Minister hire car industry to be chaired by Professor Allan Fels AO. for Public Transport and make a final report Professor Fels will be assisted by Dr David Cousins AM. and recommendations focussing in particular on the following: The Terms of Reference set by the Government, set out below, require the inquiry to undertake a wide-ranging • the appropriateness of the structure of the review of the Victorian taxi and hire car industry, focusing taxi industry including the accountability of the on core issues related to customer service, safety and range of industry participants with a particular the roles and accountabilities of industry participants. focus on commercial incentives to participants The overall aim of the inquiry is to instigate major and including licence holders to improve services enduring improvements to key aspects of the industry. to passengers; • service delivery and employee conditions, Terms of Reference in particular the working conditions, training, standards and remuneration of drivers, and The inquiry will have broad scope to review the how these contribute to service standards sector and its performance against the following and outcomes; principles: • competition in the sector, in particular focusing • customer and service focus; on vertical integration, anti-competitive • safety for passengers and drivers; practices and incentives for innovation; • support for and training of drivers; • the effects of regulation, particularly relating to entry to the taxi market through capped • integration with other forms of public licence numbers and to price controls and transport; taxi fare setting arrangements, and how these • an outcomes-based and accountable impact on customer service and innovation; regulatory framework; • the performance of the Multi-Purpose Taxi • market design that is effective, efficient and Program and wheelchair accessible taxis promotes competitiveness; and in providing service to people with disabilities • sustainability, in economic, environmental and and a broad range of mobility disadvantaged social terms. people; The overall aim of the inquiry is to instigate major • the current and potential role of taxis, hire and enduring improvements to service, safety and cars and other demand responsive transport competition to Victoria’s taxi and hire car industry. services in an integrated transport system, with a focus on the role of these services in The inquiry should be wide ranging and consider social inclusion; all point to point transport services including taxis, hire cars and other demand responsive services with a particular focus on service outcomes.
4 Setting the Scene The inquiry will gather input from key stakeholders • options for reform including benchmarking including taxi and hire car users, industry participants, safety and service standards, appropriate the business sector, the tourism sector, government market-based, legislative and administrative agencies and disability agencies. solutions, and communication technology advancements that may be harnessed, to There are many ways in which information will be facilitate improvements in the safety, service gathered. For example, the inquiry will: and environmental performance; • ask people to submit their ideas about how to • the appropriate regulatory and service model improve taxi and hire car services; for long term regulation and operation of the • talk to many individuals and organisations; industry, focussed on service outcomes; • attend meetings and conferences to hear the views • examine, evaluate and report on other models of broad groups of people; and and new approaches in the taxi and hire car • visit regional areas to hear people’s views. sectors both in Australia and overseas; • transitional arrangements from the current How can I have input into the inquiry? regulatory and service arrangements to the recommended model; and This paper marks the commencement of the inquiry’s consultation with the community and stakeholders. • any other related matters. The inquiry is seeking the assistance of individuals and organisations to ensure the inquiry covers all issues The inquiry is expected to run for approximately relevant to the Terms of Reference, and this paper 12 months, culminating in a report with recommendations provides an early opportunity to give input on the key being given to the Government. The inquiry is able to areas for the inquiry to examine. make early recommendations, if it elects, for consideration Individuals and organisations are therefore invited to by the Government while the inquiry is continuing its work. make an early submission based on the matters raised The inquiry’s recommendations may involve a in this paper and any other issues considered relevant. combination of measures including market-based, To ensure the inquiry has sufficient time to consider any legislative, administrative, commercial and input provided, we ask that submissions based on this technological reforms. paper are provided by Friday 24 June 2011. The issues to be considered by the inquiry are complex Details on how to make a submission to the inquiry and long standing, and are compounded by an absence based on this paper, and how to otherwise have input of verifiable data on many fronts, particularly relating into the inquiry, are contained on the inside cover of to demand for services. They will require thorough this paper. examination and openness to all ideas and perspectives. The different models and approaches to taxi and hire car regulation in Australia and overseas will also be examined.
The inquiry’s recommendations may involve a combination of measures including market-based, legislative, administrative, [ commercial and technological reforms. ]
Setting the Scene 5 What do people think about In relation to customer satisfaction with taxi drivers, research has shown the most important contributors taxi services? as being drivers’: • courteousness and helpfulness; While the inquiry provides an opportunity to fully explore what people think, past research suggests that Victorians • knowledge of streets and locations; are very concerned about the quality and safety of taxi • willingness to take the most direct route; services. Analysis of trends in customer satisfaction data, • wearing of clean and presentable uniforms; and complaints to the industry regulator and market research, • personal hygiene. along with public opinion as expressed in the news
media, paint a worrying picture. (Source: Wallis Consulting Group Pty Ltd)
Anecdotally, as a general theme, customers’ concerns What do customers say? in the metropolitan area have tended to focus on service General customer satisfaction standards, whereas in regional areas a lack of taxi For some time, surveys have indicated low and generally availability is a commonly raised concern. declining levels of customer satisfaction with taxi services (refer figure 1). Customer complaints The critical factor impacting on overall customer Low customer satisfaction with taxi services is also satisfaction has been found to be taxi drivers, although suggested by a steady increase in the number of formal there are other key factors including: complaints lodged with the taxi industry regulator, the Victorian Taxi Directorate (VTD). • value for money; Over the past five years, the number of passenger • safety; complaints registered with the VTD has more than • booking services; trebled from 1564 in 2005 to nearly 5000 in 2010 (refer • payment systems; figure 2). This could be attributed to some degree to the • information in taxis; regulator’s increased promotion of its complaints function over the past few years. • the availability of taxis on the streets; • taxi ranks; and Complaints are also lodged with taxi booking networks (e.g. Silver Top Taxis, Black Cabs). • personal security. Driver conduct is by far the main cause of customer (Source: Wallis Consulting Group Pty Ltd) complaint to the VTD, with the top categories of complaint relating to unprofessional conduct, driving infringements, fare disagreements/overcharges, fare refusal and route issues.
(Source: Victorian Taxi Directorate)
6 Setting the Scene Figure 1: Levels of customer satisfaction with taxi services Overall Customer Satisfaction with Taxi Services Customer Satisfaction Index (100 point scale)
Quarter (Source: Wallis Consulting Group Pty Ltd Customer Satisfaction Monitor)
Figure 2: Number of complaints lodged with the VTD by year Complaints Received by Victorian Taxi Directorate Complaints
Calendar Year
(Source: Victorian Taxi Directorate)
Setting the Scene 7 A recent survey conducted by the Australian Hotels Questions for consideration by the Association (AHA) reported that out of 30 Melbourne inquiry include: hotels surveyed: • What needs and expectations does the • 28 hotels experienced a lack of taxis outside community have in relation to taxi and hire car their hotel; services? Are these reasonable? • 28 had experienced long delays after calling taxis; • Are the community’s needs and expectations and served appropriately by the existing structural arrangements of the industry? • 27 had guests who regularly complained about taxi services. • How do needs, expectations and service standards vary between metropolitan and The AHA also reported a lack of follow-up once regional areas, and depending on the time complaints were lodged. of day or night? (Source: AHA, survey conducted February 2011) • How can safety for passengers, drivers and the broader community be maximised? A 2010 issues paper prepared by the Victorian Competition and Efficiency Commission (VCEC) as part • What is the appropriate nature and level of of an inquiry into Victoria’s tourism industry indicated a interaction between industry, government and concern of business is that the form of regulation of the the broader market (actual and potential) to taxi and hire car industry and its administration may be ensure that customer satisfaction with services unnecessarily adding to the transport costs of visitors is optimised? to Victoria. • How can a customer service culture be strengthened in the taxi and hire car industry? (Source: VCEC Issues paper: Inquiry into Victoria’s Tourism Industry, October 2010) • What role should industry players take in responding to dissatisfaction with taxi services? Public and media commentary • Do the Victorian Taxi Directorate and taxi Taxis are a rich source of debate on talkback radio and booking networks (e.g. Silver Top Taxis, in online commentary. While many of the reported stories Black Cabs) have adequate policies and are negative, it is important to realise there are also many practices in place to deal with customer positive passenger experiences which do not receive the complaints and dissatisfaction? same level of public and media commentary.
Questions for consideration by the The business and tourism inquiry include: sector perspectives • What are the sources of positive taxi and hire Low levels of satisfaction with taxis are evident in car experiences? the business community. In a recent national survey • How can the number of positive experiences conducted by the Tourist and Transport Forum, be maximised? two-thirds of respondents rated the level of customer • How can overall taxi and hire car use be service in the industry as “poor” or “very poor”. grown and optimised? That said, it should be noted that the same survey reported Melbourne as the most favoured capital city in Australia for catching a taxi.
(Source: Transport and Tourism Forum, Taxi standards in Australian Cities, survey conducted November 2010)
8 Setting the Scene Participants in the taxi and • tourists or visitors – people who arrive at one of Victoria’s airports and require transport to and hire car “market” – users and from their accommodation and to get around during the industry their stay; • business travellers – people who use taxis to get The community’s need for taxis and hire cars is serviced to and from places of business, hotels and airports. by a complex industry which has many players and This group may be less concerned with the price of which in some areas is subject to a high degree of their taxi travel and more concerned with the quality government regulation. The foundations of today’s of the taxi and the driver, and getting to and from their industry structure and key government regulatory destination in the timeliest manner. Many in this group measures (for example, restrictions on licence numbers will also use hire cars or will use the same taxi driver and price controls) have been in place for many or group of drivers; decades, having originated during the Great Depression • social / entertainment / late night users – people of the early 1930s and the Second World War. Whilst who use taxis instead of taking their car to and from some changes have taken place over the years, the core functions or events. These trips are often at night elements remain largely unaltered. and on weekends. They often involve more than one passenger. People in this group usually enjoy a range Who uses taxis and hire cars? of private or public transport options, but choose to use taxis for the convenience or for social reasons People use taxis and hire cars for different reasons, and (e.g. not wanting to drink and drive); according to the Australian Taxi Industry Association • occasional users – people who use taxis for similar (ATIA), there were 35 million taxi trips in Victoria carrying reasons, but much less frequently, than those 49 million passengers in 2010. described above. Occasional taxi users prefer other (Source: ATIA, State and Territory Statistics as at December 2010, forms of transport most of the time. They use taxis ATIA website) mainly in special circumstances (e.g. travelling to or While the concept of a “taxi” is well known, “hire cars” from the airport when going on holiday); are less commonly understood. Hire cars – not to be • mobility disadvantaged users – people who use confused with rental cars commonly used by travellers taxis because they cannot drive or easily access – include limousines, luxury and niche (wedding, vintage) other forms of public transport. This includes the cars that have a driver. Taxis and hire cars are subject elderly, people who use wheelchairs, and those to differing regulatory and structural models, and this is who have a disability that affects their mobility. For discussed in further detail in this paper. many in this group, use of taxis is made possible The choice to use a taxi or hire car is influenced by by their eligibility to receive subsidies for taxi travel the circumstances of individual passengers, who will under the Victorian Government’s Multi Purpose generally fall into one of the following groups: Taxi Program (MPTP); and • rural and regional users – in some parts of regional and country Victoria where other forms of public transport are limited, people may use taxis more regularly, fitting into one or more of the above groups.
While the concept of a “taxi” is well known, “hire cars” are less commonly understood. Hire cars – not to be confused with rental cars commonly used by travellers – include limousines, luxury and [ niche (wedding, vintage) cars that have a driver. ]
Setting the Scene 9 How do passengers access taxis Questions for consideration by the inquiry include: and hire cars? There are three ways that taxis find passengers and • What kinds of taxi, hire car and other “point to passengers find taxis: point” transport services does the community want and need? Hailing – taxis cruise the streets and are hailed or • What role do taxis and hire cars play within flagged down by passengers from the side of the road. Victoria’s overall transport network alongside private vehicles, trains, trams, buses and other Questions for consideration by the forms of transport? inquiry include: • To what extent are the needs of each type of user being met by the current structure and • Are there enough taxis available for hailing? Is regulatory regime underpinning the taxi and the situation different depending on the time of hire car industry? day or night or after a major event? • Is there a role for new or altered markets to be • How can a commonly-experienced driver involved in the servicing of one or more groups practice of refusing short fares be avoided? of user? Alternatively, should adjustments be • How safe is the practice of hailing taxis made to government regulation of existing for passengers, drivers and the broader markets to optimise the servicing of one or community? more groups of user? • Are the needs of mobility disadvantaged users Rank – designated taxi ranks are clearly signposted being adequately serviced by the current throughout metropolitan Melbourne, major regional cities structure and regulatory regime, including and country towns. In most cases passengers stand at through the Government’s Multi Purpose the rank and queue for a taxi. Additional “safe ranks” Taxi Program? operate in the Melbourne CBD, some inner-city suburbs • Are the needs of regional and rural users, and and some regional areas to provide further safety and other current or potential users that live in areas security to late night users departing entertainment that have limited access to other forms of precincts. The location of taxi ranks is determined by public transport, being adequately serviced by local governments. the current structure and regulatory regime? There are dedicated and marshalled taxi ranks at • Is the concept of multiple hiring or “journey Melbourne Airport to assist visitors exiting the terminal sharing” between passengers appropriately who require transport. At Melbourne Airport there is also dealt with under the current industry structure a holding area for taxis, and other waiting and parking and regulatory regime? areas for hire cars and bus services. Melbourne Airport provides and manages the taxi rank, taxi holding area and other infrastructure, with customers being charged an additional levy (currently $2 for customers leaving an airport rank, or $3 for pre-booked taxis and hire cars leaving from a dedicated “premium” parking area opposite Terminal 2).
10 Setting the Scene Questions for consideration by the What are the main features of the inquiry include: taxi industry? • Are the existing controls on numbers and locations of taxi ranks appropriate? The role of government regulation • Are taxi ranks large enough? – an economic perspective • Is there a need to implement measures to encourage drivers to queue at taxi ranks The provision of the vast majority of goods and services during peak times? in modern economies is done by means of reliance on markets. Markets form where there exists both supply • What safety and amenity issues exist with taxi and demand for a product, and experience shows that in ranks generally and in relation to dedicated a competitive market those forces of supply and demand “safe ranks”? will interact until resources are allocated in the most • Is there adequate capacity (e.g. ranks, lanes, efficient manner. queuing areas) at our airports for taxis and hire cars? It is generally accepted that for most products, an open market – that is, a market with minimal regulatory • Are there enough service options and intervention – does a satisfactory job and produces customer assistance facilities at our airports more desirable outcomes than a highly planned or for taxis and hire cars? regulated market. • Are airport-specific requirements appropriately enforced? Compared with other industries, the taxi industry is subject to a high degree of government regulation. The most notable areas of regulation relate to: Booking – passengers can book a taxi or hire car by telephone or over the internet. A key feature which • the number of participants in the taxi market – distinguishes taxis and hire cars is that hire cars must each taxi must operate under a taxi licence, which only provide services when they are pre-booked. is effectively a government-granted permission to run the vehicle. A licence holder can be a person, company or other legal entity. The number of licences Questions for consideration by the is subject to government-imposed limitations, and inquiry include: as at 1 May 2011 there were 5,090 taxi licences operating in Victoria. The limitation on licence • How effective are current telephone and numbers presents a barrier to participation in the internet booking services, and does that industry. Licences carry conditions, which are effectiveness vary depending on the time discussed further in later sections; of day or night? • affiliation of operators to Network Service • Are wait times for booking taxis in line with Providers – the government mandates that each community expectations? taxi operator must be affiliated to a Network Service • Is enough information provided to customers Provider for receipt and dispatch of bookings and at the time of booking a taxi? to connect to an emergency alarm system. These • How do needs, expectations and service matters are discussed further in later sections; standards vary depending on whether a • fares – the price of taxi travel (both flagfall and time/ service is hailed, taken at a rank or booked? distance charges) is determined by government. Service providers are obliged by law to charge accordingly; and
Setting the Scene 11 • quality of services – government also prescribes • that even in those taxi industries around the world that business service standards which must be met in are subject to less regulation than ours, some form of terms of vehicle serviceability, adherence to safety government intervention continues to apply, principally standards, equipment, vehicle appearance, driver in relation to driver standards. There are other important uniforms, driver competency and driver conduct. issues – for instance ensuring safety for passengers The inquiry presents an important opportunity to examine and drivers and providing subsidies to mobility impaired whether the high degree of government intervention passengers – where the need for regulatory intervention presently impacting the industry, and the nature of appears beyond question; and that intervention, is appropriate or whether the present • other structural complexities impacting on the delivery balance between market and regulation needs to be of taxi services and that may affect competition (e.g. taxi changed. These issues are particularly pertinent when booking networks). customer dissatisfaction with the “product” is taken into account, and the fact that solutions to date seem to have focused on the imposition of additional regulation. Questions for consideration by the inquiry include: In economic terms, a more market-based approach would on face value provide customers greater choice in • Why does the taxi industry require the high service, whilst increasing competition in the industry by degree of regulation that it is presently allowing more people to enter the market for provision subject to? of services. • If the forces of supply and demand were to be relied upon in the taxi industry, what would Importantly, however, any abstract consideration of the consequences be? How would these these matters needs to be overlaid by a range of consequences differ between various aspects issues including: of the industry and user groups? • the possibility of different implications of such an • Should government continue to restrict approach for different parts of the industry – for industry entry through limiting licence instance, there are likely to be varying consequences numbers, or should the market determine taxi between metropolitan and regional areas; supply levels? • the fact that existing arrangements have led to a • What would a competitive taxi market look like? complex set of regulatory and commercial structures. • Would increased competition in the industry A full consideration of the consequences of altering lead to better service outcomes? these arrangements must occur, including the potential requirement for transitional arrangements in the event • What are the impediments to the expression of a changed approach; and realisation of customer demand as a result of regulatory restrictions or limited competition in the taxi industry?
In economic terms, a more market-based approach would on face value provide customers greater choice in service, whilst increasing competition in the industry by allowing more people to enter the market for provision of services. Importantly, however, any abstract consideration of these matters needs to be overlaid by a range of issues.
12 Setting the Scene Detailed provisions affecting the taxi and hire car • Are there any restrictions or impediments to industry are contained in the Transport (Compliance supply side forces as a result of regulatory and Miscellaneous) Act 1983. Stemming from these restrictions or limited supply in the taxi industry? provisions, the VTD’s key functions are: • If a more market-based industry was pursued, • taxi and hire car licensing; what minimum forms of regulation would be needed? • taxi and hire car driver accreditations; • What advantages would growing taxi • taxi industry accreditations to licence holders, patronage have on overall industry profits? operators and Network Service Providers; • What should be done to ensure the taxi industry • compliance and enforcement activities; and carries optimal financial viability for industry • approving equipment for use in taxis. participants, including drivers? The VTD is also responsible for: • How could subsidy and assistance programs for mobility-impaired passengers work most • administering the Multi Purpose Taxi Program effectively in the context of a more market- and a country wheelchair accessible taxi subsidy; based industry? • regulating driving instructor authorities; • Should taxis be provided and funded by • developing operational policy and reviewing government in areas where it may be regulations; and uneconomical for them to operate on • liaising and consulting with participants in the taxi a commercial or market basis? and hire car industry and with consumers. • Are customers satisfied with the cost of travelling by taxi in Melbourne/Victoria? Questions for consideration by the • Should the government regulate fares or inquiry include: should the market determine them? • How do taxi fares compare with other • Are current legislative powers and provisions cities, including in markets where there are appropriate to enable effective regulation of restrictions on taxi numbers and where there the taxi industry? are no restrictions on numbers? • Are regulatory requirements made sufficiently • Are the current fare setting methodologies clear to those in the industry? and fare structures appropriate? Would • How effectively does the Victorian Taxi other models, such as a “flat fare” model, be Directorate implement and enforce regulation appropriate in some aspects of the market? affecting the industry? • Could compliance and enforcement be better targeted? The Regulator • Is the relationship between the regulator’s functions and the policy making functions of The industry regulator, the Victorian Taxi Directorate the broader government appropriate? (VTD), was established in 1994 and is a branch of the Public Transport Division of the Department of Transport. • Does the Victorian Taxi Directorate deliver The VTD is headed by a General Manager and exercises a service that meets community needs and its powers under delegation from the Director of Public expectations? Transport. The office of the Director of Public Transport • What could be done to improve regulation and obtains its high level functions and powers under the the role of the regulator? Transport Integration Act 2010.
Setting the Scene 13 Taxi licences Questions for consideration by the Broadly, there are three types of taxi licence in Victoria, inquiry include: with the type of licence determining what services the • Are the existing licence categories taxi is able to provide: appropriate? • conventional licence – this is the most common • Are the existing zoning and other conditions type of licence. Taxis with these licences are able to on licences appropriate? operate 24 hours a day, seven days a week; • peak service licence – taxis attached to these types of licence are known as “green top” taxis due to their Who are the main industry participants? livery. These taxis are only allowed to operate in the metropolitan area between 3pm and 7am, and 24 Behind the scenes in every taxi journey lies a series hours during specified major events; and of complex arrangements involving various legal and • wheelchair accessible taxis (WAT) licence – taxis commercial relationships. The fundamental roles of key with WAT licences are designed for the purpose of industry participants are shown in figure 3. transporting people in wheelchairs and are required Licence Holders to give priority to wheelchair bookings. WATs may In most cases taxi licence holders are not required to also be high occupancy vehicles which carry up to operate the licensed taxi themselves – they can “assign” 11 passengers when not carrying people in the right to operate a vehicle under the licence to a taxi wheelchairs. operator. An assignment is akin to a lease agreement. Conditions on licences divide the taxi market into Over 70 per cent of licences in Melbourne are now “zones”. Each taxi is “zoned” to a particular area, the operated by a person other than the licence holder. For intention being that the taxi should primarily be used to regulatory purposes, the assignee (operator) has all the service the community in that zone and cannot pursue privileges, duties and responsibilities of the assignor hailings outside that area (but can respond to pre- (licence holder) for the duration of the assignment period. bookings outside the area). The zones are: The assignment process allows licence holders to make • Metropolitan – metropolitan Melbourne; a return on their “investment” in the licence through • Outer suburban – Frankston and Dandenong; assignment fees. The average reported assignment fee • Urban – the cities of Geelong, Ballarat and Bendigo; as at April 2011 was around $30,000 per annum. and While the price of conventional taxi licences is ultimately • Country – all other areas. Generally country taxis are determined by what buyers are willing to pay, the current licensed to operate within five to eight kilometres of average market price for a Melbourne metropolitan the local post office. licence is over $500,000. Melbourne taxi licence values have more than doubled in nominal terms since the early 2000s, and our taxi licence values are high compared with other Australian jurisdictions.
14 Setting the Scene Figure 3: Fundamental roles of key industry participants
Licence Holder Operator Network Service Assigns Affiliates Provider Company
Bails Dispatches Books
Owns
Taxi Driver Customer Drives Vehicle Carries
Current regulatory input
While there are a number of large and medium sized Questions for consideration by the fleet operators, the vast majority of Victorian taxis are inquiry include: operated by operators who manage only one or two • What factors explain the relatively high market taxis. In some cases, operators own a single vehicle and value of licences, and why have licence values drive it themselves, bailing to another driver when they increased sharply over the past decade? are not driving the vehicle. • What impacts do the high value of There are approximately 3,000 taxi operators in Victoria metropolitan taxi licences and the current role for over 5,000 taxis. of licence holders have on service delivery? Under current regulation, each taxi must be affiliated by its • Should taxi licence holders be responsible for operator to a taxi booking company, known as a Network on the ground service outcomes? Service Provider, for receipt and dispatch of bookings • Should licences be allowed to operate as and to connect to an emergency alarm system. Network a financial instrument and be assigned? Service Providers are discussed further in a later section. If so, what conditions should attach Industry participants often take more than one role in to assignments? service delivery – for instance, some operators also drive their own taxi/s, and some Network Service Providers Operators also operate or have interests in fleets of taxis. A person or corporation that operates one or more taxis Operators are responsible for the maintenance of their is known as an operator. Some operators own the taxi vehicles and manage the administration requirements licence, while others have been assigned the rights by for their taxis (e.g. driver payments, Network Service a licence holder. Taxis may be driven by the operator Provider affiliation agreements, lease agreements and themselves or “bailed” (rented) to drivers. vehicle insurance).
Setting the Scene 15 The regulatory hurdles to entry for new Network Service Questions for consideration by the Providers are not significant, however Network Service inquiry include: Providers need to achieve a critical mass of affiliated • Does the current role of operators encourage taxis to establish and operate booking and dispatch best practice service delivery? facilities in a commercially viable manner. • Are the business service standards imposed Operators can encounter significant hurdles and costs by government on operators appropriate? if they wish to break affiliation and move to another • Is it appropriate for operators to undertake Network Service Provider. These hurdles generally multiple roles in the taxi industry? arise from commitments to a range of other services and activities provided by a Network Service Provider, • Are taxis appropriately insured to offer such as car financing and brokerage of taxi licence protection to industry participants, passengers assignments. and the community? Current legislation also recognises “secondary networks”. These are less formal taxi networks whose Network Service Providers members pass bookings amongst themselves by The term “Network Service Provider” was introduced mobile phone or pager. Members of secondary networks as part of a role-based taxi industry accreditation must also have an affiliation with a primary Network scheme that commenced on 31 December 2007. Service Provider. The accreditation scheme recognises the role of the companies that run taxi depots and provide a wide range of ancillary services and infrastructure to the taxi industry. Questions for consideration by the inquiry include: Network Service Providers’ key public-facing role is the taking of bookings and the dispatch of them to drivers. In • Does the limited number of Network Service more recent times Network Service Providers (particularly Providers have an impact on service delivery? in Melbourne) have offered an increasing range of • What is the impact of the current Network ancillary services such as security, car fit outs, financing, Service Provider industry structure on repairs, taxi licence brokerage and driver training. competition? Each taxi, through its accredited operator, is required • Does the current role of Network Service by law to be “affiliated” with a Network Service Provider. Providers encourage best practice service The average fee charged to the taxi operator for network delivery? affiliation is currently around $7,000 per annum. • Are Network Service Providers delivering a A series of mergers and acquisitions has resulted in service that meets community needs and the majority of control of the Network Service Provider expectations? industry vesting with Black Cabs (13 CABS) and Silver • Do Network Service Providers provide Top Taxis. A third smaller Network Service Provider appropriate information to passengers operates in Melbourne, Platinum Taxis. Platinum Taxis regarding their taxi booking? was accredited in 2008 and holds a small proportion • Can Network Service Providers play a greater of the market. role in monitoring demand and allocation of Two large outer suburban centres, Dandenong and taxis to ensure effective response times and Frankston, are not part of the metropolitan zone and coverage in geographical areas, including at have their own local Network Service Providers. Most major events and at peak times? regional and country townships also have their own local Network Service Providers.
16 Setting the Scene Some taxi drivers are reported to earn between $8 and • Are there technology alternatives that would $13 per hour – well below the minimum wage. facilitate equivalent or better coverage for booked services and security? The number of short-term and part time taxi drivers has grown significantly over recent years, with many • Should government mandate affiliation of taxi being overseas students. Turnover of drivers is high, operators to depots and/or Network Service requiring 1,500 – 2,000 new drivers to be trained and Providers? accredited in Victoria each year. In recent months, many • How reasonable are the charges imposed by taxi industry participants including the Victorian Taxi Network Service Providers for their services? Association (VTA) have raised concerns about a taxi • What role should Network Service Providers driver shortage, which correlates with a general fall in play in ensuring high quality service is numbers of international students coming to Victoria. delivered by operators and drivers? People who wish to drive a taxi in the Melbourne metropolitan area must complete specified units Drivers of training under TLI21209 – Certificate II in Driving Drivers provide the face-to-face transport service to Operations that make up the National Taxi Driver Training customers. There are approximately 15,000 active Framework, which currently requires 115 hours of taxi drivers in Victoria, of which more than 12,000 participation. Some providers of that course have other work in the Melbourne metropolitan area. Drivers of taxi industry affiliations. all commercial passenger vehicles such as taxis, hire cars, special purpose vehicles and buses are regulated Questions for consideration by the via a common commercial passenger vehicle driver inquiry include: accreditation scheme. • Who drives taxis, who does not drive taxis, Most taxi drivers are “bailees” who rent a taxi from and why? an operator, and therefore are considered to be independent contractors rather than employees. This • Do the current structural arrangements for is not true of hire cars which tend to be driven by those drivers encourage best practice service with an owner interest. delivery? • How can working conditions and remuneration Bailee taxi drivers are typically responsible for their own of drivers be improved? holiday and sick pay, superannuation and for paying GST to the Australian Taxation Office. They do not have • Are “bailments” a suitable employment the same rights and protections enjoyed by employees arrangement for drivers? How difficult is it for under occupational health and safety and industrial drivers to negotiate arrangements outside a relations laws. standard bailment agreement? • Should drivers be covered by occupational Bailee drivers negotiate their remuneration arrangements health and safety and other fair work with operators, which involves a revenue split of the provisions? total fare (historically this has been 50/50 however other arrangements are common) or a “fixed fee” arrangement • What influences drivers’ and passengers’ where the bailee driver pays an upfront set amount perceptions of safety? to the operator and retains the profits. Commercial • What can be done to ensure that driver and arrangements between bailee drivers and operators are passenger safety is adequately provided for not regulated by the government. and administered?
Setting the Scene 17 • What insurance arrangements do drivers Questions for consideration by the typically operate under? Is this appropriate? inquiry include: • How can more “career” drivers be • Who do the various participants in the industry encouraged? consider to be their “customers”? • What skills and training do drivers need, and • Do the roles of key industry players, and the how can skills retention and improvement be relationships between them, encourage best encouraged? practice service delivery? • Is the content, duration and delivery of current • What implications does cross-ownership training courses sufficient to encourage an of interests in the industry have for service optimal service culture, driver retention and delivery? long term professional driver engagement? • Are there regulatory issues or requirements Are other mandated driver qualifications associated with the licensing regime or other appropriate? aspects of the Victorian taxi industry which underpin Cabcharge’s market power? Others • Electronic payment system providers charge Other key industry participants include: customers a 10 per cent surcharge on top of the metered fare. Is this reasonable? • Cabcharge , a former taxi cooperative now established as a public company with significant • What are the advantages and disadvantages market power as the major provider of taxi EFTPOS of linkages between equipment suppliers and payment systems. Cabcharge also has significant Network Service Providers? other interests in the taxi industry Australia-wide, • Do current arrangements for the provision including ownership interests in Network Service and approval of mandated in-taxi equipment Providers and licences. Cabcharge offers a range operate effectively? of card and account products nationally. • Is there a conflict of interest when industry • Manufacturers and suppliers of mandated in-taxi participants also train drivers? equipment such as meters, booking and dispatch • Do registered training organisations produce systems, cameras and GPS equipment. effective outcomes? • Registered training organisations (RTOs), who • How transparent are the arrangements for train taxi drivers. Some RTOs are also broader transferring and assigning licences involving participants in the taxi industry. brokers? • Taxi licence brokers, who manage the transfer and • How do brokers assist the transfer/assignment assignment of taxi licences. Many brokers are also process? Do they add unnecessarily to the employees of Network Service Providers or large costs involved? taxi operators.
18 Setting the Scene Hire cars How can I register my interest, There are a number of important differences between provide a submission to the taxis and hire cars. Hire cars: inquiry or find out more? • most commonly take the form of modern luxury sedans or stretched limousines, although special The inquiry invites individuals and organisations to purpose vehicles used for specific purposes such as register their interest in the inquiry, make a submission weddings or tours also fall within this category; or find out further information by: • have operators who usually have a direct relationship • sending an email to: with their clients and in that sense offer a personalised [email protected] service; • visiting our website: • are not permitted to have meters. Charges are www.taxiindustryinquiry.vic.gov.au negotiated between the driver and customer; • visiting us on Twitter: www.twitter.com/taxiinquiry • can only operate after being previously booked with the operator; and • visiting us on Facebook: Taxi Industry Inquiry • are generally viewed as having higher levels of • mailing us at GPO Box 2797, Melbourne VIC 3001 customer service and satisfaction than in the case of Enquiries can be made by calling us on (03) 9655 2000. taxis. This perhaps reflects the fact that the hire car By registering your interest you will receive updates sector relies more heavily on customer retention and about the inquiry’s progress and key dates, and advance repeat business than the taxi sector. notice of public discussion opportunities. There are approximately 900 hire cars and 1,000 special purpose vehicles operating in Victoria, with the majority While there will be further opportunities to provide based in Melbourne. input to the inquiry, if you wish to provide a submission based on this paper we ask that you do so in writing by Hire car licences are issued by the Victorian Taxi Friday 24 June 2011. Directorate. The licence issue fee of a metropolitan hire car is $60,500 (or $40,000 for exclusive operation Written submissions should ideally be kept to no more of a hybrid vehicle) while a country hire car licence than 20 pages. Individuals and organisations should is $22,550. indicate if they wish their submission to be treated confidentially. Please note that freedom of information Hire cars operate under a more minimalist regulatory access requirements will apply to all submissions, even model to taxis. those treated as confidential.
Questions for consideration by the inquiry include: • Does the current industry and regulatory structure of the hire car industry encourage best practice service delivery? • How does the current industry and regulatory structure of the hire car industry impact upon the effective delivery of taxi services? • What is the appropriate nature and level of interaction between industry, government and the broader market (actual and potential) to ensure that community satisfaction with hire car services is optimised?
Setting the Scene 19 www.taxiindustryinquiry.vic.gov.au