Part D – Understanding and improving industry performance (PDF ...

In restrictive markets, the regulator is usually highly
prescriptive when enforcing taxi regulations and
monitoring taxi services. This is not surprising, as
restrictive taxi market schemes naturally result from
government intervention. For example, the role of
government in the more restrictive markets, such as New
York City and other Australian States and Territories, is to
control the number of licences via licensing regimes, set
fares and prescribe quality and safety standards.
Even in less restrictive markets, specifically those with
deregulated entry restrictions, governments still play
a role in regulating the taxi industry. However, the role
of government in these regimes is less focused on
regulating the ‘static’ taxi parameters, such as quantity
and fare controls, and more focused on regulating
quality and safety outcomes. A distinction can be made
between quality and safety outcomes and quality and
safety standards. Standards can be highly prescriptive,
particularly in relation to vehicles, and may cover such
things as vehicle types, size and age. These standards
are very common in restricted taxi markets that maintain
quantity controls. Outcomes can be thought of as
something broader, where the specifics of the services
and safety controls are left to the industry participants,
with only broad quality and safety outcomes guided by
the regulator.
The open entry taxi markets of New Zealand and
Singapore maintain a role for government in the form of
setting outcome-focused service standards for booking
networks companies, while at the same time providing
greater scope for competition between networks – such
as allowing the networks to differentiate their services:
for example, ‘environmentally friendly’ taxis in New
Zealand. 22 The actual quantity parameters, such as
supply of taxis at particular times and fares, are mostly
left up to the industry participants.
In contrast, New York, which maintains controls on the
number of taxi vehicles available, has also mandated the
type of vehicle that can be a taxi. The New York Taxi and
Limousine Commission (TLC) has announced that the
Nissan NV200 minivan will be the new official taxi in New
York, with current taxis to be phased out by 2018. 23
It is not always clear how jurisdictions have arrived at
the split of regulation between the relevant government
authority and industry itself to achieve positive
performance outcomes.
9.4.4. Higher than expected entry
In markets that have removed entry controls, entry
has usually been much greater than anticipated at
the time of the entry relaxation.
In all jurisdictions where entry restrictions have been
removed, the number of taxi vehicles increased,
sometimes more than expected by the government of the
day. The possible reasons for this are outlined below:
One probable explanation is that there was a significant
level of unmet demand prior to deregulation. However,
it has been difficult for the inquiry to establish this by
solid evidence relating to pre- and post-liberalisation trip
numbers. The inquiry found no studies of liberalisation
that were able to accurately measure the change in the
total number of trips following the move to open entry
– there was simply no reliable data on any changes in
consumer demand post-liberalisation. While an Irish
report found that liberalisation of licences resulted in an
82 per cent increase in trips in Dublin between 1997
and 2008, this is based only on survey data from Dublin
households rather than actual trip data. 24 Other studies
on jurisdictions that have deregulated are also lacking in
reliable information in this respect. 25
However, there is a strong expectation that the
number of taxi licences issued by government in a
closed entry market is not optimal. Indeed, the effects
of quantity entry restrictions is that they prevent
entry that otherwise would occur in an open entry
market. In doing so, the inquiry expects that some
trips that would be covered at times of peak demand
are not covered under a quantity entry regime.
Some studies have reported a decline in productivity
or vehicle utilisation and have implied that consumer
demand did not increase following deregulation. 26
However, a drop in vehicle utilisation does not necessarily
mean that consumer demand did not increase as a result
of greater taxi availability. It may be that the increase in
entry was such that it dampened any indications that
demand increased: that is, the percentage increase in
taxi numbers may have been more than the percentage
increase in consumer demand – this will result in an
observed decrease in productivity, at least in the short
term. Indeed, increases in fares may have diminished
some increases in consumer demand.
22 Green Cabs, accessed at: www.greencabs.co.nz/
23 Chapter 15 includes a description of the process adopted by New
York to decide on its new taxi vehicle
24 Goodbody Economic Consultants (2009), Economic review of the
small public service vehicle industry, Commission for Taxi Regulation,
Ireland, p.18
25 For example, the OECD reported that, following deregulation in the
Netherlands, trips had fallen but passenger kilometres had risen. The
inquiry finds this outcome incongruous. See OECD (2007), Op. Cit.
26 Kang, Choong-Ho (1998), Taxi deregulation: International comparison,
Dissertation, University of Leeds, accessed 29 March 2012 at: www.
taxi-library.org/kang0898.htm
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