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Another possible explanation for higher entry than anticipated is that fares that are too high, encouraging too much entry. Open entry is likely to eliminate licence values, which were previously incorporated in fares. If fares are not reduced in line with the removal of this element, then profit margins for operators will increase. As a result, new entrants will be attracted to the market, exacerbating the effect of moving to an open market. The Netherlands provides a good example of this, as maximum fares were set relatively higher than the average fare prior to removing entry controls, encouraging significant entry into the market. A third explanation for higher than expected entry is that new entrants may suffer from an ‘optimism bias’ in relation to potential earnings in the taxi market. Taxi driving is a relatively accessible occupation with low cost of entry, particularly in a completely deregulated market – all one needs is a car and a driver’s licence. This, combined with the fact that there may be no information available in the short term to potential drivers of likely earnings in a newly deregulated market, 27 means that new entrants may be overly optimistic of their potential earnings, resulting in an initial period of excessive entry into the market. Some have noted the potential role that government can play in providing information about driver earnings to the market, particularly during a time when deregulation can create significant upheaval. 28 Table 9.1 Taxi fares comparison, nominal fares 30 9.4.5. Service and driver benefits Based on available information, the inquiry’s view is that closed entry systems offer no discernable benefits over open entry systems in terms of better service quality, lower fares or better remunerated drivers, but they have fewer taxis and likely higher levels of unmet demand. It is clear that relaxing entry controls has generally resulted in an increase in the number of taxis. As previously mentioned, while there is little data on any changes in the number of trips taken by consumers following liberalisation, there is an expectation that closed entry regimes will experience a high level of demand that is not being met, particularly during peak periods. It is often contested that removing entry controls increases fares, as falling vehicle productivity will increase costs per vehicle, with the Netherlands, Sweden and some US cities reporting increases in fares following deregulation. However, there have been few comparisons between fares of open entry and closed entry regimes. The inquiry compared taxi fares between Melbourne, Sydney, New York, Paris, London, Dublin, Auckland, Wellington, Stockholm and Singapore. Where networks are free to set their own fares, the larger networks’ fares in each jurisdiction were used as a proxy for the fare for the whole jurisdiction. 29 All other fares are set by the relevant government authority or taxi regulator. The estimated nominal fares in Australian dollars for international jurisdictions are set out in Table 9.1. 30 Fares City Entry Controls? Fare Controls? 5km 10km 15km 20km Melbourne Yes Yes $12.42 $21.63 $30.85 $40.07 Sydney Yes Yes $15.48 $27.55 $39.63 $51.70 New York Yes Yes $9.54 $16.23 $22.91 $29.60 Paris Yes Yes $10.39 $17.74 $25.09 $32.44 Dublin No Yes $12.61 $20.04 $27.47 $37.22 London No Yes $16.58 $29.23 $47.69 $66.16 Auckland No No $14.09 $25.84 $37.59 $49.34 Wellington No No $14.68 $26.62 $38.57 $50.51 Stockholm No No $14.85 $23.31 $31.78 $40.24 Singapore No No $4.78 $7.29 $10.11 $12.92 Source: TII 27 Darryl Biggar (2011), Why and how should we regulate taxis? – Paper prepared for the Victorian Taxi Industry Inquiry, Melbourne, p.18 28 Ibid. 29 Green Cabs was used as a proxy for the general fare levels in Auckland and Wellington; ComfortDelGro was used as a proxy for the general fare level in Singapore; and Taxi Stockholm was used as a proxy for the general fare level in Stockholm 30 Fare calculations are based on flagfall, distance, and 2 minutes waiting time for every 5km travelled. Fares adjusted for nominal exchange rate. Exchange rates as at 21 March 2012, RBA Exchange Rates, accessed 21 March 2012 at: www.rba.gov.au/statistics/frequency/exchange-rates.html Understanding industry performance CUSTOMERS FIRST 171
The estimated nominal fares in Australian dollars for international jurisdictions excluding relevant taxes are set out in Table 9.2: 31 Table 9.2 Taxi fares comparison, nominal fares excluding taxes Fares City Entry Controls? Fare Controls? 5km 10km 15km 20km Melbourne Yes Yes $11.29 $19.67 $28.05 $36.43 Sydney Yes Yes $14.07 $25.05 $36.03 $47.00 New York Yes Yes $9.07 $15.75 $22.44 $29.12 Paris Yes Yes $8.69 $14.83 $20.98 $27.13 Dublin No Yes $10.26 $16.29 $22.33 $30.26 London No Yes $13.82 $24.35 $39.74 $55.13 Auckland No No $12.25 $22.47 $32.69 $42.90 Wellington No No $12.76 $23.15 $33.54 $43.92 Stockholm No No $11.88 $18.65 $25.42 $32.19 Singapore No No $4.47 $6.82 $9.45 $12.08 Source: TII The estimated nominal fares in Australian dollars adjusted for comparative price levels are set out in Table 9.3: 32 Table 9.3 Taxi fares comparison, nominal fares adjusted for comparative price levels Fares City Entry Controls? Fare Controls? 5km 10km 15km 20km Melbourne Yes Yes $11.29 $19.67 $28.05 $36.43 Sydney Yes Yes $14.07 $25.05 $36.03 $47.00 New York Yes Yes $15.37 $26.70 $38.03 $49.36 Paris Yes Yes $12.23 $20.89 $29.55 $38.21 Dublin No Yes $13.15 $20.89 $28.63 $38.80 London No Yes $17.72 $31.22 $50.95 $70.68 Auckland No No $15.32 $28.09 $40.86 $53.63 Wellington No No $15.95 $28.94 $41.92 $54.90 Stockholm No No $15.04 $23.61 $32.18 $40.75 Singapore No No N/A N/A N/A N/A Source: TII 31 This comparison excludes any jurisdictional specific taxes. Relevant taxes are: GST in Australia (10%), New Zealand (15%) and Singapore (7%); VAT in France (19.6%), Ireland (23%), United Kingdom (20%) and Sweden (25%); and the New York State tax of $0.50 per ride 32 Comparative price levels in respective cities based on OECD February 2012 comparative price levels, accessed 10 April 2012 at http://stats.oecd.org/Index.aspx?DataSetCode=CPL 172
Page 2 and 3: Part D Understanding industry perfo
Page 4 and 5: The number of licences is restricte
Page 6 and 7: 9.2.2. Quality and safety controls
Page 8 and 9: Case study New Zealand’s experien
Page 10 and 11: Case study Singapore’s unique reg
Page 12 and 13: Case study London’s quality contr
Page 14 and 15: A report commissioned by the inquir
Page 18 and 19: From these comparisons, we can obse
Page 20 and 21: New Zealand is an example of a taxi
Page 22 and 23: Chapter 10. 10. Taxis, hire cars an
Page 24 and 25: 10.1.2. Substitution with public tr
Page 26 and 27: Nonetheless, there are market mecha
Page 28 and 29: 10.2.2. Detriments from restriction
Page 30 and 31: On the other hand, some submissions
Page 32 and 33: 4. The regulatory burden of decidin
Page 34 and 35: Country licence releases and the pu
Page 36 and 37: 10.2.3. Are there offsetting benefi
Page 38 and 39: The inquiry conducted research into
Page 40 and 41: 10.2.4. Valuing the effect of licen
Page 42 and 43: It would also be possible to implem
Page 44 and 45: Inquiry findings è The detriments
Page 46 and 47: In its 1999 report, KPMG argued tha
Page 48 and 49: 10.3.4. Effect on taxi operators an
Page 50 and 51: The practices raised with the inqui
Page 52 and 53: Historically, the zones generally r
Page 54 and 55: Merging the taxicab markets of two
Page 56 and 57: A further summary of these data is
Page 58 and 59: 10.5. Regulation of taxi-cab fares
Page 60 and 61: • It exposes taxi operators to a
Page 62 and 63: KPMG argued that these restrictions
Page 64 and 65: 10.7. Vehicle regulations Taxis and
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Advertisements The policy to remove
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In recent years, NSPs have increase
Page 70 and 71:
Some respondents argue that the mar
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Driver obligations to the NSP NSPs
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There are nine accredited secondary
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From 1953, the use of two-way radio
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11.4.2. Mandatory network affiliati
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The inquiry considers that there is
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Walters FM also said: Until such ti
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The ACCC has been called on a numbe
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The ACCC also noted that West Subur
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This also means that other NSPs and
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Metropolitan NSPs charge affiliatio
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Figure 12.1 Average fare costs, met
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11.8.3. Affiliation with more than
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However, unlike most other goods an
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12.3. Characteristics of the paymen
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A further key feature of two-sided
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Case study Cabcharge penalised for
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To compete with Cabcharge, the newe
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12.5.1. Removing regulatory barrier
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In addition, given the well establi
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