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

The ‘orderly marketing’ philosophy of the Act is largely an
historical anachronism, having been a part of taxi industry
regulation since at least the 1930s. It reflects the idea that
taxis are common carriers forced to provide uneconomic
services alongside more profitable services and that,
for this to work, it is necessary to restrict competition
and keep order in the market. It also reflects a past era
when transport and communications were more difficult
and people more naturally focussed on local markets.
For example, one of the criteria the regulator is required
to consider when assessing licence applications is ‘the
conditions of the roads to be included in any proposed
route or area’. In practice, this criterion adds nothing to
the decisions made by the regulator.
An interesting aspect of the licence application process
is that the regulator will seek the views of the VTA
on all applications that involve more than procedural
matters. It is neither necessary nor desirable for this
to occur. Normally, where the VTA does comment it
simply reiterates the views of the existing operator and/
or depot. However, the VTA could be considered to have
an interest in maintaining an orderly industry, rather than
promoting competition and innovation. The VTA’s role in
this process could be seen as reflection of ‘regulatory
capture’ that has evolved over many years.
The process of reviewing licence applications is
administratively cumbersome and time consuming. It
also lacks full transparency. In the taxonomy set out
above, these are direct costs. By the time all parties are
contacted, evidence assembled and a report written,
it is often up to six months before an application is
determined. In some cases, it has taken twice this
time. A more transparent process would involve
public notification of the application – for example, on
the regulator’s website and in a local paper – and all
submissions and the final report made publicly available.
The licence assessment process typically involves
the regulator having to ‘second guess’ the state of
demand in a market. Also typically, the regulator lacks
the necessary information to do this. Its data is partial
at best and is historical rather than forward looking. It
is based on the demand existing operators are able to
meet – it does not cover unsatisfied or latent demands.
Obtaining the views of a few individuals or organisations
as to perceived need is also no substitute for allowing the
market itself to demonstrate need. These are part of the
indirect costs of the public interest test.
Inquiry finding
è The application of the public interest test
does little to enhance service performance
for users in country markets where alternative
public transport options are also often
severely constrained. It appears that user
demands are frequently not met because new
applicants for licences are discouraged from
applying for licences or are unduly restricted
in doing so. The public interest test works
in conjunction with zoning restrictions to
restrict competition and maintain the viability
of existing operators, whether or not they are
providing efficient services to customers.
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