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

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A further summary of these data is provided in Table 10.5. This indicates that 15 per cent of trips involve some form of ‘dead running’ beginning or ending outside of the zone. Further analysis of these data reveals that 5.9 per cent of trips taken with taxis affiliated with Frankston start a journey in the outer suburban zone and finish in the metropolitan zone; this applies to 8 per cent of Dandenong taxis’ trips. These data suggest that there would be some immediate efficiency benefits from merging the two zones, as taxis would no longer need to run back empty. Table 10.5 Overall outer suburban trip zone start and end zone statistics Trip type Beginning inside the outer suburban zone and ending outside the outer suburban zone Beginning outside the outer suburban zone and ending inside the outer suburban zone Beginning and ending wholly inside the outer suburban zone Beginning and ending wholly outside the outer suburban zone Total proportion of trips either beginning or ending outside the outer suburban zone Source: TII % of total 12.4% 1.3% 85% 1.3% 15% This does not account for the number of trip refusals by taxis that refuse to go out of zone. There does not appear to be any way to measure this effect, although a submission by Frankston taxis suggests that dead running is a problem for metropolitan zone taxis that refuse to service Frankston-bound fares. 94 The benefits from zoning are often couched in terms of better service. This argument only has force if zones were amalgamated and there were very different licence values between the two merged zones. That is because vehicles will tend to work more in the area with the higher licence value (indicating greater profitability), leaving the other zone area less well served than before. Of course, any drop in service could also be addressed with the release of more licences until the profits available in each area are similar. The inquiry notes that licence and assignment values (profits) that may be earned in servicing outer suburban zones are not substantially less than those earned in servicing the metropolitan zone. Data from the VTD indicates that, in 2011, average assignment fees per month in the outer suburban zone were within 20 per cent of those recorded in the metropolitan zone (around $25,000 compared to $30,500 in metropolitan areas) and licence prices were over $430,000 in the outer suburban zone. This suggests that removing the zone will not cause many (if any) taxis to seek work outside the outer suburban zone. Equally, the inquiry notes that a similar case could be made with respect to the Western Port and Port Philip zones, where the last recorded licence sales were in excess of $300,000. During discussions with Peninsula Taxis, the inquiry was advised that licences are now considered to have a value as high as $800,000 in the Mornington Peninsula zones. There is some performance data that shows that the ‘overall satisfaction’ of consumers is higher for Frankston and Dandenong taxis. The DOT surveys of satisfaction have generally found higher ratings for these services: Analysis, using the last 12 months of data, revealed that Frankston Taxis and Dandenong Taxis continued to receive the highest ratings by taxi travellers (78.1 and 71.7 respectively, on the 0-to-10 scale), whilst the two most widely used taxi companies, i.e. Yellow Cabs and Silver Top Taxis, received the lowest ratings (64.8 and 62.4 respectively). 95 The inquiry notes that this service performance does not imply that amalgamation of the zone will lessen such performance. Current superior performance does not necessarily demonstrate that amalgamating the zone will cause worse performance within the old zone area. In fact, there are three reasons to expect that there will be no deterioration in performance and that service performance could in fact improve: • The similarity of licence values between the zones indicates that vehicles affiliated to the Frankston and Dandenong networks will not have a major incentive to work solely outside these areas. • There should be a relatively equal number of vehicles that come into the Frankston and Dandenong areas for fares as leave these areas for fares terminating in the current metropolitan zone. • Finally, it is not obvious why the advantages of NSPs in the outer suburban zones will not remain a source of competitive advantage over the metropolitan zone NSPs. Increasing the scope for competition between NSPs in these areas should benefit customers. 94 Frankston Radio Taxis Pty Ltd (2009), Review of the Boundaries of the Frankston Taxi Zone – Submission to the Victorian Taxi Directorate, provided to the Taxi Industry Inquiry by the VTD, p.11 95 Wallis (2010), Op. Cit. Understanding industry performance CUSTOMERS FIRST 211
Avalon Airport The service of Avalon Airport highlights further performance problems that can result from zoning restrictions. Avalon Airport is 65 kilometres from Melbourne and 19 kilometres from Geelong. It currently sits in the Geelong taxi zone. This means that only Geelongzoned taxis are able to use the Avalon Airport rank and accept fares. Melbourne-zoned taxis can only drop off passengers at Avalon Airport or arrange for a pre-booked pick-up at the airport. The performance issue is that many (and perhaps most) passengers using Avalon Airport are bound for Melbourne. This implies that having Avalon Airport in the Geelong zone is particularly costly – because Geelong taxis must ‘dead run’ back to the Geelong zone after a Melbourne drop-off (again, unless a pre-booked fare can be found in Melbourne going to Geelong) and Melbourne taxis must ‘dead run’ back to the Melbourne zone. Geelong Taxi Network put to the inquiry that the issue is not, in essence, a zoning issue, but related to the expensive fare between Avalon and Melbourne (over $100). It argues that changes to the fare and the zone will disadvantage Geelongbased drivers. This view is not surprising and reflects the interests created by zoning restrictions in combination with high fares for long journeys. It would be far more efficient – and no more costly for consumers – if both Geelong and Melbourne taxis could pick-up and drop-off at Avalon Airport. This may require some re-organisation of ranks at the airport so that Geelong taxis take fares to Geelong and Melbourne taxis take fares to Melbourne. Zoning licence conditions restrict competition between networks Detailed scrutiny of the conditions imposed on licences by the regulator raises still more concerns about the zoning provisions. In particular, it seems clear that the provisions not only restrict competition between operators directly, but also restrict competition between NSPs. The general practice of the regulator has been to only approve depots 97 that are physically located in the metropolitan zone. The operator of any new licence then has to gain access to one of the approved depots in the zone, thus preventing depots outside the zone from becoming active competitors of the depots in the zone. This is made quite explicit in the licence conditions relating to the outer suburban and urban zones: for example, the outer suburban licence conditions require that the licensed vehicle ‘must at all times be operated under radio control from a depot approved by the VTD that is located within the outer suburban taxi-cab zone’ (emphasis added). 98 In smaller markets, where there is really room for only one depot to operate efficiently given the existence of economies of scale in the communications function, this rule effectively means that local depots have a monopoly over the provision of booking services in their zones. Competition between depots might be stimulated if operators had a choice of depot and were not restricted to acquiring services only from depots within their zone. In other country zones, the requirement to operate under the radio control of a depot within the relevant zone does not exist, presumably because many of these locations are just too small to have their own depots. Hence the licence condition only requires that the licensed vehicle ‘must at all times be operated under radio control from an approved depot’. 99 Inquiry findings è Current taxi zoning policies are causing a number of issues in Victoria. They are inflexible and are causing costs for taxi operators and consumers where the zone boundaries are no longer appropriate given population growth or other developments. è Taxi zones are intimately linked to entry restrictions and the value of taxi licences. Reform will require attention to both policies. Metropolitan zone taxis for conventional perpetual and peak licences ‘must at all times be operated under radio control from a depot approved by the VTD for the receipt and dispatch of bookings for taxis licensed to operate in the metropolitan taxi-cab zone and must be fitted with fully operational Global Positioning System equipment linked to that depot’. 96 96 Based on information provided to the Taxi Industry Inquiry by the VTD 97 This process is now referred to as the accreditation of network service providers (see chapter 7) 98 Based on information provided to the Taxi Industry Inquiry by the VTD 99 Based on information provided to the Taxi Industry Inquiry by the VTD 212
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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 16 and 17: Another possible explanation for hi
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 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
Page 66 and 67: Advertisements The policy to remove
Page 68 and 69: In recent years, NSPs have increase
Page 70 and 71: Some respondents argue that the mar
Page 72 and 73: Driver obligations to the NSP NSPs
Page 74 and 75: There are nine accredited secondary
Page 76 and 77: From 1953, the use of two-way radio
Page 78 and 79: 11.4.2. Mandatory network affiliati
Page 80 and 81: The inquiry considers that there is
Page 82 and 83: Walters FM also said: Until such ti
Page 84 and 85: The ACCC has been called on a numbe
Page 86 and 87: The ACCC also noted that West Subur
Page 88 and 89: This also means that other NSPs and
Page 90 and 91: Metropolitan NSPs charge affiliatio
Page 92 and 93: Figure 12.1 Average fare costs, met
Page 94 and 95: 11.8.3. Affiliation with more than
Page 96 and 97: However, unlike most other goods an
Page 98 and 99: 12.3. Characteristics of the paymen
Page 100 and 101: A further key feature of two-sided
Page 102 and 103: Case study Cabcharge penalised for
Page 104 and 105: 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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