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

• It exposes taxi operators to a degree of risk because
they cannot readily pass on changes in demand
and supply conditions (such as changes in LPG
prices) to consumers.
• The regulator may set fares at a level that is too high
or too low, with this risk accentuated by the limited
amount of information that is provided by industry on
costs and revenues.
Of these issues, the last has caused the inquiry particular
concern. It is obvious that fare regulation is not likely to
lead to efficient behaviours if the fare-setting authority
cannot collect accurate data on:
• The number of taxi trips and the distribution of these
trips across distances, times and geographies
• Revenue earned and the distribution of this revenue
• Vehicle utilisation data across times of the day and of
the week
• Waiting times for consumers at ranks and for
booked work
• The costs of vehicles and other important inputs
• The elasticity of demand for different kinds of taxi
users and/or trips
• Driver remuneration arrangements.
All of these factors should be relevant to determining
whether fares are likely to be set at an efficient level (which
allows an efficient operator to recover costs, inclusive of
a reasonable return) and establishing fare structures that
promote efficient usage of taxis.
These concerns are particularly pertinent for taxis in
country areas. Each of these markets has individual
characteristics that are difficult to account for in a fare
modeling exercise. These concerns are heightened by
the nature of demand in these markets. Pre-booked work
is far more prevalent, operators rely on repeat business
and strong relationships with the local community, and
there are opportunities for greater service innovation. As
discussed in chapter 20, there may be a good case here
for reducing the regulatory burden on operators in country
areas by allowing them to set their own fares.
As a general point, the Commission notes that not only
is there very little reliable information or data relating to
previous fare adjustments but this observation applies
equally to industry data more generally. This has
presented considerable difficulties for the Commission
over the course of this review and would be expected
to hinder the efficient administration of the taxi industry
and future decision-making of the Victorian Taxi and
Tow Truck Directorate and Government, particularly in
light of the recommendations of this review. 106
The ESC repeated this observation in 2008:
At present very little information is collected from
industry participants, and this has presented ongoing
policy and regulatory and policy problems. 107
It was expected that industry accreditation processes,
which required certain data to be compiled by NSPs and
operators, would improve data availability for regulatory
purposes. The inquiry has found that it has been
unsuccessful in fulfilling this objective.
The inquiry makes further findings about how fares
should be regulated in chapter 20 and information
gathering in chapter 2.
Inquiry findings
è There are grounds to regulate taxi fares where
rank and hail work is common.
è Regulations that prevent fare competition
are potentially costly and offer no
discernable benefits.
è Insufficient data is collected to effectively
regulate taxi fares. This must be addressed as
a matter of priority.
Ultimately, the lack of information available has constrained
the inquiry in considering submissions of issues around
fare levels and fare structures. Again, this is an issue that
has bedevilled previous taxi reviews. The ESC noted in
2005 that:
106 ESC (2005), Op. Cit., p.2
107 ESC (2008b), p.190
Understanding industry performance CUSTOMERS FIRST 215