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

Some respondents argue that the market concentration
of recent years has also had a negative effect on the
quality of taxi services more broadly, as reflected in the
comments from one operator/driver:
In the last eight years, we have gone from multiple
smaller companies to two companies running the taxi
industry … this has impacted the integrity of the
industry: more companies meant more competition
which then in turn meant customer satisfaction. 9
Others argue that, as NSPs receive no direct benefit or
income from their booking and dispatch services (and
have their income guaranteed by mandatory affiliation),
they have little incentive to improve service quality.
CabFare’s submission to the inquiry reflects these
concerns:
The desire to improve standards and to require
taxi operators to be affiliated with a NSP network,
when combined with the concentration of NSP
ownership, has encouraged an environment of
anticompetitive behaviour. 10
Additional concerns relating to competition and affiliation
raised with the inquiry include:
• The bundling of services by the large NSPs (such as
car financing and in-car technology), which means
that operators must pay for services they perceive
they do not require and makes it difficult for new
entrants in the NSP market to gain a critical mass of
affiliated taxis
• The costs incurred by operators if they wish to move
from one NSP to another.
Concerns about market concentration and mandatory
affiliation are not shared by the Victorian Taxi Association
(VTA), which argues that NSPs operate in a competitive
environment that leaves room for other business models,
such as secondary networks. The VTA argues that
the number of NSPs reflects the reality of commercial
processes and the size of the market in which they
are operating, and that their investment in subsidiary
businesses benefits the industry by providing more
efficient and industry specific services.
A key reason that Victorian taxis are better equipped
than those in other jurisdictions is because Victoria’s
NSPs are large enough to invest in real goods and
services that benefit the customer. 11
More broadly, the VTA argues that the taxi industry
faces a high level of internal and external competition
at all levels: drivers have to compete with other drivers
for fares; operators face competition for licence
assignments; and the industry faces external competition
from hire cars, community transport and providers of long
term car parking at Melbourne Airport.
The Essential Services Commission, the Department
of Treasury and Finance (DTF) and others point out
that while a move to remove mandatory affiliation (or to
introduce greater contestability into the NSP market)
may have benefits in terms of service innovation
and downward pressure on fares, it will need to be
accompanied by reforms to ensure that safety and
universal access objectives are met. DTF also notes:
Recent developments in economics, particularly when
combined with modern communications, spatial
referencing and information technology, may provide
the ideas and the tools to help develop efficient
markets in the sector. 12
Engaging the industry on networks
In November 2011, the inquiry released a discussion
paper on networks titled Improving taxi booking services
for customers, drivers and operators. The inquiry received
only three submissions in response to this paper, two of
which were confidential.
In contrast, the issues of mandatory affiliation and
the performance of NSPs has been the subject of
considerable debate through the inquiry’s social media
channels. One Facebook contributor notes:
The taxi booking companies are a racket. They add
NO value. Ever since the early eighties the taxis have
been forced to operate under radio control from an
approved depot. Can ANYONE tell me why this
licence condition was introduced? It wasn’t for the
benefit of the owners and it sure as hellfire wasn’t
for the benefit of the poor driver. The booking
companies CANNOT guarantee a service level.
They should be abolished. 13
The inquiry initiated conversations with the VTA and the
major NSPs in Melbourne on the issues raised in its
discussion paper. These conversations were helpful in
developing the inquiry’s proposals for reform.
9 Anonymous submission to the Taxi Industry Inquiry, SS108
10 CabFare, Submission to the Taxi Industry Inquiry, SS92, p.11
11 VTA, Submission to the Taxi Industry Inquiry, SS60, p.13
12 Department of Treasury and Finance, Submission to the Taxi Industry
Inquiry, SS179, p.5
13 Kevin V. Russell, comment on Taxi Industry Inquiry Facebook page,
25 March 2012
Understanding industry performance CUSTOMERS FIRST 225