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

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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
11.2. What are NSPs? In Victoria, the centralised booking and dispatch of taxi-cabs is delivered by NSPs. 14 NSPs have established brands, are permitted to display their trademark or name on taxi cabs and, for most customers, are the ‘shop front’ for taxi services. However, NSPs provide only a centralised dispatch service and do not themselves directly deliver taxi services. As set out in chapter 4, taxi operators own the vehicle and must ensure that the vehicle is fit for service, while taxi drivers (who typically bail the vehicle from operators) provide the face-to-face transport service to customers. 11.2.1. Primary NSPs The evolution of taxi booking companies Across Victoria, there are more than 90 accredited primary NSPs. 15 NSPs vary greatly in operation Booking and dispatch services depending on the size of their fleet. In some instances, an NSP may provide services to just one vehicle and As noted above, and discussed in more detail below, is a simple operation; in other instances, such as the licence conditions for Melbourne metropolitan taxis In the early 1950s, taxi services outside the Melbourne CBD were in Melbourne, an NSP may provide a sophisticated require provided an by operator a number to of be depots affiliated that with controlled an NSP. Operators designated zones. Individual taxi owners were aligned to the depots communication centre that includes multiple call affiliated and would with be a particular dispatched NSP directly install from a mobile the depot data to take bookings that were received via a landline. operators linked to more than 2,000 vehicles. As terminal in their vehicle that allows them to receive jobs Later in the decade, the introduction of two-way radios improved efficiency mentioned earlier in chapter 7 of this report NSPs must booked with allowing the NSP. taxis to NSPs be directed also agree to pick-up to monitor the locations rather than having to return to base, thereby reducing the degree of empty running. The suburban taxi zones be accredited by the Victorian Taxi Directorate (VTD). taxi while it is logged on to the network to help to protect were later abolished however a separate zone still exists for Dandenong and Frankston. the safety of the driver. While Outside there Melbourne are six accredited there are designated NSPs for the zones metropolitan covering major regional centres, such as Geelong, Bendigo and Ballarat, while taxis in country areas predominantly operate within a radius of a designated town. zone, an effective duopoly exists with three NSPs being Operator obligations to the NSP subsidiaries In Melbourne, of Cabcharge the market for (Black NSPs Cabs, is highly Arrow concentrated. and North While there are six accredited NSPs for the Melbourne area, an effective duopoly exists with Silver Top Taxis and West Suburban The Taxis agreements owned by between the Gange operators Corporation, and and NSPs Black vary Suburban) and Silver Top Taxis and West Suburban Taxis Cabs Combined, Arrow Taxis and North Suburban Taxis being subsidiaries between of networks. Cabcharge. However, Platinum in Taxis, general, a relatively the obligations sharing new entrant, common holds ownership. a small proportion Platinum of Taxis, the market a relatively with 100 taxis of affiliated operators with include: its network (see graph). new entrant, holds only a small proportion of the market with just under 100 taxis affiliated with its network. Figure 11.1 shows the level of market concentration: • Obey the dispatch rules of the network Percentage of taxis affiliated with metropolitan Figure Melbourne 11.1 NSP network market service share providers 2.3% 49.3% Silver Top Taxis, 48.4% West Suburban Taxis Black Cabs Combined, Arrow Taxis, North Suburban Taxis Platinum Taxis The outer suburban zone is serviced by two primary NSPs (Frankston Radio Cabs and Dandenong Taxis); these NSPs operate predominantly within their respective suburbs. Each of the three urban zones has one NSP (Geelong Taxi Network, Taxis Associated of Bendigo and Ballarat Taxis Cooperative). The remaining country regions have less than 40 taxis and generally have one NSP in each region, apart from a few notable exceptions such as Mildura, Swan Hill, Shepparton and Bairnsdale where there are two in each area. 11.2.2. The role of Primary NSPs While traditionally providing booking and dispatch services, the role of the primary NSPs has extended in recent years to encompass a range of additional services to taxi operators and drivers. • Ensure their vehicle(s) is maintained in good order “The • Present requirement the vehicle(s) that operators the NSP affiliate when with required a depot to exposes do so them to costs which may escalate in • an Ensure environment that drivers of imperfect of the vehicle(s) competition. comply with the It has NSP already rulesbeen observed that among depots there • Market is significant and actively market promote concentration. the NSPMarket consolidation reduces the degree of competition, • Authorise the NSP to collect information as the NSP thereby reducing the relative bargaining power deems relevant of taxi operators and drivers. This is further • Ensure that the vehicle displays the branding of the exacerbated by compulsory depot affiliation NSP as specified. which mandates that operators deal with a depot irrespective The contents of of what these conditions agreements are are being not offered.” regulated, Essential other than Services for an Commission, overarching requirement Review of Taxi that Fares NSPs 2007/08, must deal Interim with Report operators March and 2008, drivers p. fairly 59. and honestly. 16 Source: VTD supplied data Contact the Taxi Industry Inquiry 14 Section 130A of the Transport (Compliance and Miscellaneous) Act 1983 defines what is meant by a taxi-cab network service You can 15 Data contact provided the to inquiry the Taxi and Industry provide Inquiry feedback by the VTD in the following ways: Email: taxiindustryinquiry@transport.vic.gov.au Follow us on Twitter: www.twitter.com/taxiinquiry 226 Like us on Facebook: www.facebook.com/TaxiIndustryInquiry 16 Transport (Compliance and Miscellaneous) Act 1983, section 133C; Business and Service Standards, part 3 (19) Mail: Taxi Industry Inquiry, Locked Bag 20046, Melbourne VIC 3001 Telephone: 1800 TAXI II (1800 829 444)
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Part D Understanding industry perfo
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The number of licences is restricte
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9.2.2. Quality and safety controls
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Case study New Zealand’s experien
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Case study Singapore’s unique reg
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Case study London’s quality contr
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A report commissioned by the inquir
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Another possible explanation for hi
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From these comparisons, we can obse
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Page 46 and 47: In its 1999 report, KPMG argued tha
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Page 62 and 63: KPMG argued that these restrictions
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Page 102 and 103: Case study Cabcharge penalised for
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