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

From 1953, the use of two-way radio became more
widespread, allowing drivers to be directed to pick-up
locations while ‘on the road’ (rather than having to return
to base) and reducing the amount of dead running by
taxis and hire cars. 27 This coincided with an increase in
the number of homes with fixed line telephones, enabling
customers to connect directly with their local taxi depot
to pre-book a taxi.
In 1975, a study commissioned by the Victorian Ministry
of Transport analysed the organisation of the taxi industry
and its suitability to meet public demand. The report
concluded that:
The flexibility and potential of the current zoning and
depot system is limited because the inherent
fragmentation does not permit the most efficient
utilisation of the taxi industry by location and over
time throughout the week. 28
The report recommended:
… every opportunity should be taken to amalgamate
taxi depots … [and] the regulation of suburban taxis
should be relaxed to allow them increased freedom
and efficiency of movement to assist in meeting peak
demands in the central areas. 29
The report recognised that efficiency benefits could be
gained by re-introducing competitive tension into the
market for booked services and led to the removal of
many of the suburban zones. Around this time, local
monopolies were no longer favoured as the most efficient
structure for organising taxi booking services in the
Melbourne market.
The removal of the limitations on assigning licences to
a third party in 1987, 30 enabled many of the founders of
taxi depots to ‘step back’ from the day-to-day running
of taxis and either retire from the industry or focus on
their emerging taxi booking businesses. After this period,
taxi depots increasingly became vertically integrated
businesses offering a range of services to their affiliates
in addition to booking and fare payment processing.
Insurance, licence brokering, driver training, vehicle fit-out
and purchasing became supplementary revenue sources
for taxi depots. Depots evolved from cooperatives owned
by their members to networks owned by people who
were removed from the direct provision of taxi services.
11.3.2. Early regulation of depots
Mandatory network affiliation has been in place for many
decades, having come into effect during the 1950s with
the requirement for taxi operators to have their vehicle
under radio control of an ‘approved’ depot at all times.
The requirement for depots to be approved gave effect to
a ‘de facto’ regulatory regime, under which the industry
regulator (the TRB and then the VTD) approved depots
against a set of guidelines.
The general premise of the assessment was that
applicants needed to justify that the approval of the
depot would be in the public interest. To comply with
the guidelines, applicants were required to provide a
business plan of their establishment arrangements;
provide a 24 hour warning system for drivers; operate
on a 24/7 basis; conduct inspections of vehicles against
licence conditions; and discipline drivers for breaching
government and industry standards. 31
While these requirements effectively created a barrier
to new entrants, the regulator was not empowered
to regulate the performance of taxi depots after
their approval. The introduction of the taxi industry
accreditation scheme in 2007 sought to address this
shortcoming.
11.3.3. Technology, innovation and the
role of the depot
Victorian taxi depots were early adopters and adaptors
of new technologies. This innovation has increased
the efficiency of booking services but has also enabled
further business consolidation, market concentration and
vertical integration.
In 1974, ‘Bankcard’ was introduced in Australia,
Bankcard was Australia’s first widely available credit card
and proved to be popular with retail consumers as an
alternative to cash payments. This change in consumer
behaviour filtered quickly through to taxi services and in
1976 Cabcharge established itself as an industry-specific
financial services provider for the taxi industry. The advent
of Cabcharge enabled taxi operators and drivers to
accept non-cash methods of payment for taxi fares. The
administration and distribution of non-cash payments
to taxi operators and drivers became a complementary
function for taxi depots and a major part of their revenue
streams, with customers charged a service fee by
Cabcharge and part of this fee paid to the depots. 32
27 Williams, David (1978), Regulation of Taxicabs: The Victorian Case
[manuscript], School of Economics, La Trobe University, Melbourne,
p.22
28 Pak-Poy, P.G. and Associates P/L (1975), Study of Melbourne
Taxi Services – Prepared for the Ministry of Transport, Ministry of
Transport, Melbourne, p.iii
29 Ibid., pp. iii-iv
30 See section 6.2.1
31 KPMG Consulting (1999), Op. Cit, p.38
32 The issue is canvassed in greater detail in chapter 12
Understanding industry performance CUSTOMERS FIRST 231