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

11.4.2. Mandatory network affiliation
There are no specifically stated regulatory objectives
with regard to mandatory network affiliation. However,
the general understanding within the industry and of the
regulator is that the requirement exists to:
• Facilitate universal access to taxis, enabling
customers to access a taxi day or night through
the NSP
• Provide a safety communication system for drivers
and passengers where vehicles can be tracked by a
GPS link and an emergency warning system can be
activated by the driver in case of an emergency.
Licence conditions for Melbourne metropolitan taxis
require the operator to ensure that the licensed vehicle
is “at all times operated under radio control from an
NSP for the receipt and dispatch of bookings for taxicabs,
and that the vehicle is fitted with fully operational
GPS system equipment linked to that NSP.” 35 While the
wording of licence conditions varies, similar requirements
for dispatch of bookings also apply to taxis outside the
metropolitan area.
In addition to these licence conditions, section 133 of
the Transport (Compliance and Miscellaneous) Act 1983
contains provisions that contend that network affiliation is
a legislative requirement.
An operator is only permitted to affiliate their vehicle with
one accredited network. The rationale for this restriction
is not known to the inquiry, but its presence is likely to
reduce competition and hamper the efficiency of the
fleet. In an efficient booked market, taxi operators could
choose to align with two or more networks, seeing value
in access to niche markets. In turn, this would provide an
incentive for networks to seek out different or varied work
and aid competition for network services.
Previous reviews of the taxi industry in Victoria have also
questioned the requirement for mandatory affiliation.
The 1986 Foletta inquiry recommended that mandatory
affiliation be removed to “encourage competition and
innovation and allow groups of licence holders to tailor
operations to suit particular market segments.” 36
KPMG expressed concern that, “the requirement that
all taxi-cabs must be operated under radio control may
prevent taxicabs from exclusively operating from another
form of network (i.e. mobile phone or pager).” 37
The Essential Services Commission, in its 2007/08 review
of taxi fares made the following observation:
The requirement that operators affiliate with a depot
exposes them to costs which may escalate in an
environment of imperfect competition. It has already
been observed that among depots there is significant
market concentration. Market consolidation reduces
the degree of competition, thereby reducing the
relative bargaining power of taxi operators and
drivers. This is further exacerbated by compulsory
depot affiliation which mandates that operators deal
with a depot irrespective of what conditions are
being offered. 38
11.4.3. Secondary networks
Secondary NSPs are also required to be accredited;
however, their requirements under the scheme are minimal
compared with those for primary NSPs. In order to be
accredited, secondary networks must demonstrate that:
• Relevant persons in relation to the organisation are
of good character
• They have business and financial capacity to effectively
carry out their activities as a secondary network.
Presumably because operators are required to be
affiliated with a primary NSP, secondary networks are
not required under the accreditation scheme to manage
customer complaints, provide for the safety of drivers,
have disciplinary procedures for drivers or have systems
capable of recording information in relation to bookings
and other data related to their operation.
Even though secondary networks are not subject to the
same level of regulation as primary NSPs the inquiry has
found that customers have a considerably higher level of
satisfaction with their service offering. 39
The rationale for accreditation of secondary networks
appears to be less clear than for other accredited parties.
Secondary networks have no regulated obligations to
provide any level of service to customers or to their
members, making it difficult to see how accrediting these
industry participants contributes to the stated purposes
of accreditation: safety, efficiency and reliability.
35 For example, Taxi-cab licence conditions for Conventional Fixed-
Term Licences, Transport (Compliance and Miscellaneous) Act 1983,
section 144
36 Foletta, B (1986) Report of the Taxi Inquiry – Melbourne and
Metropolitan Area, p.57
37 KPMG Consulting, (1999), Op. Cit., p.39
38 Essential Services Commission (2008a), Taxi Fare Review 2007/08 –
Interim Report, Melbourne, p.59
39 Ipsos Social Research Institute (2012), Op. Cit., p.80
Understanding industry performance CUSTOMERS FIRST 233