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

More recently in the United States, a number of cities
have moved to open market arrangements while
maintaining fare and quality controls (such as Indianapolis
and Minneapolis). Phoenix and Washington DC also
maintain open markets.
9.3.2. Fare controls
The experiences of other jurisdictions suggest that
the relaxation of licence controls does not necessarily
result in the full realisation of anticipated competitive
and efficient markets. Fares do not invariably
decrease if fare controls are relaxed or removed.
These experiences have highlighted the need for
jurisdictions to be aware of the interaction between
fares and entry controls at the time of deregulation.
For example, the Netherlands deregulated its taxi industry
during the period 2000 to 2002. During this time, a new
national maximum fare was introduced temporarily, with
the intention of protecting consumers from any initial
excessive price rises as a result of licence liberalisation.
The Government’s expectation was that competition would
increase and the maximum fare could then be removed.
However, the outcome was an increase in fares – the
national maximum fare was actually set relatively higher
than the average fare under the previous regime and this
allowed operators the freedom to charge higher fares. 8 The
effect was that, while the availability of services improved
with an increase in taxi numbers, fares under this scheme
also increased to close to the maximum fare.
On the other hand, New Zealand allowed industry
participants to set their own fares when it deregulated
entry and fares (see case study). However, maximum
fares for each taxi organisation have to be registered with
and approved by the NZTA before coming into effect.
Fares are calibrated on the meter and information on
fares displayed inside and outside the taxi. Early studies
suggested that the effects were generally positive. These
studies found that in New Zealand’s large cities, entry
increased but real fares decreased. 9 The inquiry’s view
is that, broadly, the relaxation of fare controls in New
Zealand has allowed innovation and price differentiation
to a degree. While a common approach to structuring
fares is required, ATOs can emphasise different elements
of the fare structure. The public tend to focus on the
flagfall and distance rates, but the inquiry found there
were significant differences in overall fares due mainly to
the effect of waiting time changes.
The lack of readily comparable fare information seems to
be an issue in New Zealand.
Singapore adopted a similar approach to New Zealand
when it deregulated fares in 1998 and maintained this
position during the subsequent deregulation of licences
in 2003 (see case study). Each taxi network is free to set
their own fares provided that the network informs the
government and the public to ensure the predictability of
the fares.
However, the behaviour of the market seems to suggest
not as much competition on fares as this approach
implies, partly due to the indirect effects of limiting
licences – and thus competition – through Singapore’s
private and commercial vehicle permit system and
minimum fleet size requirements. The current largest
taxi network effectively acts as a market leader: it sets
prices and the other networks generally follow. To cope
with increased demand for its services, the largest taxi
network recently revised its fare structure rather than
purchase new licences, which will most likely result in
higher fares. 10 The Singapore example emphasises that,
even where there are several taxi networks competing
on a range of dimensions, competitive outcomes on
fares can be tenuous. Regardless, a 2008 Singapore
Government report suggested that fares in Singapore
are relatively low, on a purchasing power parity basis,
compared to other major cities. 11
8 Baanders, B. and Canoy, M. (2010), ‘Ten years of taxi deregulation
in the Netherlands – the case for re-regulation and decentralisation’,
European Transport Conference, Glasgow, p.3
9 See for example Gaunt, Clive (1996), ‘The impact of taxi deregulation
on small urban areas: some New Zealand evidence’, Transport Policy,
2(4), pp.257-262
10 See ‘ComfortDelGro revises taxi fares’, 5 December 2011,
accessed 29 March 2012 at www.channelnewsasia.com/stories/
singaporelocalnews/view/1169537/1/.html
11 Comparative prices in 2008 for a 9km journey during morning
peak times were Singapore S$9.39; Hong-Kong S$12.35; London
S$24.56; and New York S$14.62: Singapore Land Transport
Authority (2008), Land Transport Masterplan, p.17
164