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The Regulation of Taxis Professor Allan Fels AO Adjunct/Visiting Professor Melbourne, Monash, Oxford University Shared and App-based Transport Innovation Seminar Melbourne, Monday 15 June 2015

The Regulation of Taxis by Professor Allan Fels AO

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Page 1: The Regulation of Taxis by Professor Allan Fels AO

The Regulation of Taxis

Professor Allan Fels AO Adjunct/Visiting Professor Melbourne, Monash, Oxford

University Shared and App-based Transport Innovation Seminar

Melbourne, Monday 15 June 2015

Page 2: The Regulation of Taxis by Professor Allan Fels AO

The regulation of taxis �  Previous reviews have called for full liberalisation of

licensing

�  This has always been rejected in Australia

�  The 2011 review: Customers First: Safety, Service and Choice

�  Broadly adopted by the Victorian government

Page 3: The Regulation of Taxis by Professor Allan Fels AO

Challenges for the inquiry (1) �  If licences were fully liberalised their value would

fall to zero

�  Governments were not interested in compensation schemes especially “buybacks” schemes

�  The industry had been on notice for 30 years of possible licensing deregulation. It established other anticompetitive arrangements to minimise the impact of the change

Page 4: The Regulation of Taxis by Professor Allan Fels AO

Challenges for the inquiry (2) �  Regulatory degeneration over time relating to:

�  safety of passengers and drivers

�  the quality and knowledge and income of drivers �  the nature and quality of taxi cabs

�  treatment of people with a disability �  pricing issues in country areas

�  The quality of service had deteriorated over time and there was deep public dissatisfaction

Page 5: The Regulation of Taxis by Professor Allan Fels AO

Licensing (1)

�  Licence values prior to the inquiry were $525,000

�  Licensing was causing high prices, poor service, poor drivers and a lack of innovation

�  Key proposal was adopted: the government would no longer set a limit on the number of taxi licences. This would be left to the market

�  Any qualified person could get a taxi licence

�  Applicants have to pay $22,000 each year

�  This is indexed in line with the CPI minus 0.5%

Page 6: The Regulation of Taxis by Professor Allan Fels AO

Licensing (2) �  This scheme protects current licence holders to

some extent

�  Licence values fell to $280,000

�  About 15% new taxis have arrived

�  There was also liberalisation of hire-cars arrangements

Page 7: The Regulation of Taxis by Professor Allan Fels AO

Looking Ahead (1) �  There is massive scope for a less regulated industry to offer a

greater number and range of services and to improve quality and variety in numerous dimensions

�  Very often deregulation causes a massive expansion of the market (e.g. telecommunications)

�  An inward-looking industry has not recognised this point

�  The arrival of ride-sharing services such as Uber demonstrates to the public some of the possibilities in terms of: �  superior service and drivers �  competitive prices �  safety �  innovation

Page 8: The Regulation of Taxis by Professor Allan Fels AO

Looking Ahead (2) �  There is massive potential for a less regulated taxi industry to serve the

community better in a vast range of ways

�  There has been regulatory resistance to Uber’s arrival in Melbourne e.g. the imposition of fines. Apparently there are criminal proceedings in play against certain drivers but the legal outcome is uncertain

�  The Uber experience indicates the possibility that it can make a major contribution to enhanced courier services, delivery of meals, and countless other innovations all over the world

�  Disruptive competition is not unusual

�  It has been going on for centuries

�  The most customary response of disrupted entities is to rush to the regulator and to invoke factors such as safety, health, environment, resource depletion, licensing prerequisites, special taxes and so on to inhibit or prevent the change