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Regulation of Taxi Industry in Australia

Regulation of Taxi Industry in Australia

Introduction

Started in 2008, Uber is a taxi company that employs technology to make bookings for cab services. The company has an application that facilitates its business. The clients just need to install the application and make requests for the taxi services. This business model has seen the growth of Uber to over 58 countries and 400 cities across the world. The company uses Google Maps, a location-based service, to link the customer to the nearest driver. The registration to Uber is open since any person with a well-serviced car can sign up as a driver. This approach has eliminated the need for expensive licenses thereby making the services of Uber cheaper than the traditional taxis. The company entered Australian market in 2012 with a high number of drivers opting to partner with the company. The growth of Uber in Australia has been phenomenal. This discussion looks at the effect of Uber as a company on the Australian market; the regulations implemented the Australian government on ride-sharing business models and their overall sustainability (Uber.com, 2016).

Discussion

Just like many other countries where the company has ventured into, Uber has brought a revolution in the taxi industry in Australia. There are over a million people using Uber in Australia. The number of drivers that have chosen to provide their services for Uber has grown to over 30,000. The business gives drivers the opportunity to plan for their time. This flexibility has been lauded by the drivers. The requirements to join Uber as a taxi driver include owning a car that is not more than nine years, being licensed by the Australian Department of Transport and Main Roads, as well as successfully uploading a profile with Uber.

The passengers need to download the application and register their details. Once they are fully registered, the passengers can make orders through the application and the driver closest to them will be notified of the request (Gurvich, Lariviere and Moreno, 2015). If the driver accepts the request, they will be directed to where the passenger is located on the electronic map. The application makes it possible for the driver to call the passenger just in case the location based service is not accurate as happens in some cases.

The company offers the following service propositions in Australia. First, there is UberX, which is a ride-sharing model that allows owners of private cars to provide transport services. The next proposition is UberASSIST in which the vehicles and services are modeled to suit the people living with disabilities. UberBLACK and UberTAXI service classes are for luxury car rides and standard taxi services respectively. With the exception of UberTAXI, the services provided are not paid according to distance traveled.

The above service propositions employed by Uber has made it difficult for the traditional taxi services where the passengers paid a fee according to the mileage covered (Law and Ma, 2015). Many passengers have found the services of Uber relatively cheaper compared to the other taxis. The entry of Uber and other ride-sharing taxi companies have led to protests by other drivers whose customers and average income have dropped. This turbulence in the taxi industry has seen government and regulatory agencies step in to ensure fair competition policies (Frechette, Lizzeri and Salz, 2015).

Reforms in the Australian Taxi Regulation

The first reform to be announced in Australia is the ACT announced on September 2015(ABC News, 2015). The legislation targeted the taxi industry and on-demand transport system. Prior to the report, a review was done, and an investigative report was done on the effect of emerging technology in the transport industry. The result of the research was that the emergent technology was favorable to the on-demand transport industry. The regulation was the first of its kind amongst the cities of the world. It was the first time a city legalized the ride-sharing model of transport. The aim of the regulation was to make the residents of Canberra city access affordable, flexible and safe ride-sharing and car hire services. The other objective of the legislation is to ensure the taxi industry remains stable, competitive and sustainable.

The reform was planned to be delivered in two stages. The first stage was interim in its implementation. The interim stage that was launched in October 2015 allowed for ride-sharing taxi service based on the history of the driver and the criminal record. The legislation saw a reduction in the registration fee levied on taxis and hired cars. The latter stage introduced new laws into the parliament. The parliament passed the law in November. The law came with some reforms including the need to accredit the drivers and a reduction in the number of regulations on taxis and cars for hire.

The second legislation in Australia, after ACT, is the NSW regulation. The state government of New South Wales legislated a reform in the taxi industry. The NSW legalized the ride-sharing transport system while at the same proposed compensations for the traditional taxi drivers to curb a potential disruption of their regular income. The legislation favored the Uber model called UberX whose service proposition utilizes the vehicles belonging to private owners to offer transport services to its clients. The state government proposed a budgetary allocation of $250 million as an adjustment package for the taxi industry (Thomsen and Tucker, 2015). The package is aimed at supporting the taxi drivers whose businesses will suffer setbacks from the ride-sharing legalization. The authorities cited the need to promote innovation, tracking of drivers and promotion of accountability as the gist behind the legislation. The government was acting as a bridge between the consumers and the taxi drivers. The consumers prefer affordable rates for taxi transportation that is offered by the ride-sharing models. On the other hand, there are the traditional cab drivers whose businesses were at risk and needed to be protected. These two factors informed the NSW legislation. The authority argued that by making the legislation, it was opening an avenue for the creation of new jobs. The NSW legislation reduced the license fee for the taxis (Transport.nsw.gov.au, 2016). The legislation has been lauded by Uber and other ride-sharing businesses owners. Conversely, the legislation has been opposed by several traditional taxi drivers.

Whereas the two legislations deserve plaudits, there is much that can still be done. The legislation has brought vigor in the transport industry since most consumers are able to afford the services of a cab. Many people across Australia have embraced the innovative technology. On the other hand, a considerable number of the traditional taxi drivers have expressed their dissatisfaction with the regulation arguing that the states have acted in favor of Uber and the new entrants (Cramer and Krueger, 2015). To bridge this gap, it recommended that the government helps the traditional taxis to transition to the new model of the taxi business. The support needs to come in the form of vehicle cost subsidies as opposed to the adjustment package currently proposed.

Societal changes that promote ride-sharing taxi business model

There are several factors that have made ride-sharing companies more lucrative to drivers. The ride-sharing taxi model is so flexible as compared to the conventional taxis. The drivers have the complete control on when they will offer their services. Ride-sharing model of taxi business makes it possible for many members of the middle class to double up as employees of other companies while using their vehicles as taxis
(Geron, 2012). Most drivers commend the ride-sharing model as a means of getting additional income. The second reason that makes drivers prefer the model is the need for liquid cash flow. Conventional jobs and salary models make people wait for quite some time before receiving their remuneration, say at the end of the month or mid-month, while the income from the ride-sharing business is instantaneous hence, sustainable cash flow. In this model of transport, there is no need to pay huge license fees as the traditional taxis did. The registration fee is quite affordable for the taxis. There are minimal barriers to entry in terms of registration costs. Once a person owns a car with the right age requirement they are almost as good as done. Another factor that has promoted the ride-sharing model of cab services is the ease of use enabled through smartphone applications. The potential clients interact with the service providers through easy-to-use smartphone applications. Such an application provides the convenience needed by the customers and as a result gives a competitive advantage to the ride-sharing companies. The ride-sharing models like Uber use cashless payment systems as opposed to the traditional taxis. This coupled with the booking of transportation has made the customers opt for the former instead of the latter. The availability and predictability of the drivers is an additional feature of the ride-sharing model that appeals to the customers
(Perry, 2015).

Conclusion

The taxi industry in Australia comprises two broad groups of businesses. The first category comprises the traditional taxi drivers who are registered and charge the customers per mileage traveled. The other category is, of course, the new entrants who employ technology and innovative ride-sharing model in taxi operation. The entry of the latter has brought a disruption in the transport sector in Australia just like many other countries globally. To control the turbulence that had been created by the entry of low-cost taxi services, the government and state agencies in Australia have enacted some laws and regulations such as ACT and NSW. The laws are aimed at bridging the gap between the suppliers and consumer interests. The government wants the customers to access the transport services at affordable services. On the other hand, the government must cushion the traditional taxi drivers against business losses. The legislations come with a reduction in license fees charged on taxi drivers, adjustment packages and adoption of ride-sharing as a taxi business model. The government ought to pay attention to the complaints from the traditional taxi drivers. It is recommended that the government favors some form of transition from traditional taxi to emergent model through substantial subsidies on cars as opposed to the adjustment package.

Bibliography

ABC News. (2015). Uber launches in ACT as Canberra becomes first city to regulate ride sharing. [online] Available at: http://www.abc.net.au/news/2015-10-30/uber-launches-in-canberra/6898514 [Accessed 7 May 2016].

Cramer, J. and Krueger, A.B., 2015. Disruptive Change in the Taxi Business: The Case of Uber.

Frechette, G., Lizzeri, A. and Salz, T., 2015. Frictions in a Competitive, Regulated Market: Evidence from Taxis. New York University, August, 10.

Geron, T. (2012). Forbes Welcome. [online] Forbes.com. Available at: http://www.forbes.com/sites/tomiogeron/2012/07/09/will-ride-sharing-apps-replace-car-ownership/#4cf0f0c33ecb [Accessed 7 May 2016].

Gurvich, I., Lariviere, M. and Moreno, A., 2015. Operations in the on-demand economy: Staffing services with self-scheduling capacity. Available at SSRN 2336514.

Law, J. and Ma, W. (2015). Uber invasion: Taxis’ time is over. [online] NewsComAu. Available at: http://www.news.com.au/finance/business/travel/uberx-versus-taxis-why-the-time-for-taxis-is-over/news-story/cb1e2d9dc77aa29dd88646cbae1d5d4e [Accessed 7 May 2016].

Perry, M. (2015). Creative Destruction: Top 20 reasons ride-sharing is better than taxis and represents the future of transportation — AEI. [online] AEI. Available at: https://www.aei.org/publication/creative-destruction-top-20-reasons-ride-sharing-is-better-than-taxis-and-represents-the-future-of-transportation/ [Accessed 7 May 2016].

Thomsen, S., and Tucker, H. (2015). The NSW government is giving the taxi industry $250m in compensation after legalizing Uber. [online] Business Insider Australia. Available at: http://www.businessinsider.com.au/nsw-is-about-to-say-yes-to-uber-2015-12 [Accessed 7 May 2016].

Transport.nsw.gov.au. (2016). NSW Passenger Transport Legislation Review | Transport for NSW. [online] Available at: http://www.transport.nsw.gov.au/about/legislation/nsw-passenger-transport-legislation-review [Accessed 7 May 2016].

Uber.com. (2016). The Uber story. [online] Available at: https://www.uber.com/our-story/ [Accessed 7 May 2016].