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Submission to the Commission for Taxi Regulation

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Submission to the Commission for Taxi Regulation - National Review of Taxi, Hackney and Limousine Services and Vehicles Standards Submission S/05/002 March 2005
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Submission to the Commission for Taxi Regulation – March 2005 2Introduction 1.The Competition Authority welcomes the National Review of Taxi, Hackney and Limousine and Vehicles Standards undertaken by The Commission for Taxi Regulation. We have consistently argued that reform of the taxi regulation regime is necessary to realise fully the enormous benefits of the entry liberalisation of the industry and maintain them over time. The Authority’s 2002submission to the Department of the Environment and Local Government, on Qualitative Improvements in Taxi Services and Future Regulation of those Services, provides an analysis in this regard.12.This submission provides The Competition Authority’s comments on the format of the proposed review and on some of the substantive issues that will be under review. In general, the proposed review is laudable, in particular for its breadth of consultation and simultaneous focus on core issues. It is important that the subsequent assessment of the costs and benefits of various regulatory and other policy options takes full account of the hidden costs of regulation. Methodology of the Review 3. In pursuing its functions, the Commission’s ultimate goal should be ensuring that the markets providing taxi, hackneys and limousines services work well for individual consumers and business users. The review will provide critical information to determine:• whether consumers are offered choice by service providers, whether they are able to trust that the information they receive is correct and that their contract will be honoured e.g. whether every step is taken to ensure that they will arrive safely at their destination in a timely manner.• whether services are provided in an efficient manner i.e. rivalry between the service providers exerts downward pressure on costs and promotes quality and innovation. 4. The Commission for Taxi Regulation’s proposed approach for examining the existing regulatory framework and surveying consumers, is to be applauded for its breadth of consultation, transparency and focus on core issues. The proposed review will provide the Commission with critical information to determine the need for regulation, and the type of regulation needed. 5. In preparing a code of regulations, the Commission will have to assess the merits of various alternative policy tools (including non-intervention). This process should be guided by the Government’s policy on better regulation, which aims at ensuring that any regulatory intervention is necessary, transparent, accountable, proportionate, consistent and effective.2This is done by completing “regulatory impact assessments” (or “RIA”s): evaluations of the relative costs and benefits of the different policy interventions in order to identify the policy that works best.1 Submission to the Department of Environment and Local Government available athttp://www.tca.ie/decisions/submissions/taxisub.pdf - copy attached. 2 White Paper: Regulating Better, Department of the Taoiseach, January 2004.
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Submission to the Commission for Taxi Regulation – March 2005 36.It is important that such assessments take account of all the costs and benefitsassociated with any intervention, i.e. • the direct costs of regulation and its enforcement, which are borne by industry (e.g. increased expense), the Commission for Taxi Regulation(e.g. increased staff time) and ultimately consumers and tax-payers, and • the indirect costs or hidden costs of regulation e.g. costs borne by consumers when regulation reduces the number of taxis available because it restricts access to the profession or raises the cost ofproviding the service. Less taxis means less choice for consumers, less competition between existing providers to offer the best service to consumers, and can translate into longer taxi waiting times.RIA Example 7. For instance, if the Commission’s review found that consumers in need ofwheelchair accessible vehicles are experiencing difficulties in hiring such vehicles, perhaps at certain times of the day, a regulatory impact assessment would evaluate the benefits of requiring 100% of the taxi fleet to be wheelchair accessible compared to alternatives. Such an analysis would evaluate the full costs of requiring all taxis to be accessible - in terms of increased fares to consumers and availability of taxis - compared to, say, requiring a proportion of all taxis to be accessible. It would similarly examine whether 100% coverage would be ensure taxi drivers take business from wheelchair users in preferenceto other business, especially in times of peak demand.Drivers may have less incentive to accept jobs from those most in need of that type of vehicle, because there may be additional costs associated with picking up passengers in wheelchairs. In the absence of any incentive to accept this kind of job, having thousands of wheelchair accessible vehicles on the streets would likely not beeither a necessary nor an effective policy option when alternatives can beconsidered to adequately provide accessible taxis to those who really need them. In other words, a 100% policy might be more costly and less effective inachieving a critically important public policy objective.8.A regulatory impact analysis would consider alternative policy options such as (a) having a minimum proportion of wheelchair accessible cars3, whereby thedrivers were adequately compensated for the additional capital expense of having a wheelchair accessible vehicle, and (b) giving drivers of those vehicles financial incentives to prefer custom from wheelchair users over othercustomers. A system that subsidised fares for wheelchair passenger journeysmight simultaneously provide incentives for drivers to prefer wheelchair usersover other customers and boost demand for wheelchair accessible vehicles.43While the precise proportion of wheelchair accessible vehicles that is appropriate will depend on the country in question, support for a figure of around 15% is reported in the IRU & ECMT report (in Finland and the UK). 4For a comprehensive review of the issues surrounding taxi accessibility the reader is directed toEconomic Aspects of Taxi Accessibility, IRU (International Road Transport Union) & ECMT (EuropeanConference of Ministers of Transport), OECD 2001.
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Submission to the Commission for Taxi Regulation – March 2005 4Consumer Surveys9. Information regarding consumers’ preferences and their willingness to pay is essential to evaluate the relative costs and benefits of different policyinterventions. Customer surveys can provide such information. The focus of the surveys of Irish consumers, businesses, tourists should not be limited to their priorities in hiring taxi, hackney and limousine services but extend to finding the amount they are prepared to pay for each addition to the quality of service.5Incarrying out such analysis, the Commission may find that consumers declare that they value certain quality standards or features, such as cleanliness or style of vehicles, but that they are not willing to pay (much) for them. If the amountthat consumers are willing to pay for a particular aspect of service is less thanthe costs (direct and indirect) associated with providing this aspect, then itshould not be required. This kind of information is invaluable in finding the regulated price-quality package which best matches the needs of the vast majority of consumers.610.Price regulation is not currently within the remit of the Commission for Taxi Regulation; fares are set alongside taximeter areas by local authorities. Thusthe extent to which the optimal regulated price-quality package can be achievedin Ireland is limited by the fact that the two functions are not housed in the onepublic body. Fare levels determine the attractiveness of the business and hencethe number of taxi drivers. By affecting the number of taxis, fare regulation istherefore also a determinant of a key feature of the quality of service offered by the taxi industry – taxi waiting time. Fare regulation 11. The Commission is reviewing a number of issues related to fare regulationcovering - • The advantages or disadvantages of a uniform fare level and structure forthe country as a whole; • The potential to simplify the fare structure; • The case for extending fare control to hackneys; and • The criteria to be applied and the process to be followed in revising fare levels and responding to the requests of taxi interests for fare increases. 5An analysis carried out by the OFT in its study of The Regulation of Licensed Taxi and PHV Services in the UK (Nov 2003) may provide a useful methodology for such information gathering.6It is important to note that requiring a certain basic level of service, at a regulated price, allows for innovative businesses to provide additional services in an innovative manner. For example: some hackney firms may wish to advertise that all their vehicles are of a certain standard, others may selladvertising space inside and outside their vehicles.
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Submission to the Commission for Taxi Regulation – March 2005 5Uniformity Across Ireland 12.The task of regulating fares is complex. It requires taking into account theinteractions between quality and fare regulation as well as mimicking competitive market prices to ensure that supply meets demand. In particular,the fare regulator will have to avoid situations where there are not enough taxis because fares are too low and/or quality standards are too high. Conversely, the fare regulator will have to avoid situations where too many taxis are idlebecause fares are too high. In addressing these concerns, the specificity of local markets are important, as demand patterns for taxi services are different in urban and rural areas for instance. Thus, there is a case for having differenttaximeter areas across the country. Fare Structure 13.Whether the fare structure is simplified or not, it is vital that regulated fares are maximum fares only. Maximum fares allow drivers to offer discounts, maintaining a degree of price competition that may be availed of by innovativecompanies who intend to cater for specific market segments. Lower hiring feescan boost demand for short trips, generating extra business and dispersing taxismore, thus reducing waiting times. Hackney Fares 14. Hackney fares should not be regulated. Consumers can benefit hugely from pricecompetition between hackneys and taxis and between hackneys themselves. Price competition is facilitated in this instance because consumers can choose a hackney from the comfort of their home/office and shop around on the phone.If the Commission’s review raises concerns that consumers are not benefiting fully from such competition, it should consider informing the public of its right tonegotiate fares with hackney drivers. The Process to be Applied 15. The structure of fares should be set with the sole aim of ensuring that supplymeets demand. Ideally, an efficient system of fare regulation should attempt to mimic what would happen in a well functioning market, i.e. one where monopolypricing does not prevail and where certain groups of consumers are notsusceptible to over-charging.16. A fare review process should be established that is both regular and systematic.Fares will need to be re-balanced on a regular basis, increasing them at times ofthe day or week when customers queue and reducing them when there isovercrowding of taxis at ranks. Accordingly, fare reviews should not be seen simply as an opportunity for lobbying the fare regulator. Changes in fares, up aswell as down, should be based on objective evidence of excess supply or excessdemand – and not because of pressure exerted by special interest groups. Where there is overcrowding of taxis on streets, downward adjustment of fares is desirable.17.A reliable means of information gathering should be developed to assist the fare review process. In addition to the observation of ranks and consumer satisfaction surveys, detailed records of taxi usage should be kept. Meters could be used to assist this process.
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Submission to the Commission for Taxi Regulation – March 2005 618.The identification of consumers’ priorities in terms of the quality of servicedemanded and what they are willing to pay for different levels of quality willgreatly assist in this process. All of the above would be best achieved if the Commission for Taxi Regulation had the function of regulating price as well asquality. As the Commission develops expertise in regulatory impact assessment,it will be best placed to assess any proposed fare adjustments. It would also befree of political considerations.Having the Commission for Taxi Regulationregulating both price and quality would be in line with better regulation principles; such a policy has been implemented in the telecommunications sector, the electricity sector and most recently in the aviation sector. 19. If the Commission can issue guidelines to local authorities for setting fare levels,this would be welcome. Conclusion 20. The Competition Act, 2002 confers on The Competition Authority the function of advising public authorities on issues concerning competition, which may arise inthe performance of their functions. We have developed expertise in a number ofareas related to taxi regulation and we would be happy to assist the Commissionfor Taxi Regulation in this regard. In the meantime, we wish the Commission well in its review.
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