11
Aug
2016

Ride-sharing reforms: a win for Queenslanders

by Jim Minifie


Published by, The Brisbane Times, Thursday 11 August

From September 5, Uber and other ride-sharing services will be legal in Queensland, as they already are in the ACT and NSW. How do the proposed reforms stack up?

First, safety: the government is sensibly proposing that ride-sharing drivers have medical and criminal history checks, just as taxi drivers do, and that their vehicles be subject to regular mechanical checks. Anonymous rank-and-hail pickups will remain the preserve of taxis, and taxis will still have in-cab cameras and other provisions to protect taxi drivers and passengers. The government says it needs to review whether cameras are needed in ride-sharing vehicles, or whether smartphone IDs, booking, GPS tracking and feedback provide sufficient safety. The Government should mandate that ride-sharing companies share safety data.

Second, insurance: Government has asked the Motor Accident Insurance Commission to design compulsory third-party insurance for ride-sharing. Taxis and hire-cars are on the road more than private cars — and they have higher occupancy — so their insurance costs more. The challenge for the Commission will be to design insurance that does not deter occasional or part-time ride-sharing drivers. Ideally, it would be charged on a per-kilometre basis, perhaps via a charge implemented through the ride-sharing app.

Third, community service and disability: For now, only taxis will be part of the disability service. In time, the government will likely need to increase subsidies, because it will no longer be able to offer discounts on taxi licences as a way to get wheelchair-accessible cabs on the road. It may also be able to include ride-sharing providers in the scheme.

Fourth, fares and availability: the governments will retain fare caps on rank & hail rides, but they will lift caps on pre-booked taxi fares. Ride-sharing fares will be unregulated, but government has mandated that ride-shares and others provide a fare estimate in advance. Legalising ride sourcing will probably cut average off-peak fares, though ride-sharing fares can spike at peak times, perhaps helping to draw more drivers onto the road. Regulators will need to monitor prices and availability: ride-sharing could well prove a winner-take all market, and price regulation is always an option if a dominant provider emerges.

Fifth, customer service. Smartphone systems offer much better feedback, and operators provide better service in response. People highly value the booking, mapping, fare estimates, identification, billing and feedback systems offered by ride-sharing providers.  While Queensland taxis provide generally very good service, satisfaction is lower than for other forms of public transport. Taxi operators are very likely to retain customers if they can match or improve on the offers of ride-sharing firms.

Sixth, licence values and compensation. Queensland’s metropolitan taxi licence prices, at over $500,000, were the highest in the country in recent years, but prices plummeted when the ride-sharing threat appeared. The government is allocating $100m of taxpayers’ money for compensation to taxi licence owners: $60 million to compensate $20k each licence for all owners (to a maximum of 2 per owner), and $10,000 for each hire-car licence owner, plus $27m for hardship and some assorted fee waivers.

The compensation Queensland offers is small compared to the losses of some licence owners. But the licence values were nothing more than the expected value of excessive taxi fares: about ten percent of every taxi fare in Queensland went to pay licence owners. And not all licence owners will have experienced an investment loss. In Victoria, for example, only those who bought licences after about 2000 lost money on their investments in real terms; others recouped good returns from licence rentals. More generally, other businesses have little expectation of compensation if governments adjust regulation in response to technology changes.

Finally – what about the drivers? Nobody should expect the reforms to improve hourly incomes for drivers much: driving is a small part of the overall labour market and hourly incomes are not regulated, so taxi operators and ride-sharing companies will not pay more than they need to. But ride-sharing provides a particularly flexible way to make a living, and many drivers use it to offset variation in other sources of income. But taxi drivers who cannot easily switch to ride-sharing could find themselves with lower incomes.

Like any policy change, the reforms will result in winners and losers. But they will benefit the many customers of the $1.2b Queensland taxi market by injecting new services and new competition. They should be supported.