High standard needed for taxi deregulation

Press, 22 July 1989, Page 16

High standard needed for taxi deregulation

By

CULLEN SMITH

New legislation deregulating the taxi industry in New Zealand should set high standards for new entrants, says a visiting American Transport specialist. Dr Roger Teal, professor of transport engineering at the University of California at Irvine, said the United States experience since deregulation in 1979 showed an influx of new taxi drivers had split the market and lowered standards.

Regulations controlling the taxi industry in Seattle and San Diego were dropped in 1979, with the cities of Sacramento, Kansas City and the state of Arizona following in 1982.

Studies commissioned since, by the United States Department of Transportation showed consumers enjoyed little benefit from the change, Dr Teal said. “The conclusions from our studies were that the benefits which proponents of deregulation had touted in support of the policy really couldn’t be detected after deregulation,” he said.

“Price reductions, improvements in service and new, innovative services simply did not happen.” Dr Teal, who reported to his government on the effects of deregulation in Arizona, said prices in cities which opted to keep industry regulations proved on average 5 per cent to 10 per cent cheaper. Fare response times in deregulated cities dropped slightly from an average 10-minute wait to eight minutes, but that

was the only tangible consumer benefit noted. "In terms of innovative services, there was nothing. There were no new services being offered by the cab companies,” Dr Teal said.

Researchers were puzzled by the results and concluded the vast number of new owneroperators flooding into the industry had split the market. Most of the newcomers were individuals owning a single taxi. “They could put a deposit down for a few hundred dollars and they were in the taxicab business,” Dr Teal said. But the only areas left open to owner-operators without investing in radio equipment and a network, or joining established taxi organisations, were the airport and inner-city taxi stand trade. Dr Teal said there were so many new taxis battling for their share of the full service, 24-hour companies had to pull out of a part of their traditional market.

“Literally, hundreds of vehicles would be waiting at airports and city cabstands,” he said.

Opportunities for price savings evaporated with little incentive for the newcomers to lower fares because of the first-come, first-out system on the taxi stands.

Safety standards in the United States — “pretty minimal” according to Dr Teal — did not appear to be compromised.

“What we observed was not so much a reduction in safety per se, but a reduction in the quality of the vehicles.

“New entrants bought older, less expensive vehicles and they really went down in quality,” he said.

Dr Teal, in New Zealand at the invitation of the Taxi Proprietors’ Federation to present submissions to the Parliamentary Select Committee studying the Transport Amendment No. 2 Bill, said the key to avoid problems evident in America was the standard of entry. “New Zealand must set entrance standards high enough to ensure new entrants serve the total market. Every cab in the industry should be affiliated to an organisatin that provides a 24-hours-a-day service,” he said. Dr Teal said he was impressed by the standard of taxi service in New Zealand. The quality of vehicles and drivers was definitely higher than in the United States.

“The response and service is excellent. I haven’t had to wait five minutes, which is not my experience in the States,” he said.