When Uber is legal the taxi industry will have nowhere to hide

In the latest instalment of Uber versus the taxi industry, the Taxi Industry Forum of WA has conceded the sector could have done better. Responding to a Western Australian Government green paper into the “on demand” transport industry, it has reportedly criticised the UberX model, but also admitted its own failure to keep up with technological advances and changing consumer expectations.

Digital disrupters such as Uber have been praised by industry commentators for promoting a sharing economy that challenges established oligopolistic transport providers and bypasses government regulation.

So there was some irony in last month’s announcement from the ACT Government, home of bureaucratic regulatory activity, that it will pass laws to make Uber “legal”.

The proposal has been condemned by taxi providers, who have consistently used established law to try and shut down ride-sharing options, both in Australia and overseas. Conversely Uber has praised the move as enlightened recognition of the opportunities offered by new technologies.

For consumers, placing taxis and Uber on a more level playing field should promote competition, reduce costs and buttress safety.

Still not a taxi service

In legal terms, Uber operates along the lines of a hire car business rather than a taxi service. This will not change under the new ACT law. Uber will not be able to pick passengers up from taxi ranks or be hailed on the street.

Reduced licence fees should mean cheaper prices for consumers. The bar to Uber operating “legally” as a hire car business in most states and territories is the high cost of a licence (A$40,000 in Victoria) and/or the requirement that a hire car be a luxury vehicle. These requirements are of course an anathema to UberX, which is premised on ordinary people sharing rides in ordinary cars.

Under the proposed ACT laws, licencing fees for taxis and hire cars will be reduced, while some new, fairly minimal fees will be imposed on ride sharing operators to cover licensing and accreditation

For established services these reductions are significant. Taxi vehicles in the ACT currently pay a A$20,000 licence fee. Under the proposed reforms this fee will be reduced to A$5,000 in 2016 in the ACT. The licence fee for ride share drivers will be A$100 or A$400 for five years.

Given there will be a degree of competition in the market, one would expect this reduction in licence fees to be passed onto consumers on the form of lower prices for taxis and hire cars, as well as more opportunities for ride sharing. In addition, the proposed reforms aim to allow both taxi and ride share drivers to access more than one online “transport booking service” potentially further increasing flexibility and competition.

Safety improved

The proposed ACT reforms will impose basic safety and consumer protection standards including requirements for:

• police and driver history checks
• up-front medical assessments of drivers
• drivers to have a zero blood alcohol level and be drug-free
• minimum training requirements for drivers
• rideshare vehicles to be registered and roadworthy
• vehicles used for rideshare to receive an accredited annual inspection
• specific compulsory third-party and property insurance
• handling of private information about passengers, including bank and transaction information, to comply with relevant Commonwealth and ACT privacy legislation

In addition, under the proposed new laws, transport booking services (such as UberX) must have customer complaint mechanisms in place and drivers should be aware of the process.

A recent Choice comparison found the UberX service was as safe as that offered by taxis. This was because UberX utilises GPS tracking of all trips and because Uber already requires its drivers to undergo a police check, have a clean driving record and hold third party and third party property insurance, as well as providing insurance coverage itself for all UberX trips.

While some might accordingly see the measures proposed by the ACT Government as regulatory overkill stifling a new industry, realistically it can only bring consumers comfort. Safety is likely to be high on the list of priorities of most taxi, hire car and ride sharing users.

Consumers are unlikely to be able to investigate the driving record of their booked driver or the safety of the vehicle before they set out on a ride. Making safety measures mandatory entrenches the measures already in place by Uber to the benefit of consumers. To the extent Uber already undertakes these types of measures, the new laws should not increase costs significantly. The mandatory nature of the requirements will also prevent new ride share entrants trying to undercut Uber by skimping on safety.

Other states?

It’s hard to predict whether these moves to make Uber legal will be followed in other Australian states. But it appears consumers see UberX as offering a fresh alternative to the unresponsive and outmoded customer service of the taxi industry. So consumer demand may well prompt reform, through further regulation, of the sector in other jurisdictions before too long.

Jeannie Marie Paterson receives funding from the Australian Research Council.