The rise of new-model virtual businesses such as Uber and Airbnb has broken the link between physical assets and service delivery. Not only are these enterprises causing massive disruption in traditional industries, but they are also challenging government regulators to balance the needs of existing players, new entrants, and the public. One Australian jurisdiction, the Australian Capital Territory (ACT), is seeking to get on the front foot by revising the regulatory environment before the arrival of the new kids on the block.
No "business as usual" – for business or government
The Australian taxi industry is highly regulated compared to many countries. In large cities taxis are registered by the local authority and pay significantly higher third-party and vehicle insurance, and drivers are subject to police and medical checks. By restricting the number of taxi number plates in the market, the city or state authority maintains artificial scarcity of supply, and plates (which are effectively permits) often change hands for hundreds of thousands of dollars. In fact, the majority of taxi drivers do not actually own their own "plate" due to the high costs involved, instead renting it on a monthly basis from an investor-owner. Basic economics means that all of these additional charges are embedded into the fare paid by the customer.
The arrival of Uber and other ride-sharing services in Australia has been causing considerable excitement across the community. Depending on your view, it will either break the existing monopoly and offer customers greater choice, better service, and lower prices, or undermine the safety and reliability of transport and put taxi drivers out of work. Taxi drivers maintain that because in a number of cities, ride-share drivers are not subject to the same costs (i.e., specific taxi plate fees, registration, insurance, and GST), they are being given an unfair commercial advantage.
Although regulatory authorities are undertaking "reviews" of the situation, most seem paralyzed. The New South Wales transport authority recently suspended the registration of 40 ride-sharing vehicles for being driven illegally, i.e., as private vehicles without the correct taxi permits. In light of this, it is refreshing to see the ACT government taking a proactive approach. Resolutely stating from the outset that "ride-sharing is coming to Canberra," it has attempted to balance the need to support new services that consumers want with public safety and an acceptance that incumbents need to be transitioned out of their current onerous regulatory environment.
Changes recently announced include the progressive reduction of taxi license fees by 75% over 12 months, while requiring ride-share drivers to have compulsorily health, vehicle, and character checks, as well as adequate insurance. Ride-share services will also be precluded from waiting at taxi ranks, although there will be a consolidated booking system that covers all taxi and ride-share services.
At this stage there is no clear picture of whether the ride-share services will need to collect GST – something the Australian Tax Office is pushing for, but Uber is opposing. It is clear that the ACT will be the first of many authorities to take the decision to regulate ride-sharing. Governments worldwide will need to respond quickly and effectively to the regulatory challenges presented by new industries that are no longer tied to owning physical assets or being based in specific locations.
When it comes to technology, Uber is cool, government is creepy, IT0007-000829, July 2015
Al Blake, Principal Analyst, Public Sector