We have completed our review of the maximum fares for unbooked commercial passenger vehicle services.
Unbooked commercial passenger vehicle fare review 2018
- Consultation paper28 February 2018
- Submissions closed28 March 2018
- Draft decision21 June 2018
- Submissions closed19 July 2018
- Final decision13 September 2018
- Price determination takes effect1 October 2018
Overview
We set the maximum fares for unbooked commercial passenger vehicle (CPV) services that begin in the Metropolitan Melbourne and the Urban and Large Regional zones. Currently, only taxis meet the requirements to provide unbooked services.
This is our first fare review under the new regulatory framework for unbooked services. For this review, we released a consultation paper, draft decision and final decision containing our analysis of fares. We also released our first determination on maximum fares for unbooked services with our final decision.
We are required to review the maximum fares at least every two years.
Read about how we regulate commercial passenger vehicles.
Final decision
We released our final decision and fare determination on 13 September 2018.
Our decision is to:
- keep maximum fares unchanged
- introduce an optional ‘time and distance’ tariffs
- introduce a cleaning fee
- include a rank fee for Avalon Airport.
Our fare determination will come into effect on 1 October 2018.
Our final decision and fare determination are available on this page under the resources tab.
Outcomes from our decision
Fares for unbooked taxis will remain unchanged
From 1 October 2018, the maximum fares for unbooked taxis that begin in the Melbourne Metropolitan zone and the Urban and Large Regional zone will remain at the same levels as the 16 May 2018 fare determination. However, two new items will be introduced: optional ‘time and distance’ tariffs and a cleaning fee.
The maximum fares we set in May 2018 will continue to apply for unbooked taxis until our new fare determination comes into effect on 1 October 2018.
Unbooked taxi providers may use ‘time and distance’ tariffs if they choose
We will give unbooked taxi providers the ability to choose between two tariff structures: the existing ‘time or distance’ tariffs and the new and more transparent ‘time distance’ tariffs.
‘Time and distance’ tariffs are the tariffs that rideshare companies base their charges on: passengers are charged per minute and per kilometre travelled. This is different to the ‘time or distance’ tariffs, currently used by taxis, which swap between a time or distance charge depending on the speed of the vehicle.
‘Time and distance’ tariffs will make it easier for passengers to understand tariff schedules, estimate the cost of a trip and compare the prices for different CPV services. On average the two tariff systems will charge passengers the same amount.
Given adopting ‘time and distance’ tariffs would impose some transitional costs on some operators, using ‘time and distance’ tariffs is optional. Unbooked taxi providers can continue to use existing 'time or distance’ tariffs if they prefer.
Unbooked taxi providers may charge a reasonable cleaning fee
A reasonable cleaning fee of up to a maximum of $120 may be charged if a passenger soils the vehicle with: food, drink or bodily fluids. Soiling a taxi imposes real costs on taxi service providers. A cleaning fee ensures that the person responsible bears at least some of the costs associated with cleaning a soiled vehicle.
Fare information displayed inside and outside of an unbooked taxi will include the cleaning fee. The cleaning fee will also be itemised on the receipt when charged.
Avalon Airport access fee
In August 2018, Avalon Airport informed us that it intends to start charging an access fee to taxis using its facilities within the next six months. We have amended the price determination to include an Airport Rank Fee for Avalon Airport.
We have adopted for Avalon Airport the arrangement that already exists for Melbourne Airport's access fee. In making our final decision we note that stakeholders generally support the similar arrangement we put in place for Melbourne Airport in October 2016.
Demand and supply of taxis
Passengers are using taxis less often in Melbourne
The number of unbooked taxi trips has declined significantly since 2014 when fares were last changed (see figure 1).
We have observed that demand for taxis decreased despite growth in Melbourne’s population and economy since 2014. As fares for taxis did not increase between 2014 and 2016, the drop in demand for unbooked taxis is most likely due to passengers switching to new ridesharing services.
The number of registered taxis has increased significantly
Following deregulation of entry into the taxi market the number of licensed taxis in the metropolitan zone has almost doubled (see figure 2).
Figure 1: Unbooked taxi trips in the metro zone, 2014 to 2016
Figure 2: Changes in licensed metro taxis, 2016 to 2017
| Conventional Taxis Licences | |
|---|---|
| Jan '16 | 4279 |
| Feb '16 | 4267 |
| Mar '16 | 4263 |
| Apr '16 | 4250 |
| May '16 | 4228 |
| Jun '16 | 4204 |
| Jul '16 | 4179 |
| Aug '16 | 4132 |
| Sep '16 | 4146 |
| Oct '16 | 4147 |
| Nov '16 | 4147 |
| Dec '16 | 4146 |
| Jan '17 | 4147 |
| Feb '17 | 4153 |
| Mar '17 | 4160 |
| Apr '17 | 4164 |
| May '17 | 4165 |
| Jun '17 | 4170 |
| Jul '17 | 4178 |
| Aug '17 | 4178 |
| Sep '17 | 4179 |
| Oct '17 | 4885 |
| Nov '17 | 5829 |
| Dec '17 | 6223 |
| Jan '18 | 6603 |
| Feb '18 | 6874 |
| Mar '18 | 7336 |
| Apr '18 | 7726 |
Why we have kept fares unchanged
Overall, what we are seeing is that consumers are using taxis less but there are more taxis. Increasing maximum fares in this environment is not likely to benefit the public.
Taxi service providers could also be negatively affected if an increase in fares turns passengers away from using taxis. An increase in fares may also encourage more taxis to enter the market. More vehicles servicing fewer trips would further reduce taxi occupancy rates, with little offsetting consumer benefit from reduced waiting times.