Ten Years of Taxi Deregulation in the Netherlands - the Case for Re-regulation and Decentralisation



Ten Years of Taxi Deregulation in the Netherlands - the Case for Re-regulation and Decentralisation

Authors

B Baanders, M Canoy, ECORYS,NL

Description

The Dutch taxi market was deregulated in 2000. This caused many problems as a result of which expectations were not fulfilled. We propose an alternative based on decentralisation and price regulation.

Abstract

The taxi market in the Netherlands was deregulated in 2000. Before that time, like in many other countries, the taxi was regulated by controlling the number of taxis and the fares. Licences were delivered by the local authorities for use in ¡¥taxi zones¡¦, that covered several municipalities. The policy objective was to strengthen the role of taxi transport in the overall transport system. The capacity restraints were abolished and the fares were liberalised. Some regulation remained, concerning the vehicle, the operator and the driver. The expectations were:
?X increased supply of taxi services,
?X lower fares,
?X improved quality of service,
?X innovation.
The ten years since deregulation have shown a very different development, however.

We can distinguish several segments in the Dutch taxi market:
?X the contract market: taxis are hired (mostly by institutions) to perform regular trips according to a pre-arranged contract;
?X the non-contract market, in which we can distinguish:
o the telephone taxi, reserved by calling a dispatching centre,
o the street taxi, which is taken at a taxi rank or hailed in the street.

A car that is fit for taxi operation can be identified by its blue license plate, and can be used in all segments; there is no distinction between different types of cars, such as between the ¡¥black cab¡¦ and the ¡¥mini-cab¡¦ in London. But the market conditions are strikingly different. In the contract and telephone markets the operator has an interest to build up a good reputation. In the street taxi market, however, a an operator or driver is unlikely to meet the same client a second time, so a good reputation is not important for him.

The non-contract taxi is dominant in the four largest Dutch cities, with by far the largest number running in Amsterdam, whereas the contract taxi is marginal. In the rest of the country it is the other way around.

It is clear that the policy objectives were not met in the ten years of deregulation, particularly in the street taxi market in the largest cities. Contrary to the expectations of the policy makers, the fares went up instead of down and bad driver behaviour became a very serious problem. The bad reputation of the Dutch taxi became known to visitors from other parts of the world and Dutch travellers saw the taxis of cities like Paris, London and New York as examples of how the Dutch taxi market should function (even if the opinions of the locals in those cities are often not as positive).

As the local authorities had lost their say in the market, the cities were not able to take corrective measures. This resulted in many discussions in Parliament about the functioning of the taxi market and in a whole series of measures introduced by the Minister of Transport as remedies for individual problems, most of which were only partially successful. Parliament discussed this market much more often than it ever did before deregulation. As the deregulation was a national policy, the remedies were also national rules and this resulted in a centralisation of taxi policy, in contrast to the decentralisation that was instituted for other transport modes. The number of rules makes it doubtful if it can still be called a deregulated market, but two key elements remain: there are no fare and capacity restraints, albeit with some rules in these respects.

There are two types of literature on taxi regulation:
?X The market theory literature argues that more competition leads to lower prices and better supply. Using these arguments, taxi deregulation was strongly advocated in the 1990s, especially in the USA, Australia, New Zealand and some European countries.
?X The empirical literature stresses the market imperfections and therefore the need for regulation. The most important market imperfections are:
o the weak bargaining position of the passenger in the street taxi market,
o the low entry barrier for new operators,
In this situation a larger supply does not lead to lower prices, but to lower quality.

This paper will describe the developments since deregulation and the remedying measures that were taken. It will argue that the present set of measures, built on top of the deregulation, do not answer pertinent problems, already raised by the empirical literature. We propose a new regulation, with the regional authorities as regulators, and which differentiates according to the three segments: the contract, telephone and street taxi markets. For the street taxi, we propose to use fare regulation, but not capacity restraint.

Publisher

Association for European Transport