Reforms introduced by the ACT and NSW Are Sufficient to Compensate Taxi Disruption Caused by Uber - Case Study Example

Name Class Unit Introduction The ride-sharing service Uber entered Australia market in 2012. This is a dynamic platform where the driver can match with the passenger and partners with an aim of reaching a given destination. At the moment, Uber does not have a major competitor in Australia market despite competing globally with Didi Kuadi and Lyft. In Australia, Uber services include UberX and UberBLACK (Code, 2015). The entry of Uber in Australia has disrupted the traditional taxi business. The traditional taxi business has been on the decline following the introduction of Uber, which is convenient and costs effective. The taxi business has been under crisis in Australia since the introduction of Uber (Woo & Bales, 2016, p.17). This is due to the increasing competition from Uber, which threatens to eliminate the taxi industry which has for a long time been protected by monopoly (Rauch & Schleicher, 2015, p.5). The taxi drivers have been lobbying the local and federal governments and filing lawsuits against Uber (Law and Ma, 2015). This paper analyses whether the reforms introduced by the ACT and NSW are sufficient to compensate taxi disruption caused by Uber. The paper then looks at societal changes that have enabled the rise of ride-sharing businesses such as Uber. Lastly, the reforms are discussed on their appropriateness for the economy. Since the introduction of ridesharing such as Uber in Australia, taxi drivers have been arguing that Uber is engaging in unfair competition (Code, 2015). This is especially through the Uber mode of operation which taxi operators have been arguing is outside the regulatory framework and burdens the industry (Deloitte, 2016, p.50). The popularity of Uber has had a major impact on the taxi industry. This is especially Uber X, which has been substituting the rides that would have taken place using the taxi (Law and Ma, 2015). Since the entry of Uber, the value of taxi licence has been on decline especially in ACT and NSW. With the advantages of Uber being more than a taxi, the taxi industry has been losing their customers (Edelman & Geradin, 2015, p.17). The current level of disruption on the Australian taxi industry is high. ACT was the first state to legalise ridesharing in Australia. The reforms were introduced after a review had been done on the way in which emerging technologies and business models can enhance the on-demand transport system (Law and Ma, 2015). Through the reforms, the government ensured the Canberra residents that they will access to safe, affordable and flexible taxi, car hire and ridesharing. The reforms also promised to reduce the high costs and regulatory framework on the traditional taxi and car hire services (Deloitte, 2016, p.50). This was aimed at ensuring that the taxi industry remained competitive and sustainable for all. The reforms were carried out in two stages. The first stage involved allowing the ridesharing and innovative booking services which were to be subjected to safeguards. This included checks on the criminal history of the driver and a reduction in fee for the taxi and car hires which was done immediately (Deloitte, 2016, p.50-51). The second stage included new laws in the legislative assembly, full suite reforms which included the accreditation for drivers and rideshare (Law and Ma, 2015). At this point, the regulations for the taxi and car hires were significantly reduced. In NSW, ridesharing was legalised and the taxi drivers compensated. The 50 taxi and car hire regulations were addressed and a re-appeal made (Law and Ma, 2015). The drivers were to be compensated with $250 million as an adjustment package. NSW was the second state to legalise Uber after ACT. Under the new reforms, taxis were to continue having exclusive access to cab ranks and taxi hails. Through the regulation reduction, it was possible to save regulatory costs by $30 million. In NSW, the taxi owners were to enjoy a payment of $20,000 in the compensation package. This was capped at a maximum of $40,000 for those with multiple plates (Code, 2015). The compensation plans by ACT and NSW does not adequately compensate the taxi drivers for the disruption caused by Uber. This is taking into account that the NSW had earlier been selling the taxi plates at a high cost. It is important to note that some of the taxi owners had already invested a lot in the taxi industry and the compensation would not adequately cover their expenses (Mastracci, 2015, p.18). The financial loss due to the disruption of the taxi services in ACT and NSW cannot be adequately compensated through the proposed compensation. The taxis face a major threat which cannot be adequately compensated. The financial compensation cannot fully cover the loss of plate value in the states. This is because most of the taxi drivers use the licence value as an investment (Deloitte, 2016, p.49-51). The assistance package will not fully cover the lost value. The new reforms face difficulties in ensuring that taxi drivers have a sustainable income. The industry is facing a lot of threat from disruptive technology in the recent years (Edelman & Geradin, 2015, p.18). This is a major disruption to the taxi industry which is hard to be fully compensated. The rise of sharing economy has enabled people to share properties and resources, skills and time on various online platforms. This is a collection of various business models which allows people to have the ability to share their spare capacity for a profit (Allen, 2015, p. 24). The rise of sharing economy such as Uber can be attributed to the dramatically falling costs of transactions which made it difficult for some markets to grow. The evolution of the digital technology has led to an opportunity where people can monetize their skills and also utilise the least used resources. The main society drivers for the ride-sharing services have been the rise of mobile adoption, increase in internet penetration and the growth of digital platforms. The consumers of ridesharing have been using the service due to the fact that it benefits. This includes on-demand services which are offered at lower prices and convenience (Law and Ma, 2015). The smartphone penetration and demographics in Australia has played acceleration and usage of ridesharing. Countries such as Australia have a huge smartphone and mobile internet penetration. Most of the population have chosen not to buy cars but use ride sharing at the tap of a button (Walton, 2014, p.17). The reforms have both good and negative impacts on the economy. This is because allowing ridesharing to operate is a threat to taxi operators who used to contribute to the economy (Rauch & Schleicher, 2015, p.7). The reforms imply that the revenue gained from the taxi business will reduce. At the same time, the positive side is that ridesharing will add extra revenue to the economy through regulation and monitoring costs imposed by reforms (Cannon & Summers, 2014, p.3). Looking at the negative side, the reforms by ACT and NSW on the taxi industry are not sufficient to ensure that economy is not affected by Uber. This is due to the fact that the sharing economy model of business is based on online platforms which can evade regulations (Posen, 2015, p.405). The regulations are an important source of revenue for the government (Katz, 2015, p.1067). Most of the Uber will be able to evade regulations hence end up paying less tax than what taxi was paying earlier. Uber has been able to avoid some of the safety regulations imposed on the taxi since they operate on the interne (Bond, 2015, p.216). The current reforms give Uber drivers a different set of rules to play on compared to the competitors. Ride-sharing service is given a better platform by the current reforms which hurt the taxi industry more (Witt, Suzor & Wikström, 2015, p.181). The positive side of these reforms is the fact that the imposed regulations on ride share will also add revenue to the economy (Cannon & Summers, 2014, p.3). This is due to fact that there will be fees imposed on the ridesharing. There is an accreditation cost of $50 for every rid e- share's driver annually. The costs of rideshare licence is set at $100 annually or $400 for five years. These among other charges will be a source of revenue to the respective governments. It is estimated that the costs of regulating rideshare are about $3.6 million annually (Law and Ma, 2015). The monitoring costs may thus partly offset the loss incurred through lost taxi business. Through the reforms, ridesharing business in Australia has high potential for growth implying an increase in revenue (Code, 2015). The services of ridesharing can reduce the number of motor vehicle ownership by 10% saving about $14.4bilion for the families. This is a gain of about $9.6 billion of the cost of ridesharing takes third (Law and Ma, 2015). This shows that the reforms will have both positive and negative impacts on the Australian economy. In conclusion, ride sharing such as Uber has greatly disrupted the taxi industry in Australia. This is due to the fact that Uber has increased the market competition through their flexible and low-cost services. Uber mode of operation has been contentious with taxi drivers arguing it is outside the regulatory network. The taxi industry has been losing their customers to Uber at a fast rate. Ride sharing business has been able to rise due to societal changes such as falling costs of transactions which made it difficult for some markets to grow and the evolution of the digital technology. The high penetration of smartphones and mobile internet has made use of ridesharing thrive in the society. The reforms made by ACT and NSW will not fully compensate the taxi drivers. This is due to the high loss that the taxi industry will incur as rideshare is legalised. The loss is higher than the benefits of reforms. Reforms in ridesharing have both positive and negative impacts on the economy. The reforms imply that the revenue gained from the taxi business will reduce. At the same time, the positive side is that ridesharing will give extra revenue to the economy through regulation and monitoring costs. References Allen, D. (2015), The sharing economy, Review-Institute of Public Affairs, 67(3), 24. Bond, A. T. 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