The NSW taxi industry should be partially deregulated and ride-sharing services like Uber allowed to flourish, says former Australian Competition and Consumer Commission chief Professor Allan Fels.

Unconfirmed reports have been flying around this week that the NSW government intends to follow the ACT – which legalised Uber in October – but NSW Premier Mike Baird has denied that any decision has been made, following an independent industry review.

Professor Fels, who chaired the 2012 Victorian Taxi Industry Inquiry, backs an overhaul of NSW taxi system and says this could prove the tipping point for other, larger states to follow suit.

“It sounds like a good idea to remove the restrictions on taxi regulation, other than in respect of “rank and hail” services which the taxi industry can keep,” Professor Fels says.

He says the current system is anti-competitive and “excludes new entrants and innovators.”

“It’s, in any case, based on an out-of-date model of doing business. The regulations assume that the current taxi model is the only way of doing it.”

He asserts that the business model pioneered by Uber is superior because it has flexible pricing, not meters, and its pre-booking service improves safety because a driver can be identified and their route tracked.

Professor Fels believes legalising Uber would be a boon for consumers, because it would lead to better service, more choice, cheaper prices and more availability and make it easier and cheaper for new drivers to enter the market.

He denies new taxi drivers would flood the market and says after Victoria relaxed its regulation of the taxi industry in 2012, there was a “modest influx” of new drivers of around 15 per cent, although he concedes this does not include ridesharing drivers.

“Our conclusion was that it became easier to get licenses but drivers still had to pay, for example, around $22,000 per year in metropolitan Victoria. That limited entry, so it was not excessive.

“To be an Uber driver you have to own your own car and that’s a significant entry barrier.”

Partial deregulation – which is suspected to include allowing cabbies to keep their monopoly on rank and hail customers – would need to consider compensation for those companies and drivers that have made a heavy investment in taxi plates.

NSW taxi plates – which is tantamount to an eternal licence – cost about $300,000. An annual licence costs around $25,000 to $30,000. Plates would necessarily drop in value if reforms were made.

Professor Fels says compensation should be targeted at financial hardship and restricted to those who have purchased plates in the last ten years and not handed out to everyone.

There will also need to be a debate on the responsibilities of ridesharing drivers which could require them to buy a license, be police checked and have their vehicles regularly safety checked, which may translate to higher Uber fares.

If NSW grasps the stinging nettle and overhauls the taxi industry, it could provide a template for a regulatory re-think nationwide.

“Other states may do it a little differently but the fact that NSW has broadly approved Uber [if it does] will cause the other states to broadly approve Uber too,” Professor Fels says.

He says state and territory governments will not want to have “a reputation for not putting the public interest first and for being anti-competitive and denying a service to the public.”

While the NSW government denies it has made any decisions yet, a recent discussion paper by the Point to Point Taskforce conducting the review indicates that deregulating the taxi industry and dealing with the exponential growth of ridesharing will be front and centre.

The Taskforce looked at taxis, ridesharing services, hire cars, courtesy transport, tourist services and community transport to see how they currently operated and to get community views on what works well and what needs to change.

The taskforce’s recommendations to NSW Transport Minister Andrew Constance are expected to consider issues such as safety, sustainability, service quality, transport availability for disadvantaged groups (including people with a disability), minimising the industry’s regulatory burden and economic productivity.

The discussion paper notes the prevalence of smartphones and the increasingly popularity of ridesharing and says regulatory framework must change.

“Because of these customer benefits, an increasing number of point to point transport providers will use this technology and regulations which attempt to prevent customers from accessing these benefits will prove difficult to enforce,” says the discussion paper.

“Point to point transport providers have already begun to adapt, and government regulation must follow.”

It says that the regulatory burden on taxis has led to high costs and ultimately to higher fares for customers and notes that taxi operators and drivers have complained that their higher costs have made it difficult to be competitive with other hire cars and point to point transport providers.

“The taxi industry has argued that laws enacted to ensure public safety must be updated and enforced and there must be a level playing field.

“The current regulatory framework is prescriptive, often difficult to enforce, and consequently not as effective as it could be.”

You can read the August 2015 discussion paper here.