Will Cabcharge ditch ihail and go it alone with its 13 CABS app?

On 18 and 19 October drivers and operators affiliated with one of the seven taxi brands owned by Cabcharge in Sydney, which form part of its Combined Communications Network (CCN), were invited to celebrate the Sydney launch of 13CABS at the CCN compound in Alexandria with free food and give-aways. Over the next few months Cabcharge will change the decals of its 3,000 Sydney cabs to 13CABS. Gone will be Taxis Combined Services, South Western Cabs, ABC Cabs, Yellow Cab Co, ComCabs, 13LIME and Apple Taxis and with them a large slice of Sydney taxi history.

by Peer Lindholdt

Whatever one might think of the godfather of the Australian taxi industry Reg Kermode, he was a brilliant and visionary businessman who left behind a stack of lasting legacies when he died in May 2014, a month after Uber launched UberX in Sydney. He was 87.

The biggest of course is Cabcharge, which he founded 35 years ago and built into the large conglomerate it is today.

Less known is his astute purchase of the alphanumeric telephone numbers 13CABS (13 2227) and 13LIMO (13 5466) when auctioned by the Australian Communications and Media Authority in 2004, snapping them up for, some say, under $1,000 each. It was an absolute coup, given that a year later at similar auction a not so smart Melbourne businessman, Fiore Inglese, forked out more than $1 million for the number 13TAXI (13 8284).

In 2003 Cabcharge had bought Melbourne’s second largest taxi network Black Cabs Combined or ‘lotto cabs,’ as it was mockingly known by the locals. Like CCN in Sydney, Black Cabs had been gobbling up smaller networks but kept their individual brands. Consequently, if someone booked a taxi from Arrow Taxis they were more likely than not to get picked up by one of the other brands, say a Black Cab or an Embassy Cab - hence the nickname.

Black Cabs Combined consisted of eight different brands each with its own logo, phone number, marketing budget and other peculiarities. It was a marketing manager’s nightmare. Finally in 2009 someone in the organisation saw the light and Cabcharge decided to create one brand for its Victorian fleet -13CABS. Other Cabcharge owned networks, Newcastle Cabs and Yellow Cabs in Adelaide, have also been rebranded 13CABS and now finally it is Sydney’s turn, and to celebrate the event CCN held a soft ‘internal’ launch party at its HQ in O’Riordan Street with buntings and banners, food stalls and give-aways and a fleet of rebranded taxis on display. Its PR team was there to explain to the rank and file just how wonderful the changes would be for them and the public.

They omitted to mention Cabcharge’s plans for entering the rideshare market with “13CABS Private Hire” or what’s happening with ‘ihail’.

As launch parties go it was a fizzer. So poorly was it promoted that the General Manager of 13CABS David Greco, due to the miserable turnout on the first day, felt compelled to send an email to operators and drivers at 8am on the second day with the heading “In case you have missed the news, 13CABS has arrived!” and an invitation to call in between 11am and 2.30pm for a free feed. It didn’t help. Day 2 was also a fizzer, not because of lack of interest but for lack of parking. Maybe that was also why Mr Greco hadn’t invited the media.

That Cabcharge is putting all its taxis, bar Silver Service, under the one brand of course makes infinite sense. After all, they are all the same product aimed at the same market. One logo, one phone number, one website, one app, offering multiple choices – regular taxis, maxi taxis, Silver Service, limousines and private hire cars (ride-share). Not quite Uber yet, but getting closer.

In a recent report to shareholders Cabcharge CEO Andrew Skelton announced that one of the company’s priorities for 2017 is to expand its private hire fleet and that ultimately he wants to get rid of the Cabcharge name. “Not only does it sound like a tax”, he said, “It doesn’t exactly have Gen Y appeal”. True, true! In fact, in the mind of the general public, as a brand it stinks, as does the company itself. No Australian company has received more bad press over the past 30 years than Cabcharge. A name change won’t change that.

However the question I’m asking myself is, what is Cabcharge really up to? For the past two years the media has been fed spasmodic info about the collaborative effort by the nation’s four major taxi companies, Cabcharge, Silver Top, Yellow Cabs and Black & White Cabs, to combat Uber. Their weapon was to be ‘ihail’, their shared co-owned taxi app developed by MTData and supposedly as sophisticated as the Uber, ingogo and goCatch apps. However, a spat with the ACCC over the consortium’s application to be exempt from anti-cartel legislation delayed its launch. The ACCC demanded a raft of changes, one of which was that passengers be given the choice to get a cab from their preferred network through the app rather than from the whole fleet. A completely idiotic demand but one which no doubt helped motivate Cabcharge to ditch its multiple brands in Sydney and consolidate them under the 13CABS banner as it had done with the rest of its fleet.

But why has it taken so long? The ACCC gave ihail the green light in March. Is Cabcharge's decision to introduce ridesharing in the guise of ‘private hire’ causing a rift within the ihail cartel? After all ihail has been promoted as “an app which allows passengers to hail the nearest accessible registered taxi signed up to its service” not bloody amateur-driven mini private hire cars.

So to promote its ‘private hire’ service Cabcharge will have to do it through its own 13CABS app, which begs the question: Will it promote its own app ahead of ihail? In the invitation to the launch party Mr Greco highlighted that Sydney drivers would now get access to what he called Australia’s No 1 taxi booking app – the 13CABS app. On the ihail app passengers can choose a luxury taxi, MAXI taxi, standard taxi or a WAT. On the 13CABS app the choice is ‘closest cab’, Silver Service, Maxi Taxi or Wagon. Presumably its ‘private hire’ service will be added when it’s ready.

Probably most revealing of Cabcharge’s future plans and strategy is the press release by its CEO Andrew Skelton dated 26 August, announcing the company’s results for FY16. Here are a couple of pertinent extracts:

“We’re investing in our business and focusing on innovation to evolve and diversify for a competitive future, which is why we invested in ihail. We’re pleased to see the apps for drivers and passengers launch today,” Mr Skelton said.

Ihail launched on 26 August? And the only announcement was buried deep in a press release about Cabcharge’s FY16 results. What ever happened to ihail’s promised grand advertising campaign? And where were the headlines in the media about the launch? Even ihail’s own Facebook page failed to spruik it. Amazing!

And now for the give-away line!

Mr Skelton went on to say: My five year vision for Cabcharge is to be Australia’s leading personal transport business and to become the first choice for passengers, the preferred network and payment partner for drivers and the employer of choice in the personal transport sector”.

Evidently Cabcharge’s investment in ihail Pty Ltd has become purely strategic. It’s betting on two horses in the same race, one it owns outright and one in which it has a major stake. Whilst Cabcharge knows everything that goes on inside ihail Pty Ltd, its other stakeholders have no idea what’s going on inside Cabcharge.

The ihail cartel was formed primarily to take on Uber, but secondly to eliminate minor players in the industry such as ingogo and goCatch and traditional taxi co-ops such as Legion, Manly and RSL. The plan, I imagine, was to eventually create an ihail/Uber duopoly. However, the demands from the ACCC created more havoc, both technologically and practically, than the parties have let on. One in particular stands out. Ihail's intention was to copy Uber’s payment system where fares can only be paid one way – through the app. The ACCC insisted that ihail give pax the choice to pay in cash, via any EFTPOS facility or any other legitimate payment system. Not only did this require a major change to ihail’s algorithms, it also meant a substantial financial loss to Cabcharge as ihail’s app payments were to be funnelled through its system. Everybody knows that mobile EFTPOS will soon be obsolete and ihail was one way for Cabcharge to maintain its dominance of the fare payment market. With that monopoly now greatly diminished in value, ihail has lost some of its gloss.

So will Cabcharge ditch ihail and go it alone?

Your guess is as good as mine. The ihail cartel claims that 70% of Australia’s taxis are affiliated with its network shareholders. As it is commonly believed that there are around 20,000 taxis nationally, that gives the cartel 14,000. According to its Annual Report Cabcharge accounts for 7,448. As Mr Skelton’s vision for the immediate future is to grow its fleet substantially with ‘private hire’ vehicles, also branded 13CABS, the brand will be big enough and strong enough to go it alone.

There can be little doubt that the Cabcharge tech team has learned all it needs to know about MTData’s ihail algorithms and that it’s only a matter of time before the 13CABS app has an in-app payment function and driver app. Its biggest problem will be getting drivers.

Of course Cabcharge isn’t going to ditch ihail. It has invested too much, is too involved and it’ll still get its pound of flesh from ihail’s 5% transaction fee. However, one would expect 13CABS to compete with ihail and its co-shareholders with the same ruthlessness with which it plans to take on Uber and the minor P2P industry players, present or future.

Reg Kermode may be dead but his dirty “win at all costs” mantra lives on. •

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OZ Cabbie February 2017

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