U.K. Home Office, EE Express Concern About Motorola Airwave, ESN Roles; Motorola Responds
Thursday, May 05, 2022 | Comments

In responses to a U.K. Competition and Markets Authority (CMA) investigation of Motorola’s dual roles in the Airwave network and the Emergency Services Network (ESN), EE and the U.K. Home Office filed responses, expressing concerns about Motorola’s two roles. Motorola also filed its own response to the CMA’s investigation.

“EE agrees with the CMA’s assessment of the market, its characteristics and the potential for harm arising from Motorola’s position in running both the legacy and Airwave network, as well as being a significant delivery partner for ESN,” EE’s filing said. “The emergency services are currently deprived of the benefits of ESN services, which could bring cost efficiencies, greater productivity and save lives.”

Last October, the CMA launched an investigation into Motorola’s dual roles as the owner of the Airwave network and a contractor on the ESN, which is a broadband network intended to take the place of the Airwave network. Specifically, the CMA expressed concern that because of its dual roles, Motorola might have an incentive to delay the ESN as a contractor.

The original service agreement for the Airwave network was supposed to end in 2019 but has been extended because of numerous delays in the deployment of the ESN. The Airwave network is currently expected to provide services to first responders until 2025 or later.

EE is another of the contractors on the ESN project. EE’s filing expressed concern about several ways in which Motorola’s dual roles could cause harm to the project. For example, in terms of the transition from the Airwave network to the ESN, EE noted that Motorola is the sole provider of the mission-critical push-to-talk (MCPTT) software for the ESN, has control of interworking between the two networks during the transition and interacts with representatives from user organizations, which could allow it to influence the perceptions of the two networks.

“Motorola can control whether it allows interoperability between its MCPTT software used in ESN and any other MCPTT software developed by others,” EE’s filing said. “Motorola’s interworking between Airwave and ESN during the transition from the former to the latter is also critical. Airwave controls access to this interworking capability and so could, from a technical perspective, effectively prevent interworking with potential new MCPTT entrants in ESN.”

The MCPTT issue was also a key concern of the U.K. Home Office, which is the organization in charge of deploying the ESN.

“Even if the Home Office were to terminate the ESN Lot 2 contract and seek an alternative supplier of all those services, including an alternative MCPTT application to Kodiak, the requirement for interworking between Airwave and ESN means that Motorola has effectively ‘locked-in’ its critical position in the delivery of the ESN,” the Home Office’s filing said. “This lock-in as well as other features of the market, such as the considerable level of information asymmetry, results in Motorola holding significant unilateral market power.”

For that reason, the Home Office said it is important that the CMA look not just at Motorola’s plans for Airwave but also its strategy for 4G/LTE MCPTT services.

Meanwhile, Motorola argued that the investigation should not just focus on its dual roles.

“If Airwave profitability is the central concern, which the evidence entirely points against, the magnitude of any excess profits is set by the extent of any ESN delay,” Motorola’s filing said. “The group should therefore not only focus on the role of the Home Office in causing ESN delay, but ensure that it has a balanced picture by taking evidence from all stakeholders.”

Motorola argued that the Home Office’s dual roles as a buyer of services from both the ESN and Airwave could cause just as many issues as Motorola’s dual roles.

“The Home Office’s dual role has a far greater ability to affect competition than Motorola’s hypothetical ability, and yet the CMA has so far ignored this entirely,” Motorola’s filing said. “Motorola strongly believe that any examination of dual roles of economic actors across both ESN and Airwave must include the Home Office. A failure to do so would render the market investigation incomplete and entirely one-sided. While there are multiple suppliers to ESN, there is only one customer. Furthermore, since it is the only ESMCP participant with direct delivery contracts with every supplier, the Home Office, by design has been the system integrator and so in complete control since day one.”

EE also argued that the delays in deploying the ESN leads to continued use of older technology and said that Motorola had incentives to keep users on Airwave.

“Motorola makes materially greater revenue and profit from Airwave than it will make from ESN, as can be determined from the National Audit Office’s 2019 report and Airwave’s published accounts,” EE’s filing said. “Such significant contributions and their potential influence on Motorola’s business decisions in the negotiation of the Airwave contracts merit investigation. These factors suggest, moreover, that the CMA should consider whether or not groupwide profit incentives affect business decisions around ESN delivery.”

The Home Office argued that while there is no commercially available alternative to the Airwave network in the U.K., it was because of the market not working effectively and not because of the structure of the market.

“The Home Office strongly disagrees with Motorola’s position that ESN was never envisaged as a possible substitute for the Airwave network, and this means it is in a different economic market,” the Home Office said. “The fact that ESN is intended to replace Airwave, in fact, confirms that ESN is a potential demand and supply side substitute for Airwave and therefore could well be in the same economic market as Airwave.”

In terms of remedies, EE said that the CMA should consider any remedies that would remove any incentives for Motorola to delay the delivery of key components of the ESN. One such remedy EE proposed was requiring Motorola to divest the Airwave network. EE’s other suggestions are mostly redacted from the public document.

However, one of the other remedies suggested appears to be price regulation on Airwave prices. EE, noted though, that a price control would not be sufficient on its own.

EE said that whatever path the CMA chooses to take, it should require Motorola to make its MCPTT interoperable with other MCPTT products on the ESN.

In looking at remedies, the Home Office said that there are potentially two major harms that could come from Motorola’s dual roles: excessive prices for emergency communications and the delayed rollout of new and more effective emergency communications. “If the CMA analysis confirms these concerns by the Home Office, then the Home Office requests that the CMA looks at remedies that seek to address both sources of detriment,” the Home Office said.

Motorola argued that delays to the ESN may not be as advantageous to Airwave profits as others involved in the case believe.

“Airwave has to be provided to the exact date specified by the Home Office, now set at 31 December 2026, which given the lumpy nature of capital investment required to maintain the network at contracted levels may lead to lower overall profitability depending on the particular year selected.”

One remedy suggested by the Home Office included a price cap that would increase incentives for Motorola to deliver on the ESN.

“This could be through simply reducing the revenues that Motorola can earn through Airwave Solutions over time, or by making (some of) Motorola’s revenues for the operation of Airwaves Solutions contingent on the delivery of agreed ESN milestones,” the Home Office said.

The Home Office also suggested requirements that would help ensure other services during the transition including Motorola providing a “fully documented and supported interface” to allow alternative products to work alongside Airwave.

Motorola said that it does not believe the CMA will find any adverse effects on competition (AEC).

“Motorola believes that after a careful investigation, the group will conclude there is no credible evidence to support the finding of an AEC in the reference market caused by Airwave or Motorola and that, as a result, no remedies will be required in that regard.”

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