U.K. CMA Proposes Controls to Limit Amount Motorola Can Make on Airwave Network
Monday, October 24, 2022 | Comments

The U.K. Communications and Marketing Authority (CMA) released several proposed controls that would limit the amount of money Motorola Solutions can make from continued operation of its Airwave network.

Last October, the CMA launched an investigation into Motorola’s dual roles as owner of the Airwave network and a supplier on the Emergency Services Network (ESN), which is targeted to take the place of Airwave as the nation’s dedicated public-safety communications network but has suffered many delays.

“It is vital that the market for the critical mobile radio network services used by our emergency services works well and provides an excellent service at a fair price,” said Martin Coleman, chair of the CMA’s independent inquiry group looking into the issue. “As far as the price is concerned, the market does not appear to be working well at the moment. Our current view is that the Home Office and our emergency services are locking in with a monopoly provider which can charge much more than it could in a properly functioning market, while taxpayers foot the bill.”

The CMA said in its findings that the U.K. Home Office, is being charged more to use the Airwave network than it should be.

“The price set under the original agreement entered into in 2000 included the capital costs of building the network,” the CMA said in its findings. “By the time the period covered by the original agreement ended, that cost should have been recouped, and the price should have fallen substantially at that point, in the same way that consumers can get cheaper mobile deals after they have paid off their handset. This did not happen, and prices remained at substantially the same level. But unlike consumers, the emergency services have no choice of an alternative supplier.”

The CMA estimated that Motorola could make around 1.1 billion pounds of excess profit from the Airwave network continuing operation between January 2020 and December 2026. If the transition from the Airwave network is delayed beyond 2026, Motorola could bring in $160 million of excess profit each year after that, the CMA concluded.

The CMA also said that it determined that Motorola’s dual roles as a supplier on the ESN and as owner of the Airwave network gave it an incentive and the ability to delay the delivery of the ESN in order to maintain its profitable position with the Airwave network.

“Our analysis is that the profits Motorola derives from the Airwave Network significantly outweigh any profits it can expect to derive from the delivery of its ESN obligations, directly or indirectly,” the CMA said. “As such, it can, in our provisional assessment, be expected to dull its incentive to deliver those obligations in a timely and efficient manner.” Additionally, one other concern the CMA had was that during the transition, the ESN and Airwave network will need to be linked through interworking.

“The development of any such alternative interworking solution appears to rely on Airwave Solutions’, and potentially Motorola’s, active cooperation,” the CMA said. “Consequently, in our provisional assessment, they have an ability to delay, hamper and/or make more costly the development of any such solution and the transition process, if they choose.”

To help combat that, the CMA outlined several controls on the market. First, it proposed controlling the price that Motorola can charge for the services on the Airwave network. It also proposed imposing an obligation on Motorola to facilitate the development and delivery of an alternate interworking function. Finally, the CMA recommended that the Home Office put into place a plan that will ensure there is a new upgraded network in place or a more competitive arrangement to replace the existing setup by 2029.

In a statement, Motorola rejected the CMA’s calculations of its profits.

“Motorola Solutions entirely rejects the CMA’s unfounded and incorrect calculation of ‘excess’ profits, which is based on an arbitrary time period of the Airwave project,” Motorola’s statement said. “The fact is that Airwave, over its life, is a much better deal for the U.K. taxpayer than the Home Office originally agreed. In 2016, both the CMA itself and the Home Office approved all of the Airwave contracts that remain in place today. Airwave has been relied upon by the U.K. emergency services for the past 22 years. Despite the CMA finding no shortcomings in Airwave’s exceptional service, or any material change in the cost to run this mission-critical network, the CMA is proposing to forcibly reduce the contractually agreed price for the remaining years of the contract. Such unprecedented intervention would severely undermine confidence in long-term infrastructure investment and contracting with the U.K. government.”

Motorola said it will continue to work with the CMA and will pursue any legal options it has.

“As this is a provisional decision, Motorola Solutions will continue to work with the CMA to demonstrate the excellent value for money the Airwave network provides to the U.K. taxpayer,” the statement said. “At the same time, Motorola Solutions will pursue all legal avenues to protect its contractual position for the benefit of the 300,000 emergency services personnel who rely on the Airwave network — and the people they protect — every day.

Find a summary of the CMA’s findings here.




 
 
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