Motorola Applies for Review of U.K. Investigation into Airwave, ESN Roles
Monday, January 10, 2022 | Comments

Motorola Solutions filed an application for review of the U.K. Competition and Markets Authority’s (CMA) decision to launch an investigation into Motorola’s dual roles as operator of the Airwave network and a supplier on the Emergency Services Network (ESN) project.

The application was filed with U.K.’s Competition Appeal Tribunal. A full copy of Motorola’s application was not publicly available, but Registrar Charles Dhanowa published a summary of the application January 5.

In October, the CMA officially launched an investigation into Motorola’s roles in both projects. The Airwave network currently provides critical communications for emergency services in the U.K., but the ESN is intended to take the place of the Airwave network.

For various reasons, the ESN has been delayed multiple times. Motorola and the U.K. Home Office are currently in talks over a contract extension that could see the Airwave network operate into 2025 or beyond.

In launching the investigation, the CMA expressed concern that Motorola’s roles in both projects would give it “an incentive to delay or shape the rollout of the ESN to its advantage” due to the profits from the Airwave network.

According to Dhanowa’s summary, Motorola provided three grounds for why the CMA’s decision should be reviewed:
• That the CMA failed to understand or take into account contractual agreements and failed to assess relevant matters,
• The CMA’s approach to the investment rate of return (IRR) under the contract is “irrational and/or fails to have regard to relevant considerations,”
• That the CMA adopted “an irrational approach to the Airwave network market and ESN as an alleged ‘feature’ of the market”

On the first point, Motorola argued that CMA had a flawed understanding of the contractual position. In particular, it said argued the CMA wrongly stated that there was a “need to agree” to an extension to the contract for Airwave service to continue past 2022.

“Further, Motorola alleges that the CMA has failed to understand that the contract: (i) grants the Home Office a unilateral right to vary the date at which the Airwave network will be shut down (and to require Motorola to provide services until that date), (ii) provides for the default prices payable for the remaining life of the Airwave network, and contains benchmarking provisions. Motorola further contends that the CMA failed to assess the respective bargaining power of the parties in 2016 when the current default pricing was agreed,” the summary said.

On the second point, Motorola argued that the fact that the CMA said it analyzed the IRR for a period from 2020-2026 on the basis of the net book value of relevant assets in 2020 was irrational. The vendor argued that in its decision to launch the investigation, the CMA did not consider whether the IRR over the lifetime of the contract was reasonable.

Finally, on the third point, Motorola argued that the CMA took an irrational approach to its market consideration.

“The so-called ‘market’ was created by an exclusive and long-term contract that sets prices,” the summary said. “Furthermore, it does not make sense it does not make sense to justify intervention on the grounds that the market is ‘extremely concentrated’ as this logic could apply to any bespoke service delivered on a long-term contract.”

Additionally, Motorola argued that it was unreasonable to treat delivery of the ESN network as a “feature” of the Airwave market.

“Motorola submits that the ESN is not a competitive alternative to the Airwave network,” the summary said. “Users will migrate from Airwave to ESN only when ESN becomes fully operational, at which point, the Airwave network will be shut down and shall cease to exist.”

Separate from those arguments, Motorola also challenged the timeline for the investigation and argued that the process by which that timeline was determined was unfair, the timeline was unfair and the decision on the timeline was “unreasoned,” according to the summary.

Motorola asked the tribunal to release an order quashing the CMA decision and remitting that decision to the CMA for it to make a new decision. Alternatively, if it does not take that path, Motorola asked the tribunal to quash the CMA’s decision on the timeline and remit it to the CMA for reconsideration. Motorola also asked for costs associated to the situation.

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