The UK competition watchdog proposes price controls for Motorola’s role in operating a controversial communications network for emergency services.
The Competition and Markets Authority (CMA) has unveiled plans to cap the global telecom giant’s fees for its existing Airwave network while rolling out the heavily delayed replacement emergency services network it is also providing.
The ruling marks the latest milestone in a long-running program riddled with controversy and postponement.
After examining the market regime for the provision of two emergency service technologies by one provider, the CMA found that the Home Office and emergency services appear to be tied to a monopoly provider. It said its assessment showed that a lack of competition allowed Motorola to generate around £160m in excess profits a year.
The CMA proposed price controls on Airwave to ensure lower costs for taxpayers and said the network’s long-term future should be resolved by the Home Office.
Martin Coleman, Chair of the CMA’s Independent Investigation Group, said: “It is vital that the market for critical cellular networks used by our emergency services is performing well and providing excellent service at a fair price.
“In terms of price, the market doesn’t seem to be doing well at the moment. We currently believe that the Home Office and our emergency services are tied to a monopoly provider who can charge far more than they could to create a well-functioning market while the taxpayer foots the bill. We therefore propose to stop this by directly intervening through price control and providing the basis for the Home Office’s decision on how to ensure these vital services in the future. “
Airwave, which dates back to 2000, was set to be replaced by the 4G-based Emergency Services Network (ESN) in 2019 under a deal partially won by Motorola. But the telecom company is also involved in ESN. The CMA approved this merger at the time, in part because Airwave service was scheduled to be discontinued at the end of 2019.
But delays in launching ESN meant Motorola Solutions had a “dual role” that gave the company “an incentive to delay launching ESN or use it to its advantage, given the significant profits it is currently making from operations.” of the Airwave network,” the regulator said as it launched its investigation.
In evidence presented to the CMA, the Home Office said Motorola benefited “very significantly” from the ESN delay, as it also benefits from Airwave’s extension.
The CMA’s preliminary estimate projects that between January 2020 and December 2026, Motorola will generate incremental earnings in the range of $1.1 billion in excess profit each year after 2026.
A spokesman for Motorola Solutions said: “Motorola Solutions completely rejects the CMA’s unsubstantiated and incorrect calculation of ‘excess’ profits based on an arbitrary time period of the Airwave project. The fact is that over its lifetime, Airwave is a much better deal for the UK taxpayer than originally agreed by the Home Office.
“In 2016, both the CMA itself and the Department of the Interior approved all Airwave contracts that remain in place today. UK Ambulance Services have relied on Airwave for the last 22 years. Although the CMA has not identified any deficiencies in Airwave’s exceptional service, or any material change in the cost of operating this mission-critical network, the CMA proposes a compulsory reduction in the contracted price for the remaining contract years. Such an unprecedented intervention would seriously undermine confidence in long-term infrastructure investments and contracts with the UK government.
“As this is an interim decision, Motorola Solutions will continue to work with the CMA to demonstrate the Airwave network’s excellent value for money to the UK taxpayer. At the same time, Motorola Solutions will pursue all legal avenues to protect its contractual position for the benefit of the 300,000 rescue workers who rely on the Airwave network every day – and the people they protect – every day.”
The launch of ESN was originally planned for 2017 but was delayed. According to Matthew Rycroft, chief of the Home Office, the project underwent a “mentality reset” in 2018. Joanna Davinson, former chief digital, data and technology officer at the Home Office, told MPs the delay would cost an additional £550m a year. The network may not be fully available before the end of 2024, she acknowledged. ®
https://www.theregister.com/2022/10/17/cma_motorola_airwave/ CMA proposes price cap for Motorola as Airwave supplier • The Register