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The UK government, the National Audit Office and the Public Accounts Committee have expressed concerns to the Competition and Markets Authority (CMA) about the role of Motorola in the UK’s new Emergency Services Network (ESN).
Concerns have been expressed about the impact of Motorola’s dual role as the owner of the company providing the current mobile radio network (Airwave Solutions) and as a key supplier in the roll-out of the planned new network. The concerns encompass Motorola’s incentives to deliver ESN, given the continuing high profitability of the Airwave network.
The Airwave network is a secure private mobile radio communications network for all organisations involved in public safety in the UK. Currently, there is no alternative method for police, fire and emergency services staff to communicate securely with each other when in the field.
The Airwave network was commissioned by the Home Office in 2000 under a private finance initiative (PFI) framework arrangement that was due to end in December 2019. At that point, the network was expected to be shut down and a different secure communications system using a commercial 4G mobile network was to become operational.
Motorola Solutions (Motorola) won one of the key contracts for the delivery of ESN in 2015 and purchased Airwave Solutions, the owner and operator of the Airwave network, in 2016.
Over the past two years, there have been increasing concerns about the delays to the roll-out of ESN and costs to the UK taxpayer of the continuing operation of the Airwave network, which is now expected to continue operating until the end of 2026.
The CMA is said to be particularly concerned that Motorola could stand to make excess profits of about £1.2bn between 2020 and 2026 – a cost that will ultimately fall to the taxpayer. The government said the issue has arisen because the planned replacement of the Airwave network with ESN has been delayed from 2019 to the end of 2026.
The CMA said its initial review of the evidence available indicated that the supply of the Airwave network in the UK was not working well, resulting in significant detriment to customers and the taxpayer. Given the nature and significance of the issues the CMA has identified, it has reached the initial view that further investigation is needed.
Specifically, the CMA believes the highly differentiated and bespoke nature of the Airwave network requires it to be designed, built and operated under a long-term exclusive contract, and has questioned the dual role of Motorola with the incentives that such a position creates. It also questioned the absence of competitive tension in the award of the original contract, with only one supplier taking part in the bidding process and the resulting likely uncompetitive pricing structure.
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The CMA noted that delays in the roll-out of ESN have necessitated the extension of the Airwave network by three years to 2022 and now require a further extension until the end of 2026, thereby prolonging the likely uncompetitive pricing structure well beyond the original term of the PFI agreement.
The result, insists the CMA, is significant detriment for customers, as evidenced by what it calls “the persistently high and increasing” returns achieved by Motorola in the four to five years to 2019. It also stressed that “the harm” in this market and the burden of any excess profits made by Motorola, which it calculated at around £700m as at 2019, ultimately falls to the UK taxpayer.
The CMA said such “customer detriment” would continue for as long as the Airwave network remained in place, with the £1.2bn in excess profits that may be expected to be extracted by Motorola from 2020 to 2026 based on the latest expected shutdown date.
“At the moment, Motorola is the only provider of critical mobile radio network services used by our emergency service workers and is involved in both the current and future set-up,” said CMA chief executive Andrea Coscelli. “We are worried that the company could be cashing in on its position, while taxpayers are left to foot the bill. The CMA is minded to launch a market investigation to dig deeper into its concerns and will now consult with a range of stakeholders, including the government, on its plans.”
While the probe is still in its early stages, the CMA has identified two potential solutions in its consultation that may, in principle, be available should a market investigation confirm its initial concerns: regulate Motorola’s rate of return in relation to the Airwave network or require Motorola to sell the Airwave network.
The CMA is required to consult before making a market investigation reference. Following its consultation, which is open until 2 September 2021, the CMA will decide whether to launch a market investigation.
In response to the CMA statement, a Motorola Solutions spokesperson told Computer Weekly: "We are aware that the U.K. Competition and Markets Authority is consulting on whether to launch a market investigation into the Airwave network. As a trusted technology partner to the UK market for more than 50 years, Motorola Solutions remains committed to working with the Home Office to deliver mission-critical communications. This includes the Airwave network that U.K. emergency services rely upon every day, and the safe transition to next-generation technologies (Emergency Services Network).”