UK regulator opens Motorola Solutions market investigation over roles in Airwave, ESN

Motorola Solutions could be subject to price controls on its highly profitable Airwave TETRA network serving public-safety users in the United Kingdom (UK) or be required to divest Airwave entirely as potential results of a new market investigation, the UK government’s Competition and Markets Authority (CMA) announced.

CMA unveiled its investigation plans on Monday, when it published comments made during a consultation proceeding that concluded on Sept. 2 and a 48-page final report supporting the decision to proceed with a market investigation of Motorola Solutions. CMA launched the consultation in July, when the regulator issued a report that Motorola Solution is positioned to realize about £1.2 billion—$1.66 billion—in “excess profits” from 2020 through 2026 through extensions of the Airwave contract.

“As the sole provider of critical mobile radio network services used by our emergency services, we’re concerned that Motorola could be cashing in on its position, leaving taxpayers to cover the cost,” CMA Chief Executive Andrea Coscelli said in a prepared statement. “We’re now referring this market for a full investigation, so that we can thoroughly examine these concerns and, if necessary, take action to address any problems.”

CMA identified members of the inquiry group leading the market investigation of Motorola Solutions, but no dates for next steps in the investigation were cited and no publicly available timetable was given for the completion of the investigation.

Timing surrounding CMA’s completion its market investigation could prove to be important. Under the existing contract that expires at the end of next year, the Home Office and Motorola Solutions are required to agree on the terms of a new extension at least 12 months in advance—in other words, by the end of this year, which is about two months away.

It is unclear at this time whether an Airwave extension agreement would make the CMA market investigation moot or whether the investigation’s findings could result in the terms of the extension being revisited. IWCE’s Urgent Communications asked about these scenarios, but the Home Office declined to comment on the matter—a typical response, as government agencies often avoid commenting on hypothetical situations, particularly prior to an investigation.

Although the market investigation has just been launched, the CMA final report cited three remedies for the problems cited as justification for the market investigation into Motorola Solutions:

• Establishing pricing controls on Airwave via some form of rate-of-return regulation, a common practice use by regulators dealing with natural monopoly networks;
• Requiring Airwave to practice open-book accounting, “including the mandatory reporting of capital expenditure.” The CMA report claims that Motorola Solutions did not reach the capital-expenditure levels on Airwave promised to the Home Office, but this information was only learned recently.
• Require Motorola Solutions to divest itself of Airwave.

Airwave has been one of the highest-profile projects for Motorola Solutions since being purchased in 2016, accounting for a large portion of the vendor’s profitability outside of the U.S., according to industry analysts and the final CMA report.

Not surprisingly, Motorola Solutions disagreed with the CMA assessment that the Airwave situation warrants a market investigation.

“We strongly believe that a market investigation is not warranted,” according to the Motorola Solutions statement. “We have provided financial transparency throughout this project, including audited, statutory financial statements, detailed reviews of CAPEX and spend, and financial plans for the Airwave network.

“The Airwave service delivers exceptional value for money for the UK taxpayer. Motorola Solutions has provided price reductions even while making significant investments to maintain the network, which is relied upon by the UK emergency services every day and continues to function at the highest levels.”

CMA expressed concerns about Motorola Solutions’ dual roles when the Airwave purchase was considered in 2016, but the agency approved the deal after receiving assurances from the Home Office and Motorola Solutions that Airwave would be shut down when the LTE-based Emergency Services Network (ESN) was finished in 2019.

Motorola Solutions was particularly outspoken in refuting the notion that it has slowed delivery of its ESN obligations in an attempt to extend the useful value of Airwave—an implication made by numerous industry sources and UK politician over the years, and one that the CMA plans to explore in its market investigation.

“We reject the assertion that we have an incentive to delay the implementation of the ESN,” Motorola Solutions said in its statement. “In fact, we continue to deliver on our commitments and invest heavily in the ESN programme, and its launch remains our key priority for the benefit of public-safety professionals and citizens across the country.

“This is a contractual matter between the Home Office and Motorola Solutions, and this investigation threatens the principles of long-term government contracting in the UK.

“We look forward to working with the CMA independent group to demonstrate that Motorola Solutions continues to provide exceptional value for the UK emergency services.”

In the CMA report, Motorola Solutions is described as a “monopoly provider” of Airwave, the public-safety TETRA network that provides mission-critical communications to UK first responders via a contract with the Home Office. Given the lack of an alternative, the Home Office has “limited leverage to secure value for money in any future extension of Airwave contract,” the CMA reports states.

No mission-critical-communications alternative to Airwave exists, because the Emergency Services Network (ESN)—the UK’s public-safety LTE initiative that initially was supposed to replace Airwave in 2019—is not yet operational. Motorola Solutions also has a key role in the ESN development as the provider or software and services, including the necessary broadband push-to-talk (PTT) solution.

These dual roles held by Motorola Solutions in Airwave and the ESN long have been cited as problematic by industry observers and UK politicians, who have noted that Motorola Solutions receives much more revenue annually by continuing to provide TETRA via Airwave than it would through a successful ESN.

Exploring this dynamic is one of the key components of the investigation by CMA, which indicates that Motorola Solutions’ dual roles is one reason that the public-safety LMR market “is not working well” in Great Britain. The following statement in part of the CMA final report:

“Motorola’s position as owner of Airwave Solutions and key supplier in the design and roll-out of ESN, which may be resulting in the preservation of weak competitive constraints on Motorola in the supply of LMR network services for public safety, because of:

1. the ability of Motorola to shape or otherwise delay the design and roll-out of ESN, and thus hamper the emergence of the significantly different competitive dynamics envisaged by the Home Office when it procured the design and roll-out of ESN; and
2. the incentive on Motorola to do so, arising from the significant profits it derives from operating the Airwave network.”

Motorola Solutions repeatedly has denied the implications in its filings on the subject, noting that it has not purposefully slowed the development of ESN and that—as only one contractor on the massive public-safety LTE project—it is not in a position to cause a delay unilaterally.

“It is therefore abundantly clear that Motorola is not the cause of ESN delay,” Motorola Solutions states in a September filing as part of the CMA consultation proceeding. “To attribute, or even to seek to attribute, blame to Motorola for the Home Office’s need to extend the Airwave network (due to the delayed roll-out of ESN) is an unfair, unreasonable and irrational departure from clearly established and objectively reported facts.”

Motorola Solutions has not yet delivered the version of its LTE push-to-talk solution—based on the PTT platform gained by purchasing Kodiak in 2017—to date, but it is expected to do so in April, , a Home Office official said earlier this month. Delivery of this solution will allow testing to begin on ESN Version 1.0, which is expected to give UK public-safety agencies a mission-critical voice alternative to Airwave sometime in 2023.

But the delivery of the PTT solution is far from the only issue that the Home Office has in making the ESN operational throughout Great Britain.

Coverage is a big factor, particularly in rural and remote locations, where the Home Office has assumed responsibility for the buildout. Of the 292 cell sites planned in these areas, just 127 have been built, and only six have been activated. Coverage in the London Underground and air-to-ground communications also have not been finalized.

Home Office officials believe the ESN will be ready by the end of 2026, and they want to extend the Airwave agreement with Motorola Solutions until that date.

CMA’s final report suggests that Motorola Solutions delivery of its PTT solutions was a key factor in the delays associated with the ESN, which was supposed to be completed in 2019, so Airwave could be retired at that time.

“At this stage, based on the above evidence, it appears to us that Motorola’s approach to the development of its MCPTT software may have been (and may continue to be) a material factor in delays to the ESN programme, because of the alleged inadequacies of the solution it had put forward as part of its original bid (Wave 7000); the need to develop mission-critical capability into the replacement technology (Kodiak); and the lengthy and apparently inflexible product roadmap that Motorola has adopted in order to do so,” the CMA report states.

“In addition, the evidence suggests that Motorola largely controls the speed at which the various features required for ESN are delivered as part of its product release schedule. Thus, through Kodiak and its crucial role in supporting communication between Airwave network users and ESN network users, Motorola appears to have the ability to impede the timely transition of public-safety organisations from the Airwave network to ESN.”

Many key aspects of the CMA final report have been redacted, presumably to protect business-confidential or government-confidential information. In many key areas, the redactions make it difficult for readers to ascertain the scale of cited issues or fully comprehend explanations.

Several industry sources and some people submitting comments in the CMA consultation have questioned the practical effectiveness of the proposed remedies.

Forcing Motorola Solutions to divest Airwave would remove the conflict-of-interest questions that will be explored in the market investigation, but one commenter expressed concern that such measures would “carry much more uncertainty (unless Airwave transfer to public ownership)” for UK public-safety agencies that depend on Airwave.

The Home Office also acknowledged that it could be challenging to execute an Airwave divestiture by Motorola Solutions while ensuring no lapses in the performance of the critical network.

“Any divestiture would be a non-trivial technical and delivery exercise, which would need to be managed carefully to ensure the continuity of the current Airwave network service (for the time being) and the ESN programme as the parties try to manage transition in parallel,” according to a footnote in the Home Office comment to the CMA consultation.

In addition, industry sources have told IWCE’s Urgent Communications that it is difficult to imagine a scenario in which purchasing Airwave for a short period—presumably with less profitability than it enjoys today—would be attractive to an entity qualified to maintain a mission-critical TETRA network.

Regulatory price controls were better accepted by commenters to the CMA consultation, but many industry sources cautioned that such a measure could set a dangerous precedent for all UK procurements, not just the Airwave project.

While most agree that Motorola Solutions enjoys a monopoly in UK public-safety communications, industry sources note that it is a monopoly power approved by the UK government in the original Airwave contract, approved by the Home Office and the CMA when Motorola Solutions purchased Airwave in 2016, and was understood when the Home Office negotiated the Airwave extension to 2022.

If the UK government chooses to impose price controls on an Airwave extension because it believes it lacks negotiating leverage at the moment, “that could put a damper on all UK government procurements going forward, and I can’t imagine they want that,” said one industry source who requested anonymity.

Industry sources also noted that one potential remedy to Motorola Solutions’ dual-role situation is not listed as an option: removing Motorola Solutions as a key contractor for the ESN project.

One paragraph in the CMA final report may offer a hint behind this omission. Redactions prevent the precise premise from Motorola Solutions being clear, but the CMA response includes reasoning that could apply to almost any ESN-centric remedy.

“In response to the CMA’s consultation, Motorola stated that it was not clear why the CMA has ignored the alternative [redacted] remedy of requiring that [redacted]. Motorola stated that this remedy would [redacted],” the CMA final report reads. “The CMA’s current view is that such a remedy would not be practicable and would be disruptive to the rollout of ESN. In addition, this remedy would not address any excess profit that Airwave Solutions may be making until it is switched off.”

Another technical complication to removing Motorola Solutions from the ESN project also was noted in the CMA final report.

“Switching would also be hampered by the fact that the technological solution developed on the Airwave side (called the Wave Radio Gateway) is specific to Kodiak and would require several years to be modified to work with an alternative MCPTT solution,” according to the CMA report. “In addition, any alternative MCPTT solution would also need to be developed to handle the required volume of calls.”