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Motorola Solutions appeals Airwave investigation decision by CMA

Motorola Solutions appeals Airwave investigation decision by CMA

  • Written by Donny Jackson
  • 7th January 2022

Motorola Solutions has asked the United Kingdom (UK) Competition Appeal Tribunal to review a regulator’s decision to investigate the company’s highly profitable Airwave TETRA network that serves UK public-safety agencies, according to a summary of the challenge published this week.

Motorola Solutions submitted on Dec. 22 its request seeking tribunal review of the Competition and Markets Authority (CMA) market investigation reference, according to summary of the request authored by Charles Dhanowa, registrar of the Competition Appeal Tribunal. The summary was posted to the tribunal website on Jan. 5.

CMA announced its investigation plans in October, after the regulator issued a report in July asserting that Motorola Solution is set to realize about £1.2 billion—about $1.6 billion—in “excess profits” from 2020 through 2026 through extensions of the Airwave contract. With this in mind, CMA has suggested potential remedies to the situation would be to subject Airwave to government-determined price controls, mandate that Airwave utilize open-book accounting, or require Motorola Solutions to divest Airwave.

CMA is collecting comments now—the deadline for submission is Jan. 10–and preliminary results could be released in April, under the CMA’s current schedule for the matter.

Motorola Solutions did not respond to a request from IWCE’s Urgent Communications seeking a copy of the company’s full request to the tribunal in time for the information to be included in this article, but the company did provide a statement acknowledging its challenge to the CMA probe.

”We confirm that we have appealed the decision by the CMA to refer this matter to a market investigation,” according to statement from a Motorola Solutions spokesperson. “We remain focused on working with the CMA independent group to demonstrate that Motorola Solutions continues to provide exceptional value for the U.K. emergency services.”

Omdia's Take

“The requirement for a fair and just approach to mission-critical communications is beneficial for us all. It will be good to see how this plays out, given the arguments seem logical and fair and without a direct alternative. Whatever the outcome, it seems likely that the UK will need to continue to use the Airwave network.”

— Thomas Lynch, Omdia research director

Click here to learn more about Omdia and its industry reports.

Officials for the UK Home Office and Motorola Solutions repeatedly acknowledged throughout 2021 that the nationwide Airwave TETRA system needs to remain operational to provide mission-critical voice communications to UK public-safety agencies beyond December 2022, when the current Airwave contract extension expires.

With the Emergency Services Network (ESN)—the UK public-safety LTE network that was supposed to replace Airwave at the end of 2019—still not operational, a second Airwave extension that would let UK first responders continue to use TETRA through the end of 2026 is desired.

Motorola Solutions is both the exclusive provider of Airwave TETRA services and is the contractor over software and services for the much-delayed ESN. Both the CMA and several UK officials over the years have expressed concern about this dual role for Motorola Solutions, questioning whether the vendor giant has a financial incentive to slow development of the ESN to ensure that UK public safety would use Airwave—a much more lucrative proposition for the vendor giant, on an annual basis—for additional years.

Motorola Solutions officials repeatedly have denied this assertion.

Under the terms of current Airwave agreement, any Airwave extension agreement was supposed to be completed by Dec. 31, 2021, according to a statement from Motorola Solutions CEO Greg Brown. When asked whether an Airwave extension was signed by the Dec. 31 contractual deadline, a Motorola Solutions spokesperson declined to comment, citing “confidentiality reasons.”

A CMA spokesperson has informed IWCE’s Urgent Communications that the CMA market investigation is being done independent of the Airwave extension negotiations, so there would be no CMA requirement to delay a deal. However, multiple industry sources familiar with the situation have indicated that it would be difficult for the UK Home Office and Motorola Solutions to release the terms of an extension agreement—if it exists—amid uncertainty concerning the findings of the CMA market investigation.

In terms of the Motorola Solutions appeal to the Competition Appeal Tribunal, the vendor describes the accounting approach used by the CMA as “irrational,” according to the tribunal summary. Motorola Solutions also questions the CMA approach to assessing the market for mission-critical communications for the UK.

“Motorola contends that the CMA has adopted an irrational approach to the Airwave network ‘market’ and ESN as an alleged ‘feature’ of that market,” according to the tribunal summary written by Dhanowa. “The so-called ‘market’ was created by an exclusive and long-term contract that sets prices. Furthermore, 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.

“It is unreasonable to treat delivery of the ESN network as a ‘feature’ of the Airwave network ‘market.’

Motorola submits that ESN is not a competing alternative to the Airwave network. 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.”

But perhaps the most important aspect of the Motorola Solutions challenge to the CMA market-investigation decision is the UK watchdog analysis of the contractual agreement between the UK Home Office and the company—an arrangement that began when Motorola Solutions bought Airwave in 2016.

“The CMA has failed to understand and/or take into account the contractual agreement(s) and failed to assess relevant matters,” according to Dhanowa’s tribunal summary of the Motorola Solutions appeal. “In particular, Motorola contends that the CMA proceeded on the basis of a flawed understanding of the contractual position between Motorola and the Home Office, in that the CMA wrongly stated that there was a “need” to “agree” an extension to the contract in order for the Airwave service to be continued beyond 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 the services until that date); (ii) provides for the default prices payable for the remaining life of the Airwave network; and (iii) 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.”

Motorola Solutions contends that these issues constitute “clear and fatal flaws” in the CMA decision to pursue a market investigation of Airwave, and the company contends that the CMA timeline is “unfair” and “unreasoned,” Dhanowa states in his summary.

In terms of potential remedies, Motorola Solutions primarily is asking the tribunal to require the CMA to rethink its market-investigation plans, according to Dhanowa.

“As regards the relief sought, Motorola seeks: a) An order that the MIR Decision is quashed and remitted to the CMA to take a new decision; b) Alternatively, an order that the Administrative Timetable Decision is quashed and remitted to the CMA for reconsideration,” the tribunal summary states.

 

Tags: homepage-featured-4 Applications Companies Federal Government/Military Funding Land Mobile Radio Long Term Evolution (LTE) News Policy Public Safety Public-Safety Broadband/FirstNet Software Standards State & Local Government Subscriber Devices System Installation System Operation Wireless Networks News

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One comment

  1. Avatar Thomas Lynch OMDIA Analyst 10th January 2022 @ 6:16 am
    Reply

    The requirement for a fair and just approach to mission critical communications is beneficial for us all. It will be good to see how this plays out given the arguments seem logical and fair and without a direct alternative whatever the outcome it seems likely that the UK will need to continue to use the Airwave network.

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