UK Home Office outlines struggles with Motorola Solutions about Airwave, ESN

UK Home Office officials have asked the Competition and Market Authority (CMA) to consider revamping two contracts with Motorola Solutions, which otherwise holds a negotiating advantage in both the existing Airwave TETRA system and the unfinished Emergency Services Network (ESN) public-safety LTE initiative, according to a Home Office filing.

In a response to the CMA investigation of Motorola Solutions’ Airwave power, the Home Office requested that the investigation—and any remedies from the proceeding—also address Motorola Solutions’ key position in the ESN, which was supposed to replace Airwave in 2019 as the UK mission-critical-communications network.

“The Home Office requests that the CMA look at remedies that seek to address both sources of detriment,” according to the Home Office response, which was written in January but not posted until March 23.

“It is not only the potentially excessive prices Motorola charges for operating Airwave Solutions that the Home Office is concerned results in harm to UK taxpayers, but what appear to be unnecessary and inefficient delays to the rollout of a new and enhanced emergency services network, as well.”

This Home Office request to the CMA was submitted less than month after the Home Office announced a $2.09 billion, four-year deal with Motorola Solutions to extend the life of the Airwave system through the end of 2026, which is the latest target date for completion of the ESN.

Despite the new Airwave extension, the Home Office filing asks the CMA to consider mandating price controls on Airwave that not only would limit Motorola Solutions’ profits from Airwave—the vendor is set to realize about £1.2 billion ($1.66 billion) in “excess profits” from 2020 through 2026, according to a July 2021 report from the CMA—but would incent the company to deliver on its ESN commitments.

CMA plans to issue its provisional decision on the matter in June, with a final report scheduled for release in September, according to a updated timetable posted by CMA.

Motorola Solutions, which tried to appeal the CMA investigation in December but was denied, stated in its response that the CMA “group” should focus its attention on the role played by the Home Office in the problematic Airwave-ESN situation.

“The [CMA] Group is also invited to consider whether the conflict between the role of the Home Office as Airwave customer and as ESN customer has led to taxpayer money being wasted through a (so far) failed ESN procurement programme and an unnecessarily prolonged Airwave service,” according to the response from Motorola Solutions. “There is a vast amount of material in the public domain regarding the Home Office’s failings, including the Home Office’s own admissions.

“The Group may wish to consider whether a single powerful government ministry ought to be permitted to control, on behalf of the taxpayer, the purchasing of two networks, one of which is intended to replace the other, especially when the Home Office has publicly admitted to its procurement failings in respect of deliverability, scope and governance. It was for the Home Office to set and ultimately accomplish ESN delivery, once it had decided that ESN was necessary.”

Throughout its communications to the CMA, the Home Office seemed to reference—the filing is heavily redacted, particularly at key junctures—a position that has been held by many UK elected officials for years: that Motorola Solutions ownership of Airwave and its key role in the development of ESN is bad for UK taxpayers. Indeed, many have questioned Motorola Solutions’ motivation to make ESN a reality when the vendor giant gets more revenue from a two-year Airwave extension than it would from successfully completing the ESN contract.

For this reason, some observers were surprised that potential remedies from the CMA investigation did not include any mention of altering the Home Office agreement with Motorola Solutions regarding the ESN. The CMA indicated that the ESN was not part of its initial proposed remedy, because it was worried that such an investigation could delay the ESN deployment.

But the UK Home Office response repeatedly attributes the failure of the ESN to succeed Airwave as the UK’s mission-critical communications system to the fact that Motorola Solutions has not delivered a mission-critical-push-to-talk (MCPTT) offering that is a suitable alternative to the push-to-talk (PTT) service over TETRA.

As a result, the Home Office requested that the CMA consider ESN-related remedies, even though seeking a change to the ESN contract at this point would be unusual—a fact the Home Office seemed to acknowledge,

“The Home Office recognises that allowing the CMA to restructure its ESN contracts with Motorola at no cost to the Home Office could be considered a severe remedy,” the Home Office response states. “However, … it may be the only effective solution to ensure UK citizens and taxpayers benefit from ESN in a timely manner.”

“Put simply, Motorola’s [redacted text] are stifling innovative and efficient delivery and causing significant delay in the delivery of ESN.”

But Motorola Solutions’ response to the CMA—filed in January but made available to the public on March 23—states the vendor “has no incentive to delay ESN” and “has no ability to delay ESN.” Instead, the Motorola Solutions response points to the Home Office as the culprit in the expensive ESN delays—a position the vendor indicates is support by the National Audit Office report from July 2021.

“The latest National Audit Report (“NAO”) blames the Home Office, not Motorola, for ESN delays,” the Motorola Solutions filing states.

“[Quoting the NAO report,] ‘Our report on the Emergency Services Network found that despite the high inherent risks, the Home Office set an over-ambitious timeline for delivery, with no contingency, and fell significantly behind schedule. We found this problem is widespread, as international public-sector digital programmes also often overrun and exceed their budget.’”

Motorola Solutions cited the NAO’s findings that the Home Office’s ESN technical challenges included increasing the network coverage/resiliency of the 4G network, developing handheld and in-vehicle devices that would work with the ESN, integrating all components, and meeting first responders’ needs in the air and underground. In addition, the ESN faced “significant” difficulty with “the availability of devices able to communicate directly with each other without a network signal.”

In its response, Motorola Solutions noted that “none of the factors listed by the NAO fall within Motorola’s area of responsibility.”

Meanwhile, the Home Office indicated that it is virtually helpless to resolve the Airwave-ESN matter by itself in a manner that will meet the UK government’s goals for the program. Absent intervention by the CMA, there is little the Home Office can do to change the situation, according to the Home Office filing.

“The attractiveness of the ‘status quo’ to Motorola means there is simply no pressure on Motorola to reach any new agreement with the Home Office,” the Home Office response states. “As time has progressed and the profitability of Airwave has increased, [redacted text], the financial incentives on Motorola to leverage its position as the key, and currently irreplaceable, provider of the Kodiak MCPTT solution and of interworking and delay the delivery of ESN, and therefore the end of the Home Offices contract for Airwave, have increased.”

Motorola Solutions was awarded its portion of the ESN contract in December 2015. Weeks later, the company announced it plans to pay more than $1 billion for Airwave TETRA system, which was scheduled to be shut down when the contract expired by the end of 2019. At that point, UK public-safety agencies were expected to migrate all communications to the ESN, which was designed to leverage the EE commercial wireless network with coverage enhancements and push-to-talk service from Motorola Solutions.

CMA approved Motorola Solutions’ purchase of Airwave in 2016, based significantly on the pretense that Airwave would be shut down in 2019.

But that timetable to transition from Airwave to ESN proved to be wildly optimistic. The ESN project repeatedly encountered network delays—indeed, only a fraction of the planned 292 rural towers are operational today—and the Home Office’s coordination between vendors repeatedly was found to be lacking.

Even if the ESN network had been completed on time, UK first responders would not have been able to use the public-safety LTE system as planned, because Motorola Solutions did not deliver the push-to-talk solution envisioned by the Home Office in a timely manner. Motorola Solutions initially tried to develop Wave 7000 internally to meet this mandate, but it eventually opted to purchase Kodiak’s push-to-talk solution.

“Wave 7000 required too much development, and ultimately the Home Office was forced to agree to a reset to the ESN programme, and did so in May 2019 [redacted text],” according to the Home Office response to the CMA.

Meanwhile, UK public-safety agencies continue to need mission-critical voice communications, resulting in the Home Office agreeing to a three-year extension of Airwave through 2022 and the recent four-year extension through the end of 2026.

“In the UK, other than for trials, there is no currently available 4G/LTE alternative to TETRA due to Motorola’s delay in the delivery of its MCPTT Kodiak product,” according to the Home Office filing.

One feature of the ESN contract that was supposed to provide the Home Office with some negotiating leverage with Motorola Solutions was Deed of Recovery language, which allows the Home Office to penalize Motorola Solutions if it fails to meet ESN development schedules. But the “substantial growth in Airwave’s margins since the Deed of Recovery was developed”—and a reduction in the penalty—means that the Deed of Recovery “is not a sufficient penalty to incentivise Motorola to keep to its ESN milestones,” according to the Home Office.

Yet another problem that the UK Home Office has when negotiating with Motorola Solutions is a lack of information about the operations of the Airwave system.

“The Home Office has very little sight of the activities needed to maintain Airwave, only receiving limited financial information once a year through the often-late annual accounts,” the Home Office response states. “Its reasonable enquiries to understand why costs are increasing, [redacted text]. In comparison, Motorola has good information on, and in fact controls, the Home Office’s only bargaining chip: the date of the delivery of the ESN network.”

Of course, the UK government could end its ESN agreement with Motorola Solutions, but that would have little—if any—beneficial impact, according to the Home Office.

“Even if the Home Office were to terminate the ESN Lot 2 contract and seek an alternative supplier of all those services, including an alternative MCPTT application to Kodiak, the requirement for interworking between Airwave and ESN means that Motorola – has effectively – ‘locked-in’ its critical position in the delivery of ESN,” the Home Office response states.

“This ‘lock-in’—as well as other features of the market, such as the considerable level of information asymmetry—results in Motorola holding significant unliteral market power. It is therefore important that the CMA look beyond just Airwave and understand Motorola’s wider strategy, from 2015 to date, and how that strategy has developed over the period.”

With this in mind, the Home Office encouraged the CMA to contemplate a price-control remedy designed to incent Motorola Solutions to meet its ESN milestones on schedule, noting two potential approaches.

One would be “reducing the amount of revenue Motorola earns from operating the Airwave network over time,” according to the Home Office filing. “By not allowing Motorola to earn a margin on operating the Airwave network, this would enhance Motorola’s incentives to invest in and deliver ESN in a timely manner.”

An alternative—or a complement—to this strategy would “making part of the revenues that Motorola earns from operating the Airwave network contingent on the achievement of agreed ESN delivery milestones,” the Home Office noted. “Such a price cap would be more complex than simply reducing the revenues that Motorola can earn through operating Airwave, but would also more directly (and therefore, potentially more effectively) address what the Home Office views as the most important detriment—delays to the rollout of ESN.”

Motorola Solutions disagreed, stating in its response that “there is no credible evidence of an AEC [adverse effect on competition] in the reference market caused by Airwave or Motorola and that—as a result—no remedies will be required in that regard.”