Final cases made about Airwave, ESN, before CMA issues provisional decision on Motorola Solutions

Key players in the United Kingdom (UK) plans to deliver public-safety communications via the Airwave TETRA system or the much-delayed LTE-based Emergency Services Network (ESN) offered very different opinions on what should be done as UK competition watchdog prepares to make it provisional decision on the roles played by Motorola Solutions in both networks.

Yesterday, the Competition and Market Authority (CMA) posted on its website the last responses made by the UK Home Office, Motorola Solutions and EE—the wireless carrier charged with building the LTE network portion of the ESN—prior to the CMA issuing its “Provisional Decision” report. CMA is considering whether Motorola Solutions has too much market power and whether the company should have to divest Airwave or be subject to regulatory pricing to address cost and delivery concerns that the Home Office has cited about Airwave and the ESN.

CMA’s administrative timeline indicates that the provisional decision would be made by the end of June—tomorrow—but it is unclear when a report about the provisional decision will be made public. The responses posted yesterday on the CMA website were all submitted by the end of May.

In the latest submissions, there was little consensus among the parties about whether the CMA should take action against Motorola Solutions or what the potential remedies should be.

Motorola Solutions reiterated its argument that the CMA should not take any action, noting that it is meeting its contractual obligations for Airwave under terms agreed upon by the UK government, led by the Home Office. If the CMA does choose to alter the terms of the Airwave contract, the ruling could have a negative impact on the UK government’s relationship with all contractors, not just those associated with public safety, according to Motorola Solutions.

If the CMA decides to take action, it should not impact the current Airwave contract—a $2.09 billion, four-year deal with to extend the life of the Airwave system through the end of 2026—according to Motorola Solutions. Instead, any action should be applied to any negotiations/procurements that the UK government chooses to pursue if Airwave is needed in 2027 or beyond—a scenario that only would be needed if the ESN still was not ready to provide mission-critical voice communications to UK first responders by the end of 2026.

For the ESN to replace the Airwave TETRA network, the ESN needs to have mission-critical-push-to-talk (MCPTT) implemented as a mission-critical-voice alternative to the existing LMR system. The MCPTT offering is supposed to be supplied by Motorola Solutions—based on the PTT platform gained by purchasing Kodiak in 2017—but UK Home Office officials repeatedly have cited MCPTT issues as key reasons for the delay in ESN, which was supposed to be completed in 2019.

Many UK officials have expressed concern that Motorola Solutions is slowing the delivery of MCPTT to ensure that UK first responders remain dependent on Airwave—a much more lucrative contract for Motorola Solution than the ESN. Motorola Solutions repeatedly has denied this, noting that there are numerous other area besides MCPTT that have created ESN delays.

Whatever the reasons for the ESN delay, it has become a costly proposition for the UK government and its taxpayers. According to a filing by Home Office Secretary Matthew Rycroft that was updated last month, the total cost of the Airwave-to-ESN transition has risen by 6.2 billion pounds—about $7.6 billion, or more than the total cost of the much larger FirstNet system in the U.S.—since the project was procured in 2015.

In terms of potential solutions that the CMA could order, the UK Home Office submission expresses support for price controls.

“The Home Office considers that a charge control and associated transparency remedies are necessary,” according to one Home Office response. “Such remedies are necessary to address Airwave Solutions’ unilateral market power, although not necessarily the dual role that Motorola holds—albeit a reduction in Airwave’s price would, to an extent, marginally reduce but not remove, the incentives on Motorola to delay ESN.”

The Home Office also said that a CMA decision requiring Motorola Solutions to more transparent information would be helpful, but the benefits would be “marginal” if applied on a standalone basis, according to a Home Office submission that addresses potential remedies.

Potentially more beneficial would be a “structural separation” remedy, in which Motorola Solutions would be required to divest Airwave, although such an approach would need to be implemented carefully, according to the Home Office.

“Before imposing a structural separation remedy, requiring Motorola to divest Airwave Solutions, the Home Office would encourage the CMA to investigate and consider the potential risks that may arise as a result of such divestiture, in particular any risks that may erode or diminish the quality of service provided by the Airwave network,” the Home Office submission states.

“As the CMA will appreciate, a primary concern for the Home Office is to ensure the continuity of mobile radio communications for Great Britain’s emergency services and in turn their safety and the safety of the general public.”

Throughout all of the submissions, commercially sensitive phrases have been redacted—often at key junctures of the text—in the publicly available versions of the responses, including at this juncture of the Home Office document.

“Additionally, at this point in time, [redacted],” according to the Home Office submission. “Further, Motorola have warned [redacted], at least while there is a threat of divestiture. [Redacted]

“The Home Office is further concerned that, even if Motorola’s ability to delay ESN through its late delivery of Lot 2—and in particular the Kodiak MCPTT application—falls away, Motorola is still able to hamper the roll-out of ESN through other means. For example, amongst other things, the Home Office believes Motorola is [redacted].”

While Motorola Solutions is under contract to deliver the Lot 2 portion of the ESN—the part addressing software and services, including MCPTT—the LTE network for ESN largely is the responsibility of EE, a large commercial wireless carrier in the UK.

In its submission, EE also encourages the CMA to require Motorola Solutions to divest an asset, but the divestiture would be of its ESN role, not selling Airwave. EE’s submission also stresses the need for the CMA to require that Motorola Solutions provide an interworking solution that would support interoperability between Airwave users and ESN users during the critical transition period.

“Some form of ESN divestment remedy is necessary and … it should be designed in a way which provides for interworking and delivers ESN and the public interest benefits described above as soon and as effectively as possible,” the EE submission states. “Motorola itself suggests … that the proportionate response to address the Adverse Effect on Competition (AEC) arising from its dual role would be to require cessation of its participation in ESN.

“In EE’s view, this could resolve the AEC caused by Motorola’s dual role but other steps would also be necessary to facilitate the implementation of this divestment remedy for ESN.”

Part of EE’s recommended remedy would require Motorola Solutions provide the Kodiak source code to the ESN program, according to the EE submission.

“EE submits that deconflicted continued use of Kodiak can only be achieved by a remedy that the Kodiak Software source code be provided to the ESN Programme along with all appropriate documentation and knowledge transfer (with direct access to the relevant Kodiak specialists) on an expedited timeframe so that the Programme could then continue to develop a separate code branch to deliver the software required to make ESN successful,” the EE submission states.

EE’s submission also noted that Motorola Solutions provides software to control rooms—the UK equivalent of 911 centers in the U.S.—and that control-room software must be upgraded to work with MCPTT, whether it is from Motorola Solutions or another vendor.

“To ensure that there is no barrier to user organisations adopting ESN, we would invite the CMA to consider (and consult as appropriate with Emergency Services organisations) about the provision of control-room software and how its timely development can be guaranteed,” the EE submission states.

Not surprisingly, Motorola Solution disagreed with the notion of any suggested CMA remedies, noting that the UK government has agreed to all contractual term associated with Airwave—the UK’s nationwide TETRA system that Motorola Solutions bought in a deal that closed in early 2016.

Many UK officials have complained that Motorola Solutions is operating Airwave in an non-competitive environment. However, the notion that the UK government should have procured an LMR alternative when the ESN clearly would not be ready by the end of 2019 was not practical, according to the Motorola Solutions response addressing potential CMA remedies.

“Competition for the market as defined by the CMA took place with the Home Office’s decision to procure ESN, and Airwave simply provided the fallback solution to cover against the risk of delays,” according to the Motorola Solutions submission. “Although in theory that fallback service could have been procured, at this point, the thought experiment has lost all contact with reality.

“Given the high demands of running the Airwave service, no outside company would seek to come in and provide the highly demanding Airwave service—with all its legacy technology issues that would inevitably come out in due diligence—on a ‘pay as you go’ basis (bearing in mind that the Airwave network services can be [redacted]) without receiving a significant risk premium.

UK officials have complained repeatedly that Motorola Solutions will realize more than $1 billion in “excess profits” from contracts extending the use of Airwave beyond 2019, but Motorola Solutions’ internal-rate-of-return (IRR) figures are not out of line, according to the Motorola Solutions submission. In addition, Motorola Solutions claims it provided the Home Office with a less-expensive alternative in 2018, but that offer was declined.

“Neither of Motorola’s probability-weighted IRRs remotely justify intervention to rewrite the last years of a long-term contract,” the Motorola Solutions submission states.

“It would be biased, or at least give the appearance of bias, in the context of a market investigation to pretend that the Home Office had made an entirely different contractual choice six years ago, not least when the Home Office was specifically offered (in 2018) significant discounts in return for providing greater certainty to Airwave about the term over which services would be required.”

Motorola Solutions expressed its opposition to price controls and noted the potential broader implications that such action could have on the UK government’s procurement efforts in the future.

“Despite the protestations of the CMA, Motorola (and likely other prospective contractors) would regard the imposition of a charge control as a blatant attempt by the UK government to draw in regulatory powers to rewrite the terms of a contract to which it has agreed,” according to the Motorola Solutions submission. “This is deeply objectionable and—no matter what the CMA claims—will, in fact, severely undermine trust in the UK government as a contracting partner.”

Within the Motorola Solutions submission, the company reiterated its belief that the CMA provisional decision should not include any of the suggested remedies.

“Motorola strongly believes that, to the extent that any of the potential remedies appear in the provisional decision, this will simply be confirmation that:

• the CMA has not conducted a fair and complete market investigation;
• the CMA continues to rely on unsound economic analysis;
• the CMA continues to ignore the actual operation of the market and decisions made by the Home Office, preferring instead to air vacuous theories about how competition within a contract might have worked; and
• the market investigation has been aimed squarely at retrospectively re-writing the agreed terms of the Airwave contract for the benefit of the UK government.”