Motorola benefits from delays in the UK's emergency services network, says govt
Providing both old Airwave system and its replacement boosted supplier's profits, says British Home Office
The UK's Home Office has admitted Motorola has "very significantly benefited" from the delay to the Emergency Services Network (ESN) because it also profits from the extension of the current Airwave communication network used by police, fire brigades and the like.
In a submission to the country's deals watchdog, the Competition and Markets Authority (CMA), the central British government department said postponement of the ESN meant Motorola would financially benefit from the extension of the deal for Airwave, in which it also has a stake. ESN was supposed to go live in 2019 and is not expected to be finished by 2026.
Last year, Motorola revealed it would bag £1.2bn in profits during the six-year Airwave extension period from 2020.
The Home Office said in its submission:
"Due to the delay in the delivery of the ESN network, the opportunity for additional competitive interactions arose; however, as these interactions were unforeseen both when the Airwave PFI and other contracts were agreed and when the ESN Lot 2 contract was agreed, the nature of those commercial relationships and other relevant features of the market has meant that Motorola has very significantly benefited from delay, increasing its unilateral market power in the process."
At the same time, Motorola was making more money from Airwave the more ESN became delayed.
"As time has progressed and the profitability of Airwave has increased, the financial incentives on Motorola to leverage its position… have increased… all at a cost to the UK taxpayer," the Home Office submission added [PDF].
It said Motorola provides the "currently irreplaceable" Kodiak MCPTT solution underpinning the "push-to-talk" feature vital to Airwave, as well as interworking between Airwave and ESN necessary for the rollout of the new system.
Motorola signed a deal to buy Airwave Solutions in December 2015, the same week it won a UK government contract to provide software for the ESN.
The CMA cleared that merger at the time, partly because the Airwave service was scheduled to be closed at the end of 2019.
However, ESN underwent a complete revision in 2018 – a "mindset reset" as a senior civil servant christened it – and is now due to go live in 2026.
In 2019, the National Audit Office said [PDF] ESN was forecast to cost up to £9.3 billion to 2037, an increase of £3.1 billion, 49 percent, from the 2015 business case.
In October last year, the CMA launched a probe into whether Motorola Solutions is abusing its market position by holding roles in both Airwave and its replacement ESN.
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In its statement, the Home Office said it agreed with the watchdog's investigation. "The CMA should examine the strategy documents of Airwave Solutions at the time of the ESN contract bidding to understand what actions, if any, the company was intending to take to respond to the threat posed by ESN on its revenue," the Home Office said.
Launching its investigation, the CMA said [PDF] it would examine the period around the award of the ESN contracts and acquisition of Airwave Solutions by Motorola, which resulted in a series of new contractual arrangements in 2016; the 2018 negotiations that led to the extension of the contracts to the end of 2022; and the 2021 negotiations relating to the potential extension of the contracts beyond 2022.
In its statement [PDF], Motorola welcomed the CMA's investigation, but said it should go back further in time.
"Since Airwave only came about because of the very contract being investigated, the contractual starting point in 2001 and economic outcome for the Home Office by the end of the contract in December 2026 need to be an integral part of the analysis.
"Motorola believes that after a careful investigation the Group will conclude there is no credible evidence to support the finding of an 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." ®