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UK regulator proposes price cap on Motorola as supplier of Airwave network

Home Office and emergency services appear to be locked in with monopoly provider, market watchdog says

The UK's competition watchdog is proposing price controls on Motorola's role in running a controversial communications network for emergency services.

The Competition and Markets Authority (CMA) has put forward plans to cap the global telecoms giant's fees on the existing Airwave network while the severely delayed replacement Emergency Services Network, which it also supplies, is introduced.

The ruling marks the latest milestone in a long-running program beset with controversy and postponements.

Following a probe into the market arrangement for the provision of two emergency services technologies by one supplier, the CMA found the Home Office and emergency services appear to be locked in with a monopoly provider. It said its assessment showed a lack of competition was allowing Motorola to make around £160 million in excess profits a year.

The CMA proposed price controls on Airwave to ensure lower costs for taxpayers and said the long-term future of the network should be resolved by the Home Office.

Martin Coleman, chair of the CMA's independent inquiry group, said: "It is vital that the market for critical mobile radio network services used by our emergency services works well and provides an excellent service at a fair price.

"As far as the price is concerned, the market does not appear to be working well at the moment. Our current view is that the Home Office and our emergency services are locked in with a monopoly provider which can charge much more than it could in a properly functioning market, while taxpayers foot the bill. We are therefore proposing a direct intervention through a price control to stop this and lay the basis for the Home Office to decide how it intends to ensure these vital services are to be delivered in future."

Dating back to 2000, Airwave was set to be replaced by the 4G-based Emergency Services Network (ESN) in 2019 under a contract won in part by Motorola. But the telecoms firm also has a stake in 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.

But delays to the introduction of ESN meant that Motorola Solutions had a "dual role" offering the company "an incentive to delay or shape the roll-out of the ESN to its advantage, given the significant profits it currently receives from operating the Airwave network," the regulator said when it launched its probe.

In evidence submitted to the CMA, the Home Office said Motorola had "very significantly benefited" from the delay to ESN because it also profits from the extension of Airwave.

The CMA's provisional estimate is that Motorola could make in the region of £1.1bn excess profit from the operation of the network between January 2020 and December 2026. If the rollout of the new ESN continues to be delayed, Motorola could make around a further £160m excess profit each year after 2026.

A Motorola Solutions spokesperson said: "Motorola Solutions entirely rejects the CMA's unfounded and incorrect calculation of 'excess' profits, which is based on an arbitrary time period of the Airwave project. The fact is that Airwave, over its life, is a much better deal for the UK taxpayer than the Home Office originally agreed.

"In 2016, both the CMA itself and the Home Office approved all of the Airwave contracts that remain in place today. Airwave has been relied upon by the UK emergency services for the past 22 years. Despite the CMA finding no shortcomings in Airwave's exceptional service, or any material change in the cost to run this mission-critical network, the CMA is proposing to forcibly reduce the contractually agreed price for the remaining years of the contract. Such unprecedented intervention would severely undermine confidence in long-term infrastructure investment and contracting with the UK government.

"As this is a provisional decision, Motorola Solutions will continue to work with the CMA to demonstrate the excellent value for money the Airwave network provides to the UK taxpayer. At the same time, Motorola Solutions will pursue all legal avenues to protect its contractual position for the benefit of the 300,000 emergency services personnel who rely on the Airwave network – and the people they protect – every day."

The introduction of ESN was originally planned for 2017, but it was delayed. The project then underwent a "mindset reset" in 2018 according to Home Office boss Matthew Rycroft. Joanna Davinson, former chief digital, data and technology officer at the Home Office, told MPs the delay would create £550m in additional annual costs. The network might not be fully available before the end of 2024, she admitted. ®

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