Excess profits on Motorola's Airwave estimated to be £1.3B
UK competition regulator begins consultation on price controls for controversial blue light network
The UK's competition watchdog has estimated Motorola could make nearly £1.3 billion ($1.6 billion) in excess profits over a decade owing to its position as a supplier of the Airwave legacy blue light wireless comms network.
As part of a consultation discussing "charge controls" over Airwave, which was founded in 2000, the Competition and Markets Authority (CMA) said the US telecoms and network giant was set to make "supernormal profits of around £1.27 billion ($1.58 billion) from the operation of the Airwave Network between 1 January 2020 and 31 December 2029."
In its latest report on the subject, the CMA has ruled that features of the market for the communications network created an "adverse effect on competition" which gives Airwave Solutions – owned by Motorola Solutions – the "ability to price services above levels the CMA would expect to prevail in a competitive market and results in a detrimental effect on customers."
The CMA has published a draft order [PDF] for consultation. It proposes charge controls to limit the price of Airwave Solutions and Motorola Solutions for services in scope by more than 40 percent.
"It will, nonetheless, give Airwave Solutions and Motorola Solutions the opportunity to recover their reasonable costs of providing the services and to earn a reasonable level of profit in doing so, i.e. the level of profit that would be expected in a well-functioning market," the CMA said.
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Airwave started out as part of BT, in various forms, was pun out in 2002 and ultimately became Airwave O2 Ltd. It was bought by two Macquarie Group investment funds in 2007. Motorola bought Airwave for £817.5 million ($1.017 billion) in 2015.
The CMA opened its investigation in October 2021 following concerns that the market might not be working well, resulting in a more expensive service. One concern was the Home Office's weak bargaining position when it came to the network; another was Motorola's dual role in providing the current network and in helping to deliver the Emergency Services Network to replace it. It proposed price caps on Airwave in its report published earlier this year.
Airwave had been due to stop running in 2022, after ESN, an upgrade to 4G with additional data services, was introduced. However, ESN has been delayed until at least 2026, possibly 2029, with additional costs running up to more than £1 billion ($1.24 billion).
In a statement sent to The Register, a spokesperson at Motorola Solutions, said:
"Anyone who enters into a contract with the U.K. government, and adheres to it, should be able to have trust and confidence in its terms. Despite the CMA finding no shortcomings in Airwave's exceptional service, the CMA intends to forcibly reduce the contractually agreed pricing going forward." ®