Motorola faces price checks on UK emergency services radio contract | Competition and Markets Authority

Britain’s competition watchdog is to introduce price controls on how much Motorola can charge the government for operating the communications network used by police, fire and other emergency services, after found that it will make £1.1 billion in excess profits by 2026.

The Competition and Markets Authority (CMA) said a lack of competition meant the US company, which runs the Airwave radio network that allows emergency services to communicate safely, makes £160m pounds of excess profits per year.

The CMA estimates that in total Motorola will make £1.1bn in excess profits – those that exceed what you would expect in a well-functioning market – between 2020 and 2026, when the new service network Very Delayed Emergency (ESN) is intended to be posted online.

Airwave was commissioned in 2000 by the Home Office under Labor and was due to close in December 2019 with an expected total cost of £1.5billion.

The interim assessment found that Motorola’s monopoly position meant it had been able to charge the Home Office “prices well above competitive levels”.

“It is essential that the market for critical mobile radio network services used by our emergency services functions well and provides excellent service at a fair price,” said Martin Coleman, chairman of the CMA’s Independent Investigation Panel. .

“Our current view is that the Home Office and our emergency services are locked in with a monopoly supplier who can charge far more than they could in a properly functioning market, while taxpayers foot the bill. . Unlike consumers, emergency services do not have the choice of an alternative provider.

The CMA said Motorola’s financial filings suggested that while the Airwave network only made up about 7% of the company’s global revenue, it made up about 21% of pretax profits.

The CMA is proposing direct intervention through price controls to prevent Motorola from overcharging until the new 4G-enabled ESN network comes online.

A Motorola spokesperson said: “Motorola Solutions fully rejects the unfounded and incorrect calculation of CMA’s ‘excess’ earnings, which is based on an arbitrary time frame of Project Airwave. The fact is that Airwave, over its lifetime, is a much better deal for the UK taxpayer than the Home Office originally agreed.

The company said it would continue to work with the CMA to “demonstrate the excellent value for money the Airwave network offers the UK taxpayer. At the same time, Motorola Solutions will pursue all legal avenues to protect its contractual position,” the spokesperson said.

The watchdog said the Home Office should ensure the new network, which Motorola is also involved in building, or more competitive deals are in place by the end of 2029 at the latest.

Concerns about Airwave’s switch to ESN were identified as far back as 2016 by the National Audit Office, which said it had not been tested and may not be suitable for certain communications for security agents. fight against terrorism. The ESN system was designed to save money by relying in part on existing commercial mobile phone networks rather than a separate network.

James V. Hayes