CMA issues proposals to prevent emergency services being overcharged for Airwave network

Almost a year after it opened a market investigation into the role of the Airwave infrastructure in the Emergency Services Network (ESN) used by UK first responders, the Competition and Markets Authority (CMA) has provisionally concluded that Motorola, which operates the network, appears to be able to charge the Home Office, which represents the emergency services, prices well above competitive levels, resulting in higher costs which are ultimately paid by taxpayers.

In its provisional findings, the CMA found that the Home Office was being charged more by Motorola to use the Airwave Network than should be the case. Following the investigation, which was led by an independent group of experts, the CMA has outlined a set of proposed changes to limit the price Motorola can charge to a level that would apply in a well-functioning, competitive market.

The Airwave network is the infrastructure and services that enable the police, fire and other emergency services to communicate securely with each other in the field. It provides a secure private mobile radio communications network for all organisations involved in public safety in the UK and, when commissioned, there was no alternative method for emergency services staff to communicate securely with each other in the field.

It was commissioned by the Home Office in 2000 under a private finance initiative (PFI) framework arrangement that was due to end in December 2019. At that point, the network was expected to be shut down and a different secure communications system using a commercial 4G mobile network was to become operational. In fact, the merger was first cleared by the CMA, in part because of the general expectation that the Airwave network would be shut down by 2019.

Motorola Solutions won one of the key contracts for the delivery of ESN in 2015 and acquired Airwave Solutions, the owner and operator of the Airwave network, in 2016. Yet the project has been blighted by a series of delays in the roll-out of ESN and costs to the UK taxpayer of the continuing operation of the Airwave network, which is expected to continue operating until the end of 2026.

Concerns about the impact of Motorola’s dual role as the owner of the company providing the current mobile radio network and as a key supplier in the roll-out of the planned new network were first expressed in summer 2021.

One of the main reasons cited by the CMA for opening investigations was that insufficient information – particularly in relation to the projects and associated costs needed to maintain and refresh the current network – was provided to the Home Office in negotiations about the pricing of the Airwave network and, as a result of this and the importance of the Airwave network for public safety in the UK, the Home Office was in a weak bargaining position and unable to secure value for money.

In addition, due to Motorola’s dual role, the CMA wanted to understand if the significant profits Motorola could earn from the Airwave network affected its incentive to support – and not to delay – the delivery of ESN. The price set under the original agreement entered into in 2000 included the capital costs of building the network. By the time the period covered by the original agreement ended, that cost should have been recouped and the price should have fallen substantially – in the same way that consumers can get cheaper mobile deals after they have paid off their handset cost. This did not happen, and prices remained at the same level. Unlike consumers, however, the emergency services have no choice of an alternative supplier.

The CMA’s provisional estimate is that Motorola could make excess profit in the region of £1.1bn from the operation of the network between January 2020 and December 2026. It added that if the roll-out of the new ESN continued to be delayed, Motorola could make around a further £160m excess profit each year after 2026. Moreover, the CMA added that recent figures suggest while the Airwave network accounts for around 7% of Motorola’s global revenues, it makes up around 21% of Motorola’s global pre-tax profits.

The CMA has also recommended that the Home Office puts in place a clear plan as soon as possible to ensure that a new, upgraded network, or more competitive arrangements, replace the existing setup by the end of 2029.

“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,” said Martin Coleman, chair of the CMA’s independent inquiry group.

“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 tax payers 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,” he added.

However, in response Motorola Solutions said that it rejected entirely what it called the CMA’s “unfounded and incorrect calculation” of excess profits, which it said was based on an arbitrary time period of the Airwave project.

A Motorola Solutions spokesperson told Computer Weekly: “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 U.K. government.”

The CMA is inviting comments on its provisional findings and expects to make a final decision later in 2022. And emphasising that the CMA’s findings were provisional, Motorola Solutions said that going forward it would continue to work with the CMA to demonstrate the value for money that it said the Airwave network provides to the UK taxpayer. The company spokesperson also noted that at the same time, Motorola Solutions would pursue all legal avenues to protect its contractual position.