UK regulator proposes price cap on Motorola as supplier of Airwave network
(2022/10/17)
- Reference: 1666001706
- News link: https://www.theregister.co.uk/2022/10/17/cma_motorola_airwave/
- Source link:
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.
[1]
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.
[2]
[3]
[4]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.
[5]
"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 [6]when it launched its probe .
[7]
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.
[8]UK police to spend tens of millions on legacy comms network kit
[9]Motorola benefits from delays in the UK's emergency services network, says govt
[10]Samsung gets 2-year contract extensions to provide rugged handsets for UK's troubled Emergency Services Network
[11]Samsung gets 2-year contract extensions to provide rugged handsets for UK's troubled Emergency Services Network
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 [12]"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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[4] https://www.gov.uk/government/news/cma-issues-proposals-to-address-overcharging-for-emergency-service-radio-network
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y018GqdUjYSNl@NOT8LwPAAAAIE&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://www.theregister.com/2021/10/25/cma_motorola_solutions_esn_probe/
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Y018GqdUjYSNl@NOT8LwPAAAAIE&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[8] https://www.theregister.com/2022/06/09/uk_police_legacy_airwave_bill/
[9] https://www.theregister.com/2022/05/10/motorola_airwave_esn_profits/
[10] https://www.theregister.com/2021/12/16/samsung_esn_extension/
[11] https://www.theregister.com/2021/12/16/samsung_esn_extension/
[12] https://www.theregister.com/2020/09/15/mindset_reset_emergency_services_network/
[13] https://whitepapers.theregister.com/
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.
[1]
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.
[2]
[3]
[4]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.
[5]
"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 [6]when it launched its probe .
[7]
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.
[8]UK police to spend tens of millions on legacy comms network kit
[9]Motorola benefits from delays in the UK's emergency services network, says govt
[10]Samsung gets 2-year contract extensions to provide rugged handsets for UK's troubled Emergency Services Network
[11]Samsung gets 2-year contract extensions to provide rugged handsets for UK's troubled Emergency Services Network
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 [12]"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. ®
Get our [13]Tech Resources
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[4] https://www.gov.uk/government/news/cma-issues-proposals-to-address-overcharging-for-emergency-service-radio-network
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y018GqdUjYSNl@NOT8LwPAAAAIE&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://www.theregister.com/2021/10/25/cma_motorola_solutions_esn_probe/
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Y018GqdUjYSNl@NOT8LwPAAAAIE&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[8] https://www.theregister.com/2022/06/09/uk_police_legacy_airwave_bill/
[9] https://www.theregister.com/2022/05/10/motorola_airwave_esn_profits/
[10] https://www.theregister.com/2021/12/16/samsung_esn_extension/
[11] https://www.theregister.com/2021/12/16/samsung_esn_extension/
[12] https://www.theregister.com/2020/09/15/mindset_reset_emergency_services_network/
[13] https://whitepapers.theregister.com/
Re: ESN standards, just like web standards
Anonymous Coward
Well if it doesn't work then use the relevant contractual clause to take action.
It seems more to me that the government has screwed up again and is now trying to save face by 'stealing' money back from their chosen supplier. While I'm no fan of Motorola I think it is damaging for the governments position to mess around like this.
And in other news IR35 is back.
Anonymous Coward
1% back on, so support your on payroll colleagues and pay your tax.
Re: And in other news IR35 is back.
Jimmy2Cows
Well done for posting such a relevant and nuanced comment. You must be so proud.
[slow clap]
So what happens if...
localzuk
Motorola decides "eh, we're not making profit enough now, let's cancel the contract"? If the govt can go forcing new terms on the supplier, can the supplier not simply back out of the contract?
Surely the answer here is that the government need to stop using monopolies for their major projects?
Re: So what happens if...
Anonymous Coward
The problem is that Motorola had the monopoly on the old Airwaves network but should have been closed down by now. ESN is a consortium, which Motorola had a stake in, but they have been buying up competitors and now that stake has become a major stake, so they have effectively a near monopoly in the new network as well.
Anonymous Coward
AC for obvious...
But there are a lot of real PITA things I find with Airwave when you rely on it and some really odd limitations.
HOWEVER - it works almost everywhere. Certainly more places than I can get any form of signal on my work phone... So I'm not hugely optimistic about how well I'll get on with ESN if/when it arrives given that it relies on cellular only as far as I understand it (and that most of my patch is rural but in areas dead against any form of antenna because it'll give the lizard-people more direct control)
Potemkine!
If that system is vital for the customer, I don't see how the customer can force the monopolistic supplier to lower the price of the service. Sounds like magical thinking.
== Bring us Dabbsy back! ==
ESN standards, just like web standards
Worked for a company integrating Motorola's ESN into our main product. It's all meant to be based on an international standard, so Motorola could, in principle, be replaced by another provider. The reality, like web standards, is there is ambiguity in implementations of the standard which will make it impossible to change providers without a huge amount of development and testing.
The other part is that Motorola's functionality is incredibly flakey and unreliable, at least when I was working with it. There is no reason to believe it has improved.
AC for obvious reasons.