The Competition & Markets Authority has made the decision to restrict the amount Motorola Solutions can charge emergency services for use of the UK’s Airwave network.
This follows an investigation into the provision of the TETRA-based system, the provisional findings of which were published at the end of last year. Motorola has stated that it will appeal the decision.
Discussing the situation in a statement, a CMA spokesperson said: “A market investigation by the Competition & Markets Authority, conducted by an independent group of experts, has found that the market is not working well, and the emergency services have no choice but to carry on using the Airwave Network.
“As a result, Motorola, which owns the company that operates the network, can charge the Home Office (which negotiates the contracts on behalf of the emergency services) prices well above competitive levels, resulting in higher costs which are ultimately paid by taxpayers.”
The CMA has subsequently imposed the aforementioned price cap, using its powers under the Enterprise Act 2002. The CMA spokesperson continued that following imposition of the cap “Motorola can charge to a level that would apply in a well-functioning, competitive market, putting an end to the estimated £200m per year of over-charging.”
According to the CMA, the price limit will have the effect of lowering the cost of Airwave by almost £200m a year. It will apply until the end of 2029, with a review in 2026.
The organisation is also making a formal recommendation to the Home Office to develop a plan “so that when the charge control ends, the price of emergency communications network services is set competitively.” According to the statement quoted above, this is to “encourage competition in the longer term.”
The initial CMA investigation into Motorola’s provision of Airwave took place in the light of the company's simultaneous involvement in delivery of the system’s planned replacement, the Emergency Services Network. Motorola was the original Lot 2 contractor providing ‘user services,’ but has since removed itself from the project. For more background on this, click here.
Chair of the CMA’s independent inquiry group, Martin Coleman, said: “Our emergency services have to use the Airwave Network to protect the public and themselves. When the original contract period for the Airwave Network came to an end, there was no alternative provider, so Motorola held all the cards when it came to pricing.
“As a result, the emergency services are locked in with a monopoly provider with no option but to pay a much higher price than they would if the market was working well.”
Coleman continued: “We are generally reluctant to impose price controls, but the particular circumstances of this case mean that a price cap is the only effective way of ensuring the emergency services, and the taxpayers who fund them, aren’t paying considerably over the odds.
“The cap will end the supernormal profits that Motorola has been making while allowing it to make a fair return.”
Responding to the CMA decision in its own statement, a spokesperson for Motorola Solutions said: “Motorola Solutions strongly disagrees with the CMA’s final decision and believes it cannot be justified on competitive, economic or legal grounds. We will appeal the decision.
“In 2016, the Home Office negotiated and agreed to the fixed price Airwave contracts, which were also provided to the CMA as part of the CMA’s approval of Motorola Solutions’ acquisition of Airwave.
“Despite the CMA finding no shortcomings in Airwave’s exceptional service, the CMA intends to forcibly reduce the contractually agreed pricing going forward. We believe this unprecedented overreach will have a chilling effect on long-term investment and contracting with the UK government.
“Motorola Solutions is committed to vigorously protecting its contractual position in delivering the Airwave network, an essential service that operates at the highest levels and is relied upon by the 300,000 emergency services professionals who protect communities across the U.K. every day.”
Author: Philip Mason