According to a statement issued by the CMA: “A market investigation by the CMA, led by an independent group of experts, has provisionally concluded that Motorola, which operates the network, appears to be able to charge the Home Office prices well above competitive levels, resulting in higher costs which are ultimately paid by taxpayers. The CMA has therefore outlined a set of proposed changes to limit the price that Motorola can charge to a level that would apply in a well-functioning, competitive market.”
The statement continued: “The Airwave network was originally commissioned by the Home Office through an open procurement exercise in 2000. The original contract, which was due to end in late 2019 or early 2020, was to build and operate the Airwave Network. The network was expected to be shut down and replaced by a new secure communications solution using a commercial 4G mobile network – the Emergency Services Network – when the contract ended.
“However, because the new ESN network was not ready for switchover as planned and is not expected to be ready until 2026 and possibly later, the emergency services continue to rely on the Airwave Network, which is a monopoly provider of these essential communications services.”
The CMA opened the investigation in October 2021 following what it calls “concerns that the market might not be working well, resulting in a more expensive service”. According to the statement, these concerns included 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 ESN to replace it”.
According to the CMA, it also 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”.
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.
“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.”
In its provisional findings, the CMA also stated that the Home Office is being charged more by Motorola to use the Airwave Network than it believes should be the case. This is due – again, according to the CMA – to the price of the technology in question remaining at the same level as when it was first rolled out.
To quote the statement issued by the government once again: “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 at that point, in the same way that consumers can get cheaper mobile deals after they have paid off their handset.
“This did not happen, and prices remained at substantially the same level. But unlike consumers, the emergency services have no choice of an alternative supplier.”
Going back to the topic of the delayed ESN roll-out, the CMA has provisionally estimated that Motorola could make around £1.1bn excess profit from the continued operation of Airwave between January 2020 and December 2026. If the ESN delay continues, meanwhile, the company could, says the CMA, make around a further £160m excess profit per year post-2026.
As well as the price control intervention, 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 set-up by the end of 2029”.
Responding to the findings, a spokesperson for Motorola Solutions 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.”
The spokesperson continued: “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."
Airwave is a narrowband (TETRA)-based network, designed to provide secure and reliable communications to emergency services agencies across the UK. Currently in the process of being rolled out, the Emergency Services Network is based on a ‘hardened’ version of a pre-existing commercial network. The core contracts for ESN were originally issued in 2015.
The CMA is currently inviting comments on its provisional findings. A final decision is expected to be made later in the year.
