The Competition and Markets Authority (CMA) has imposed a cap on Motorola Solutions’ charges for its operation of the Airwave communications network for emergency services.
This comes after an investigation that the CMA said found the services were paying almost £200 million per year more than they should have due to protracted delays in switching to the Emergency Services Network (ESN).
Motorola has responded by saying it will appeal against the decision.
The company has been operating Airwave on behalf of the Home Office since 2016, after acquiring it from Macquarie Group. It was due to have been replaced by now by the ESN, but this remains in the distance after repeated problems, as highlighted in a recent report from the National Audit Office.
The CMA has used its powers to impose the cap under the Enterprise Act 2002 after deciding the market is not working, with Motorola “holding all the cards” and charging prices well above competitive levels as there is no choice of an alternative supplier.
It said the price set under the original agreement included capital costs of building the network that should now have been recouped and fallen substantially, but it has estimated the company would make “supernormal” profits of £1.27 billion between 2020-29.
Competitive market level
The charge control will limit the price of Airwave services to a level the CMA has decided would apply in a competitive market. The cap has been set to apply until the end of 2029 but there will be a review in 2026.
The organisation added that this would reduce Motorola’s incentive to delay the delivery of technology to help shut down the network and transition to the ESN.
It has also recommended to the Home Office that it come up with a plan so that, when the charge control ends, the price of emergency communications network services is set competitively.
Martin Coleman, chair of the CMA’s independent inquiry group, 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.
“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.”
Plan to appeal
The company has responded with a statement that: “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 UK every day.”
