The UK competition watchdog is to introduce price controls on how much Motorola can charge the government for running the communication network used by police, fire and other emergency services, after finding it will make £1.1bn in excess profits by 2026.
The Competition and Markets Authority (CMA) said a lack of competition meant the US company, which runs the Airwave radio network that allows emergency services to communicate securely, is making £160m in excess profits annually.
The CMA estimates that in total, Motorola will make £1.1bn in excess profits – those that are over and above what would be expected in a well-functioning market – between 2020 and 2026, when the much-delayed new emergency services network (ESN) is meant to come online.
Airwave was commissioned in 2000 by the Home Office under Labour, and was meant to be shut down in December 2019 with a total predicted cost of £1.5bn.
The provisional assessment found Motorola’s monopoly position meant it had been able to charge the Home Office “prices well above competitive levels”.
“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,” said Martin Coleman, the 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 taxpayers foot the bill. Unlike consumers, the emergency services have no choice of an alternative supplier.”
The CMA said Motorola’s financial filings suggested that while the Airwave Network accounted for only about 7% of the company’s global revenues, it made up about 21% of pre-tax profits.
The CMA is proposing a direct intervention through a price control to stop Motorola overcharging until the new 4G-capable ESN network comes online.
A spokesperson for Motorola 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 company said it would 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,” said the spokesperson.
The watchdog said that the Home Office should ensure that the new network, which Motorola is also involved in building, or more competitive arrangements are in place by the end of 2029 at the very latest.
Concerns over the switch from Airwave to the ESN were identified as early as 2016 by the National Audit Office, which said it was untested and may not be suitable for some communications for counter-terrorism officers. The ESN system was designed to save money by partly relying on existing commercial mobile phone networks rather than a separate one.
