With the help of friends in government, Motorola achieves telecom supremacy

So to carry on my run of articles on this website, I have planned to share one of my favorite content pieces this week. I used to be hesitant to add it to the website because I really did not want to offend the initial writer, but I hope he/she is happy that I enjoyed reading their work and planned to share it with my readers.

After communication breakdowns contributed to the deaths of 125 New York firefighters on Sept. 11, 2001, the nation spent tens of billions of dollars making public safety radios more compatible, no matter their brand.

The vast majority of those tax dollars landed at the feet of Motorola. The market leader for years has held an iron grip over pricing power for the gadgets that let police, firefighters and other first responders talk during emergencies.

That spending has delivered some public benefit. Nearly a decade after a commission’s report, radio connections have improved. New York’s networks, for example, performed well after Hurricane Sandy last year.

Kansas City’s Metropolitan Area Regional two Way Radio System is known as a sparkling success story in the nation’s push for seamless communication among public safety workers.

The metrowide system’s 2012 upgrade for 24,000 workers is also but one example of how, in domino-like fashion, Motorola leveraged one contract to land the next and the next.

Meanwhile, the U.S. Department of Homeland Security sees a national system riddled with too many weak signals and fragmented frequencies. The push to resolve such issues with competitively priced upgrades has moved at a snail’s pace.

A McClatchy investigation over seven months found that in one region after another, city, county and state officials favored Motorola, helping the firm secure an estimated 80 percent of all the emergency telecommunications business in America.

In a 2011 report, Congress’ investigative arm, the Government Accountability Office, warned that government agencies may be overpaying for radios because they “lack buying power in relationship to device manufacturers.”

From the nation’s capital to the Midwest to the Pacific Coast, government officials have handed the company noncompetitive contracts, used modifications of years-old contracts to acquire new systems or crafted bid specifications to Motorola’s advantage.

Those officials, perhaps without recognizing their collective role, helped stunt the very competition needed to hold down prices.

In a weakly policed but humongous patchwork of as many as 20,000 city, county, state and federal two-way radio networks, governments have paid as much as $7,500 apiece for Motorola models. They paid those prices even while some competitors offered products meeting the same specifications for a fraction of the cost.

In Europe, albeit with a lower-power network that requires more costly towers and infrastructure, police radios serving the same functions sell for $500 to $700.

Motorola’s contract wins have been clouded by irregularities or allegations of government favoritism in Chicago, Dallas and the San Francisco Bay Area and on statewide systems in Illinois, Iowa, Kansas and Washington, to name a few. Losing bidders often have been left chafing with the belief that they weren’t playing on a level field.

State officials in Kansas bypassed state competitive bidding requirements in 2005 with an unusual modification of a 1991 contract with Motorola — one providing for a new, $50 million digital system. State officials defended their action by arguing that competitive bids were taken on the original system 14 years earlier.

In Chicago, city officials justified a noncompetitive, $23 million contract on the grounds it would protect a $2 million investment in proprietary Motorola equipment. The city’s inspector general found the equipment’s actual value was $350,000.

Between 2009 and 2011, the state of Iowa issued five solicitations for radio bid prices that each favored Motorola, one requiring that two knobs on the radios be exactly 19 millimeters apart — a parameter fitting only a Motorola radio, The Des Moines Register first reported.

“While our public safety people do an extraordinary job in protecting the public, I am not impressed with the choices they’ve made relative to technology,” said Democratic Rep. Anna Eshoo of California, who represents part of Silicon Valley and has for years monitored Motorola’s dominance with chagrin.

She called radio prices of $5,000 and above “ludicrous.”

Industry dominator

Illinois-based Motorola Solutions, as its public safety arm has been called since Motorola Inc. split in two in 2011, declined to make its chief executive, Gregory Brown, available for an interview. Nor would the company respond to detailed questions submitted by McClatchy.

Instead, Motorola issued a statement saying that it has developed “state-of-the-art technology to support the challenging and demanding missions of public safety” for more than 80 years.

“Customers choose Motorola because we have remained committed to serving these dedicated professionals by closely listening to them and responding with innovative solutions that meet their needs,” it said.

Yet McClatchy’s investigation found that:

• Even after uniform design standards for two-way radios took hold in 2005, Motorola found ways to elbow rivals out of some markets by peddling proprietary extras that don’t interact with non-Motorola radios, such as special encryption software sold for a few dollars per radio in states including Kansas and Missouri.

• Many cities and counties have awarded Motorola sole source contracts by using “cooperative contracts” that piggyback on deals that Motorola won competitively elsewhere. In 2011, financially distressed Fort Worth, Texas, and Washington, D.C., each handed Motorola a $50 million deal by adopting pricing from a Houston-Galveston area regional contract.

• Auditors who track grants from the Department of Homeland Security and other agencies have given little scrutiny to state and local officials who tilt procurements toward Motorola, including those who ignore requirements that its radios fully interact with other brands.

Motorola’s rugged two-way radios, able to survive a dropped bowling ball or submersion in a tank of water, have for decades set the standard for performance in the emergency communications market.

“You’ll never get fired for buying Motorola,” goes the saying.

The company usually has held a technological edge over competitors, even if its digital radios were plagued by some of the same failures as its rivals in recent years. Those glitches have been blamed for contributing to the deaths of at least five firefighters nationwide.

In addition, the company’s longstanding marketing of proprietary features in its systems has clashed head-on with the national goal of interoperability. Fire commanders in some cities, for instance, carried multiple radios to multi-alarm blazes to ensure they could talk with every unit dispatched to the scene.

John Powell, a former chairman of a National Public Safety Telecommunications Council panel on the subject, said that even today “we’ve got these systems going in with federal grant dollars that are really being a detriment to interoperability.”

Powell criticized federal agencies for failing to put enough “teeth in those grant guidance documents” to ensure against proprietary features, such as Motorola’s encryption.

It is rare that a single company wields such power over a multibillion-dollar industry, especially one financed solely by taxpayers.

“Motorola is, in practical terms, a monopoly, and they control the market for the purpose of keeping the pricing very high,” said Jose Martin, president of Power Trunk, a subsidiary of a Spanish firm, Teltronic, which is trying to break into the U.S. public safety radio market.

Motorola stressed in its statement that it was “an early participant” in the 25-year-old industry-government effort to develop design standards, known as Project 25, or P25, that are supposed to open competition to all comers.

Martin, however, contended that Motorola pushed for P25 standards so the United States wouldn’t fall under Europe’s similar uniform manufacturing standard for emergency radios.

As a result, Martin said, “U.S. taxpayers are being exfoliated.”

A hold on Kansas City

Some 3,600 police, firefighters and emergency medical workers in Kansas City had relied since 1993 on a network installed by General Electric Corp.

The company’s public safety radio business was ultimately bought by the Harris Corp., Motorola’s biggest rival.

Like public safety agencies in most large cities, those in the Kansas City area have shifted in the last few years to the P25 common standards designed to prevent use of proprietary features that can freeze out competition.

When bids went out for a total system replacement, however, Motorola had the upper hand.

Johnson County had just bought a new system from the company and one of its multimillion-dollar master controllers, essentially the network’s pulse, said Ed Brundage, manager of the Kansas City Police Department’s radio system.

While the radios meet P25 standards, he said, the standards still weren’t sufficient to ensure full communication between controllers, or switches, made by different manufacturers.

In addition, Independence also had acquired a new Motorola system in 2007.

That made Motorola the preferable contractor, Brundage said, though a more limited arrangement was still possible with Harris.

Motorola narrowly won the $39 million contract over Harris, the only other bidder, for service to Kansas City, Gladstone, Riverside and North Kansas City.

Including equipment purchased by suburban communities, Brundage estimated the entire cost of the metro area’s radio upgrade at $80 million to $100 million.

Kansas City was able to upgrade 4,000 Harris radios to the P25 standard with new software while buying 2,500 new radios, with the 3,600 handsets for public safety agencies averaging $3,500 each, Brundage said.

When Cass and Wyandotte counties come aboard, six of the metro area’s nine counties will have joined the network, covering about 95 percent of the area’s population, he said.

Despite plaudits the system has received, there has been a downside to Motorola’s dominance.

In Kansas City’s suburbs, Motorola has embedded inexpensive, proprietary encryption features in its systems that can complicate the push for interoperability.

Last year, Independence and Blue Springs elected to use Motorola’s encryption product to secure day-to-day police communications, not just for radio exchanges during major manhunts or sensitive investigations.

That handed Motorola a marketing edge.

Keith Faddis, director of the public safety radio program for the Mid-America Regional Council, said the agency has tried to limit the damage by requiring that every radio is programmed to regional talk groups where the encryption feature won’t work.

But Gary Light, sales manager for KC Wireless Inc., which sells radios made by another Motorola rival as well as some Motorola models, said that police chiefs of some towns said they were told by colleagues: “If you want to communicate with us, you are going to buy Motorola with ADP.”

Jim Ross, police chief in Lake Tapawingo in Jackson County, said he felt compelled to heed that advice and bought seven handsets and car radios.

“We’re all in the same boat.”

Read more here: http://www.kansascity.com/2014/03/29/4924583/with-the-help-of-friends-in-government.html#storylink=cpy