Motorola Solutions (NYSE:MSI) recently launched upgrades to its existing line of video products in a bid to further its dominance of the public safety communications industry. The company launched the MVX1000 Digital In-Car Video System R1.2 and Real-Time Video Intelligence R1.1 products earlier this week. While the former captures data from within police vehicles (both video and audio) and relays it back securely to the headquarters upon arrival, the latter delivers real-time video feed to officers located anywhere in a device-agnostic manner. With demand for data growing and a push towards building a nationwide 4G LTE network for public safety purposes also happening for the same reason, it is a good sign for the future that Motorola is looking to keep up with changing times.
LTE threat to Motorola?
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The company, which was formed after the erstwhile Motorola split in two in 2011, is a dominant player in the U.S. public safety industry, and has been so for decades. Motorola Solutions also has an enterprise segment that develops rugged handheld devices such as bar code scanners, RFID readers, enterprise tablets and other mobile computing devices, but government solutions including public safety still account for almost two-thirds of its total revenues.
However, Motorola Solutions’ dominance of the public safety industry has come on voice technology used in mission-critical situations such as analog and digital two-way radios, and not data. The expert consensus is that the company accounts for almost 80% of all the deployed emergency radio systems in the country. But while voice still reigns supreme, especially in mission-critical situations where it can never totally be replaced by data, the need for more data or better information for public safety is increasing.
In order to fulfill this need, the government has identified a next-generation 4G technology called LTE, which is already being deployed for commercial purposes by carriers such as Verizon, AT&T and Sprint. A job creation bill passed in February last year has reallocated the D Block spectrum for public safety use and provided a funding of $7 billion to build out a nationwide 4G LTE network by the end of the decade. The industry seems to be taking baby steps towards high-speed data transmission but it is in this transition, however slow, that lies the next big risk to Motorola’s continued dominance of the public safety market. Among the companies that are looking to disrupt the market are Northrop Grumman, Harris Corp., Lockheed Martin, SAIC and Raythein, among others.
Mission-critical voice might preserve Motorola’s dominance
However, the risk to Motorola is not immediate. LTE, as a standard, has not evolved enough to support mission critical voice services, which is where a bulk of Motorola’s public safety business lies currently. Although some work is being done in this area, the reliability of voice communications required in mission-critical situations is not expected to be achieved over LTE in the next 8-10 years at least. As a result, we expect LTE’s high-speed data capability to only supplement existing public safety voice services for the foreseeable future.
Moreover, Motorola has already started leveraging its dominant position in the industry and government relationships to build public safety LTE networks in certain regions. The company recently received approval to not only build but also operate and maintain a federally funded public safety LTE network in the San Francisco Bay area known as BayWEB for the next 10 years. It is also building out a public safety LTE network in Harris County, Texas, as part of another deal worth $11 million.
However, these regions are part of only a small set that have been granted waivers by the FCC to build their own LTE networks and are not part of the $7 billion nationwide program. Motorola’s fundamentals may therefore seem to be on a firm footing right now. But over time, as the industry-wide shift to LTE gets underway and a solution to the reliable VoLTE (voice over LTE) issue is found, Motorola could face challenges in preserving its dominance in the U.S. public safety market.