By Greg Gordon
McClatchy Washington Bureau
WASHINGTON — As Chicago cops braced for protests in advance of the NATO and G-8 summits in 2012, hometown radio giant Motorola made what seemed like a grand gesture.
The company, which for years has used tenacious marketing and clout to reign over the emergency radio business, donated to the city $1.8 million worth of telecom equipment that could beam data and videos to law enforcement officers shielding the world leaders.
Generosity wasn’t the only motive behind the gift.
In a letter, Motorola Vice President John Molloy said the company also could operate a network for the city as a “test platform” until year end and provide Chicago’s public safety agencies entree to the world of emergency broadband LTE — the new global standard for transmitting huge amounts of data at rocket speed.
Motorola’s gift was designed to keep on giving.
From Mississippi to Texas to California, the company now known as Motorola Solutions Inc. has reshaped its business strategy in the face of a technology tsunami that threatens to upend its decadeslong hold on the emergency communications market.
While fighting to preserve its immense walkie-talkie franchise, Motorola has maneuvered to become a player in broadband, where it must contend with new and bigger competitors in a scrum for billions of dollars of taxpayer funds pledged for a coast-to-coast emergency data delivery network.
Motorola’s aggressive push into broadband, however, is a cause for consternation among officials of the First Responder Network Authority, or FirstNet, the Commerce Department agency tasked with building the first nationwide public safety communications system. To garner broadband business, Motorola has relied on many of the same strategies and deep customer relationships that helped it capture more than 80 percent of the radio market.
As McClatchy reported in a series of articles last year, the industry giant has landed scores of sole-source radio contracts and wielded enough pricing power to sell its glitzy handsets for as much as $7,000 apiece, at a taxpayer cost of hundreds of millions, if not billions, of dollars that could have been saved in a more competitive market.
At the request of three senior Democrats in the House of Representatives, the Department of Homeland Security’s inspector general, John Roth, recently ordered an audit to examine McClatchy’s disclosures and determine whether federal grant money has bankrolled biased contract awards to Motorola.
The new broadband network, backed so far by a whopping $7 billion federal commitment, is expected to spawn a competitive market involving names such as AT&T, Verizon, Cisco, General Dynamics and Alcatel-Lucent.
What threatens Motorola is the possibility that technology advances could within a few years enable ruggedized cellphones to transmit voice communications as reliably as two-way radios, a development that eventually could crumble the company’s radio franchise, which serves thousands of public safety agencies.
One Motorola tactic for penetrating the new market has been to donate equipment, as the company did in Chicago.
It’s a way to “lock in future relationships and future opportunities,” said Steve Koman, a former Motorola employee who was a consultant to the city of Charlotte, N.C., when it sought unsuccessfully to build a broadband network a couple of years ago. Koman said he finds such equipment donations by a market kingpin to be troubling.
“I’ve always wondered if these kinds of gray-zone practices violate the spirit of federal antitrust laws,” he said, “because they appear to be a continuous attempt to corner the market.”
A Motorola executive vice president, Robert Schassler, contended in a phone interview that many companies routinely invite government agencies to join them in testing new products.
The 2012 donation of a mini-broadband network wasn’t Motorola’s first gift to Chicago, which has been buying the company’s radios since 1956.
In 2009, the company gave the city a mobile radio network to help protect members of the International Olympic Committee coming to town to weigh Chicago’s bid to host a future Olympics.
Motorola’s philanthropy was rewarded later with a $1.5 million no-bid contract from Cook County to use the donated equipment to build a “high-performance” data network for the city and county — a system that was doomed from the start because its radio bandwidth was too narrow to transmit data at high speeds, said Sophia Ansari, a spokeswoman for the county sheriff’s office. The county now plans to swap the equipment for new Motorola radios, she said.
As for the broadband LTE (for Long Term Evolution) equipment donated for the summits, the city has obtained a temporary license to build a test network but is still mulling what to do, said Melissa Stratton, a spokeswoman for Chicago’s Office of Emergency Management and Communications.
Charlotte also was a recipient of Motorola’s largesse before hosting the 2012 Democratic National Convention. Motorola loaned the city about 3,000 radios free of charge to assist state and federal law enforcement officials in communicating with one another.
Such gestures, which are not always trumpeted publicly, typically grow from carefully cultivated relationships that have helped Motorola steamroller competitors for nearly 20 years in the multibillion-dollar radio business.
The company’s formula: build top-quality equipment; dote on police, fire and sheriff’s departments; woo contracting officials; pursue every angle to gain a sole-source deal or an inside track, and where possible, embed equipment with proprietary features so it can’t interact with competitors’ products.
It’s worked so well that a single company — Motorola — has dominated state and federal two-way radio markets, untouched by federal antitrust regulators, although there’s been little price testing to assure that taxpayers got the best deal.
Motorola executives make no apologies for their market supremacy.
“Motorola Solutions’ public safety success is because we offer the best solutions and service at competitive prices, because our customers trust in our products and commitment to stand behind them, and because of our continued investment in innovation,” said the company’s chief spokesman, Kurt Ebenhoch.
Motorola’s Schassler said the company that pioneered the first police radio in 1930 is the only manufacturer that has stood behind cops, firefighters and emergency medics “uninterrupted” for 85 years.
That commitment has engendered strong loyalties from the nation’s more than 4 million first responders, legions of whom insist on toting a Motorola as their communication lifeline.
But to rivals and frustrated government officials, Motorola is the industry’s version of “Leave it to Beaver’s” unctuous Eddie Haskell (“You look lovely today, Mrs. Cleaver”), whose charms are but a cover for myriad connivances. Using an array of tactics, the company repeatedly has found ways to stick taxpayers with the priciest equipment when far cheaper options performed to the same standards.
Schassler was asked whether Motorola sales representatives propose ways for government officials to award sole-source contracts.
“No,” he replied.
State and local government officials have done the dirty work, frequently skirting laws or federal grant guidelines requiring competitive bidding.
Motorola officials acknowledged that the company’s seemingly ubiquitous sales force has wined and dined some government officials where state laws allow, but Schassler called that “a very, very rare occurrence” that is first approved by a company attorney.
However, two government officials who lacked authorization to speak for the record said the company has hosted state or local contracting employees in some of Las Vegas’ priciest restaurants.
Despite its scant experience in broadband, Motorola has been fastest out of the gate in applying the technology to public safety. In 2010, the company entered an eight-year partnership with the Swedish colossus Ericsson, a leading supplier of broadband equipment, especially the cores that serve as the brains for each network. Motorola also has partnered with cellular industry giant Verizon Wireless, and it has developed a handset that can both receive broadband data and enable voice transmissions over a standard two-way radio network.
The Schaumburg, Ill.-based firm has secured contracts to assemble four of eight federally funded emergency broadband pilot projects — in Los Angeles County, Harris County, Texas, the San Francisco Bay Area and Mississippi, though the latter two later collapsed because of negotiation impasses for leases of frequencies on the federal wireless spectrum. Motorola also is among five vendors approved to sell equipment for New Mexico’s statewide pilot project.
The company’s early success in the pilot projects has been controversial:
—An official of Harris County, Texas, sent gasps through a hotel conference room in May 2011 when he said he handed Motorola the $7.5 million first stage of a pilot broadband network because the company told him “a great story,” according to two people who were present. Both insisted upon anonymity for fear of reprisals. The award in the county surrounding Houston drew protests from two major competitors because they weren’t invited to bid, even though most of the financing came from a Department of Homeland Security port security grant. Motorola and county officials contended the contract was competitively awarded, because it was written as a modification to a 2007 radio contract for which Motorola won the bidding.
—In San Francisco, Motorola won a $50.6 million Commerce Department grant in 2010 to build the first metropolitanwide emergency broadband network — a deal arranged by former Motorola sales executive Laura Phillips in her new job overseeing public safety grants to the region. Phillips was later fired amid outrage that the grant was awarded without approval from any of the three major cities and 10 counties involved, said several current and former government officials who spoke anonymously because of the matter’s sensitivity. Phillips pointed to a Commerce Department audit that cleared her of improprieties.
Former San Jose Police Chief Chris Moore said he implored Motorola’s No. 2 executive, Mark Moon, to wait until a regional board approved the grant to avoid city and county protests. He said Moon responded: “I’d rather take the $50 million and bad publicity than not get the $50 million.” Motorola spokesman Ebenhoch said Moon doesn’t recall making such a remark and “strongly believes the statement to be inaccurate and false.”
—While a joint authority representing Los Angeles County and more than 80 cities reviewed bids in 2011 for twin public-safety radio and broadband networks, Motorola added William Bratton, a former Los Angeles police chief and currently the New York police commissioner, to a lucrative post on its corporate board. A team led by Raytheon Corp. won the bidding, but Motorola threatened a suit, and a county lawyer urged nullifying the award because it might violate an arcane state law. During two more rounds of bidding, Motorola slashed its prices and ultimately won both contracts, worth a half-billion dollars.
FirstNet officials did not respond to requests for comment about Motorola’s dealings.