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With 4G LTE likely to play a big role in future public safety communications, Motorola Solutions (NYSE:MSI) is actively investing in R&D for next-generation communication systems. The company recently showcased the APX 7000L, its first two-way portable radio that works both on legacy LMR (Land Mobile 2 Way Radio) and next-generation 4G LTE networks. Similar to the previous-generation APX 7000 in most voice-related functionalities, the 7000L offers additional capability to connect to public safety LTE networks for high-bandwidth data applications such as video transmission and digital imaging. The new two-way radio also supports roaming between LTE and LMR networks, and offers simultaneous access to both voice and data – thereby saving valuable time for first responders in mission-critical situations. In order to smoothen the transition process, the company said that existing APX 7000 customers will not have to purchase the new device and can instead upgrade them to include LTE functionality. The APX 7000L is expected to be available early in the third quarter this year and will be marketed primarily to federal law-enforcement agencies.
The demand for data services in public safety is growing, as evidenced by the government's push towards building a nationwide 4G LTE network (FirstNet) for first responders. With the transition from narrowband to interoperable narrowband/broadband networks underway, Motorola faces a threat to its huge legacy base of LMR-based radio systems in the U.S. However, the company has been proactive in dealing with this by launching easy-to-upgrade compatible products and signing contracts with U.S. agencies to deploy public-safety LTE networks in the country. While a large-scale transition to LTE could still cause competition from rivals such as Raytheon and Northrop Grumman to intensify, it is a good sign for the future that Motorola is looking to keep up with changing times.
LTE threat to Motorola?
Motorola Solutions, 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. The company 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 the back of voice technology used in analog and digital two-way radios, and not data. According to the FCC, the company accounted for almost 80% of all the deployed emergency Walkie Talkie systems in the country in 2010.  But while voice still reigns supreme, especially in mission-critical situations where signal quality and reliability are of paramount importance, public safety agencies have come to increasingly rely on high-bandwidth applications that the existing narrowband networks fail to support.
In order to fulfill this need, the government has identified next-generation 4G technology LTE, which has already been deployed for commercial purposes by carriers such as Verizon, AT&T and Sprint. A job creation bill passed in February 2012 reallocated the 700MHz 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. The companies that are looking to disrupt the market include Northrop Grumman, Harris Corp., Lockheed Martin, SAIC and Raytheon, 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 LMR 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 unlikely to be achieved over LTE in the next 5-8 years at least. Moreover, the fact that public safety agencies have a bulk of their existing infrastructure on legacy voice networks means that they will be reluctant to shift to an all-LTE network in the near term. As a result, we expect LTE's high-speed data capability to only supplement and interoperate with existing public safety voice services for the foreseeable future.
In the recently launched APX 7000L, we see this interoperability at play. The LMR radio in the 7000L confirms to the same mission-critical voice standards as before, offering dual-band support for VHF and 700/800 MHz bands and validated at Federal Information Processing Standards (FIPS) 140-2 Level 3 for high-level encryption and information security. The LTE radio supports the 700MHz LTE bands that were recently allocated for public safety and allows for simultaneous voice and data as long as the LMR voice channels are established on 800MHz or VHF.  Interoperability on 700MHz will likely be incorporated in the next APX version.
In order to increase the adoption of its radio systems, Motorola is leveraging its dominant position in the industry and government relationships to build public safety LTE networks in certain regions. The company recently secured a $175 million multi-year contract to not only build but also operate and maintain a federally funded public safety LTE network for Los Angeles Regional Interoperable Communication System Authority (LA-RICS). . 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 of about four entities 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.