Motorola 2015 Annual Report Download - page 12

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and customers, as well as our suppliers, and we may be dependent upon their cyber security capabilities as well as their
willingness to exchange threat and response information with us.
A cyber attack or other significant disruption involving our IT systems or those of our outsource partners, suppliers or our
customers could result in the unauthorized release of proprietary, confidential or sensitive information of ours or our customers.
Such unauthorized access to, or release of, this information could: (i) allow others to unfairly compete with us, (ii) compromise
safety or security, given the mission-critical nature of our customers’ systems, (iii) subject us to claims for breach of contract, tort,
and other civil claims, and (iv) damage our reputation. We could face regulatory penalties, enforcement actions, remediation
obligations and/or private litigation by parties whose data is improperly disclosed or misused. In addition, there has been a sharp
increase in laws in Europe, the U.S. and elsewhere, imposing requirements for the handling of personal data, including data of
employees, consumers and business contacts, as well as imposing requirements for remediation action, including specific timing
and method of notification. There is a risk that our Company, directly or as the result of some third-party service provider we use,
could be found to have failed to comply with the laws or regulations of some country regarding the collection, consent, handling,
transfer, retention or disposal of such personal data, and therefore subject us to fines or other sanctions. The European Courts
invalidation of Safe Harbor as a mechanism to legitimize cross border data flows increases the risk that our Company, directly or
through some third-party service provider that we use, may inappropriately transfer EU personal data. Any or all of the foregoing
could have a negative impact on our business, financial condition, results of operations, and cash flow.
Government regulation of radio frequencies may limit the growth of public safety broadband systems or reduce
barriers to entry for new competitors.
Radio frequencies are required to provide wireless services. The allocation of frequencies is regulated in the U.S. and
other countries and limited spectrum space is allocated to wireless services and specifically to public safety users. The growth of
public safety broadband communications systems may be affected: (i) by regulations relating to the access to allocated
spectrum for public safety users, (ii) if adequate frequencies are not allocated, or (iii) if new technologies are not developed to
better utilize the frequencies currently allocated for such use. Industry growth may also be affected by new licensing fees
required to use frequencies.
The U.S. leads the world in allocating spectrum to enable wireless communications including LTE. Other countries have
also allocated spectrum to allow deployment of these and other technologies. This changing landscape may introduce new
competition and new opportunities for us.
The Middle Class Tax Relief and Job Creation Act of 2012 (the “Legislation”) authorized an additional ten MHz of
broadband spectrum for public safety use for a total of 20 MHz of broadband spectrum for public safety. In addition, public safety
retained 14 MHz of the 700 MHz narrowband spectrum, subject to the FCC's authority to determine whether such spectrum
should be authorized for future broadband use. The Legislation further provides for the establishment of a centralized
governance model through an independent authority within NTIA designated as the “First-Responder Network Authority” or
“FirstNet” but allows for states to opt out of the plan to develop a nationwide public safety network and perform their own
competitive procurements if certain criteria are met. States that opt out would still be eligible for some funding and would also be
allowed to help cover their operating costs by leasing unused/underused spectrum to secondary users.
Although the Legislation has been enacted, the implementation of a nationwide public safety network under FirstNet has
been slow to progress due to complexities involving: (i) regulatory requirements, (ii) development of the specifications and
statements of work, (iii) decision making on the system architecture and (iv) political considerations from various stakeholders.
Longer term, MSI’s opportunities to sell LTE equipment and related services in this space will be substantially impacted by:
(1) the deployment model being developed by FirstNet, which has been heading in a direction more favorable to commercial
carriers; (2) the type of procurement process established by FirstNet; (3) the timing and number of states (if any) that choose to
opt out of FirstNet, and whether the FCC approves their request, as detailed in the Legislation; (4) FirstNet’s stated intent to
reduce handset prices; and (5) fiscal, public, and regulatory policies and/or special interest politics that risk delaying deployment.
FirstNet released its RFP in early 2016 and will only accept national deployment bids, likely removing the possibility that a bidder
could be selected to build out the network for a single state or region.
We derive a portion of our revenue from government customers who award business through competitive bidding
which can involve significant upfront costs and risks. This effort may not result in awards of business or we may fail to
accurately estimate the costs to fulfill contracts awarded to us, which could have adverse consequences on our future
profitability.
Many government customers, including most U.S. government customers, award business through a competitive bidding
process, which results in greater competition and increased pricing pressure. The competitive bidding process involves
significant cost and managerial time to prepare bids for contracts that may not be awarded to us. Even if we are awarded
contracts, we may fail to accurately estimate the resources and costs required to fulfill a contract, or to resolve problems with our
subcontractors or suppliers, which could negatively impact the profitability of any contract award to us, particularly in the case of
fixed price contracts. In addition, following the award of a contract, we have experienced and may continue to experience
significant expense or delay, contract modification or contract rescission as a result of customer delay or our competitors
protesting or challenging contracts awarded to us in competitive bidding.