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Ofcom has called for the CMA to launch an in-depth investigation into Microsoft and AWS’ potential anticompetitive practices.
UK comms regulator Ofcom has called for further investigation into the UK’s cloud market, due to concerns about deteriorating competition.
Ofcom began a probe last year into the country’s public cloud infrastructure services market and singled out Microsoft and Amazon Web Services (AWS) over alleged anticompetitive practices.
Following this probe, Ofcom has referred the market to the UK’s Competition and Markets Authority (CMA) for further investigation. The comms regulator is concerned that competition could deteriorate in this market if left unchecked.
Ofcom’s study into cloud infrastructure services in the UK found that AWS and Microsoft had a combined market share of 70pc to 80pc in 2022. Google was the next closest competitor with a share of 5pc to 10pc.
The regulator claimed certain features appear to make it difficult for UK businesses to switch and use multiple cloud suppliers. These features include high fees for transferring data out of cloud storage, technical barriers for interoperability and “committed spend discounts” that encourage customers to use a single provider for their cloud needs.
Ofcom claims the ‘hyperscalers’ – Microsoft and AWS – also have significantly higher fees to transfer data out of cloud storage than other providers.
Fergal Farragher, the Ofcom director behind the market study, said the cloud is the foundation of the digital economy and has “transformed the way companies run and grow their businesses”.
“Some UK businesses have told us they’re concerned about it being too difficult to switch or mix and match cloud provider, and it’s not clear that competition is working well,” Farragher said. “So, we’re referring the market to the CMA for further scrutiny, to make sure business customers continue to benefit from cloud services.”
Mark Boost, the CEO of Kubernetes service provider Civo, applauded the “bold action” from Ofcom and said it could help make the cloud market a “truly competitive space”.
“The CMA’s broad enforcement powers opens the door to wide-ranging remedies,” Boost said. “Urgent changes are also needed to how hyperscalers structure their services to enable customers to reap the benefits of simultaneously accessing multiple different providers, as well as a review of the fairness of incentives for loyal customers.”
An AWS spokesperson reached out to us to voice the company’s disagreement with Ofcom’s findings, stating that the findings are a “fundamental misconception of how the IT sector functions, and the services and discounts on offer”.
“Only a small percentage of IT spend is in the cloud, and customers can meet their IT needs from any combination of on-premises hardware and software, managed or co-location services, and cloud services.
“UK companies, and the overall economy, benefit from robust competition among IT providers, and the cloud has made switching between providers easier than ever. Any unwarranted intervention could lead to unintended harm to IT customers and competition. AWS will work constructively with the CMA.”
A report by the International Data Corporation in July claimed the public cloud services market jumped in value by nearly 23pc last year, reaching $545.8bn in global revenue. Microsoft retained the top spot overall with a total market with 16.8pc last year, followed by AWS at 13.5pc.
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Updated, 1.20pm, 5 October 2023: This article was amended to include a statement from an AWS spokesperson detailing the company’s disagreement with Ofcom’s findings.
