The regulator has concerns that Microsoft and Amazon’s dominant positions within the £7.5 billion public cloud market could be stifling competition
UK communications regulator Ofcom has referred the public cloud infrastructure services market to the Competition and Markets Authority (CMA) for investigation, asking them to probe the dominant market position of market leaders Amazon and Microsoft.
A recently completed study conducted by Ofcom investigated the supply of cloud services in the UK, seeking to understand if these markets are working well and if regulatory action was necessary. It concluded that the UK’s two leading providers of cloud infrastructure services, Amazon Web Services (AWS) and Microsoft (Azure), have a combined market share of 70% to 80% (as of 2022). In comparison, the next closest competitor is Google, with a share of 5% to 10%.
The report concluded that there were several instances where this could limit the market competition, including high data transfer fees, spend discounts, and technical barriers to switching. This, therefore, makes it difficult for consumers to change cloud providers or use multiple providers simultaneously.
Ofcom noted their concern that that the level of competition “could deteriorate further over the longer-term” and therefore felt it necessary to refer the public cloud infrastructure services to the CMA, asking the regulator to conduct a full market investigation.
“The CMA (Competition and Markets Authority) will now conduct an independent investigation to decide whether there is an adverse effect on competition, and if so, whether it should take action or recommend others to take action,” it said.
Speaking to CNBC, Ofcom director Fergal Farragher said, “I think what we’d like to see is a fair playing field for competition in the market, and I think that’s all about making sure that the business customers who rely on the cloud can switch and use multiple providers easily.”
This request from Ofcom should not come as a complete surprise. A previous report from Ofcom, published earlier this year, hinted that the market could be dangerously unbalanced.
“We are concerned that constraints on customers’ ability to use more than one provider could make it harder for smaller cloud providers to win business and compete with the market leaders,” read the report.
Amazon have inevitably disputed the report’s findings, saying that the Ofcom report is “based on a fundamental misconception of how the IT sector functions”.
The CMA have appointed an independent inquiry group, who will complete their investigation by April 2025.
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