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Market regulator could go for Microsoft and Amazon in cloud services

Market regulator could go for Microsoft and Amazon in cloud services

In a move that may well be emulated by regulators in other markets, UK communications regulator Ofcom has today referred the public cloud infrastructure services market to the UK Competition and Markets Authority (CMA).

The CMA will conduct an investigation to examine the market and consider whether there are competition concerns, and, if so, plan action to mitigate them.

Before the decision to start a CMA investigation, both Amazon and Microsoft had lobbied hard against it.

Ofcom has estimated that the market for cloud services in the UK was worth up to £7.5 billion in 2022, with Amazon Web Services and Microsoft Azure taking the lion’s share, with Google Cloud Platform gaining some ground in third place.

In its previous market study, Ofcom identified a number of features in the supply of cloud services that make it more difficult for customers to switch and use multiple cloud suppliers.

The features which Ofcom is most concerned about are:

-Egress fees – charges that cloud customers must pay to move their data out of the cloud

-Discounts – which may incentivise customers to use only one cloud provider

-Technical barriers to switching – which may prevent customers from being able to switch between different clouds or use more than one provider

Ofcom’s report also outlines concerns it has heard about the software licensing practices of some cloud providers, in particular Microsoft.

Sarah Cardell, CEO of the CMA, said: “We welcome Ofcom’s referral of public cloud infrastructure services to us for in-depth scrutiny. This is a £7.5 billion market that underpins a whole host of online services, from social media to AI foundation models. Many businesses now completely rely on cloud services, making effective competition in this market essential.”

She added: “Strong competition ensures a level playing field so that market power doesn’t end up in the hands of a few players – unlocking the full potential of these rapidly evolving digital markets so that people, businesses, and the UK economy can get the maximum benefits.”

The CMA will conclude its investigation by April 2025.