Ofcom’s interim UK cloud market report flags competition concerns about AWS and Microsoft

Ofcom has accused public cloud giants Amazon and Microsoft of indulging in anti-competitive behaviours that will financially drawback UK shoppers and enterprise, and is consulting on whether or not to make a referral to the Competition and Markets Authority (CMA) to research additional.

The regulator has reached the halfway level of its investigation into the UK cloud infrastructure market and confirmed, in an interim report on its findings to date, a proposal to refer the market over to the CMA after figuring out regarding behaviours that Amazon and Microsoft “display some form of”.

While Ofcom mentioned its investigation had uncovered “some evidence of active competition” within the market, which give clients with “product innovation” and “discount” advantages, it has additionally found that competition is being restricted by options that make it troublesome for patrons to vary suppliers or add extra ones to their roster of cloud companions.

“Our provisional view is that competition is being limited by market features that make it more difficult for customers to switch and use multiple suppliers (known as multicloud),” mentioned Ofcom in its 222-page interim report.

These options embrace egress charges, that are the costs clients pay to switch their knowledge out of a cloud; and interoperability restrictions, which frequently imply clients should put “additional effort into reconfiguring their data and applications to work on different clouds”, mentioned Ofcom.

The ultimate function of concern is one Ofcom phrases “committed spend discounts” that it claims incentivises clients to make use of a single hyperscaler for “all or most of their cloud needs” and could make it much less enticing to make use of rival suppliers as new wants emerge.

“As a result, we are concerned that a significant number of customers, especially those with more complex requirements, may face material barriers to switching and multicloud. This could leave some customers ‘locked-in’ to one of the leading providers,” the report continued.

“We are most concerned in relation to AWS and Microsoft, given their market position and the fact they display some form of all the above behaviours that limit competition.”

In addition to this, the report mentioned Ofcom is worried that if clients encounter difficulties when attempting to maneuver to new suppliers, this might stifle the flexibility of different opponents to Amazon and Microsoft to problem their standing as market leaders.

As a consequence, Ofcom mentioned it’s now planning to seek the advice of on a proposal to refer the cloud infrastructure market to the CMA to hold out an intensive market investigation.

“This would allow the CMA to further examine if there are interventions that could address the adverse impact of the barriers we have identified and improve how the market works for customers,” the report added.

Amazon Web Services (AWS) and Microsoft have each issued statements in response to the interim report findings, which individually define their dedication to working with Ofcom as its investigation continues.   

A spokesperson for AWS mentioned: “The UK has a thriving and diverse IT industry with customers able to choose between a wide variety of IT providers. At AWS, we design our cloud services to give customers the freedom to build the solution that is right for them, with the technology of their choice. This has driven increased competition across a range of sectors in the UK economy by broadening access to innovative, highly secure and scalable IT services.”

Meanwhile, the Microsoft assertion mentioned it “remains committed to ensuring the UK cloud industry stays highly competitive, and to supporting the transformative potential of cloud technologies to help accelerate growth across the UK economy”.

The Ofcom investigation into the UK cloud infrastructure market started in September 2022 and the organisation has dedicated to publishing a ultimate report on its findings by October 2023.

In the meantime, cloud market stakeholders have till 17 May 2023 to suggestions on Ofcom’s interim findings and its plan to refer the market for additional investigation by the CMA.