Ofcom consults on competition probe referral for UK cloud services market

Ofcom’s HQ

Telecom and media regulator Ofcom is consulting on referring the UK cloud services market to the country’s competition watchdog over concerns about the market power and practices of Amazon and Microsoft.

Ofcom, halfway through a probe into the UK cloud service market has launched a consultation, open until May 17, on the proposal to launch a market investigation.

The regulator said that it had concerns about Amazon Web Servicse (AWS) and Microsoft, who together have a 60-70% share of the market, leaving Google trailing in third place with 5-10% share.

Specifically, it said it was concerned about egress fees or charges  that customers pay to transfer their data out of a cloud and the leading players set at significantly higher rates than other providers, at technical restrictions on interoperability imposed by the market leaders that prevent some of their services working effectively with services from other providers, and committed spend discounts that are structure to incentivize customers to use a single provider for all or most of their cloud needs.

Arguing that cloud computing has become critical for many businesses across the economy, including telecoms companies, broadcasters and public sector organisations, Ofcom said that a referral for a market investigation would enable the Competition and Markets Authority to further examine the nature and extent of barriers and consider if there are interventions that could improve how the market works for customers and ultimately UK consumers.

“We’ve done a deep dive into the digital backbone of our economy, and uncovered some concerning practices, including by some of the biggest tech firms in the world. High barriers to switching are already harming competition in what is a fast-growing market. We think more in-depth scrutiny is needed, to make sure it’s working well for people and businesses who rely on these services,” said Fergal Farragher, Ofcom’s director responsible for the market study.

Responding to the findings, an AWS spokesperson said: “These are interim findings and AWS will continue to work with Ofcom ahead of the publication of its final report. 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.”