Dive Brief:
- Ofcom raised concerns about cloud service provider practices that could stifle U.K. market competition in a Wednesday announcement. The telecommunications regulatory authority noted heightened concerns about AWS and Microsoft due to their dominant market position.
- High data transfer fees, technical restrictions and committed spend discounts are three of the practices that can prevent organizations from switching cloud providers or deploying in multiple clouds, Ofcom said.
- “These market features can make it difficult for some existing customers to bargain for a good deal with their provider,” Ofcom said. “There are indications this is already causing harm, with evidence of cloud customers facing significant price increases when they come to renew their contracts.”
Dive Insight:
Market consolidation among the hyperscalers has raised concerns over cost, competition and security among cloud users and government regulators.
AWS and Microsoft command a combined 60% to 70% of the U.K. market, Ofcom said, citing its analysis of data it requested from Synergy and IDC. The third hyperscaler, Google Cloud, owns between 5% and 10% of U.K. cloud spend. The research is built on 2021 market share ranges.
That aligns with the three-quarters of all global spending on cloud the three largest providers account for, according to Synergy Research Group’s quarterly market analysis.
The Wednesday announcement was accompanied by a preliminary report, which is part of a year-long study that will conclude in October. It offers a provisional assessment of competition in the market for cloud infrastructure services, finding “reasonable grounds” to suspect cloud providers of unfair practices that “prevent, restrict or distort” competition in the U.K.
Ofcom referred the matter for additional investigation to Britain’s Competition and Markets Authority, a regulatory body empowered to impose market-opening measures and recommend further government actions.
As the market for public cloud continues to grow and global dependence on cloud services deepens, regulatory scrutiny has intensified.
The Federal Trade Commission opened an inquiry into market competition in March, and the U.S. Department of the Treasury voiced concerns about cloud market competition in a February cloud banking report.
Ofcom’s report noted initiatives in the European Union, including the Data Act and the Digital Markets Act, that may mitigate some of the agency’s concerns, although they would not apply directly to the U.K. market.
The two hyperscalers singled out in Ofcom’s report signaled their willingness to cooperate with regulators.
“These are interim findings and AWS will continue to work with Ofcom ahead of the publication of its final report,” an AWS spokesperson said via email.
“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,” AWS said. “This has driven increased competition across a range of sectors in the U.K. economy by broadening access to innovative, highly secure, and scalable IT services.”
A Microsoft representative expressed similar sentiments.
“We look forward to continuing our engagement with Ofcom on their cloud services market study,” the Microsoft spokesperson said via email. “We remain committed to ensuring the U.K. cloud industry stays highly competitive, and to supporting the transformative potential of cloud technologies to help accelerate growth across the U.K. economy.”
