Dive Brief:
- Microsoft disputed allegations that its software licensing practices inhibit cloud market competition in a 101-page response last week to the U.K. Competition and Markets Authority. The regulatory agency issued a provisional decision in January, after a 15-month investigation of Microsoft, AWS and Google Cloud.
- The CMA recommended its board use powers granted by the 2024 Digital Markets, Competition and Consumers Act to designate Microsoft a strategic technology provider subject to intervention and further investigation. AWS was also recommended for Strategic Market Status designation.
- Microsoft pushed back. “Current and future competition in the cloud simply does not and will not turn on the price of Microsoft’s legacy software,” the company said. “Popular as it may be on PCs and on back-office servers, open-source software dominates the public cloud.”
Dive Insight:
The regulatory agency's provisional findings show the U.K. cloud market is “highly concentrated,” with AWS and Microsoft occupying commanding positions. Microsoft raised broad objections to the investigation’s methodology and the report’s conclusions, citing a lack of domain-specific expertise and foresight.
In response, Microsoft said the Provisional Decision Report “does not reflect how the cloud computing market operates in practice. Instead of following the evidence, it grounds much of its analysis in hypothetical scenarios and focuses on largely theoretical issues.”
Microsoft pointed to AWS’ market dominance, recent gains by Google Cloud and the rise of Oracle’s infrastructure services business as evidence of healthy competition among providers. The response also highlighted a profound impact of generative AI technologies on cloud in the years since U.K. communications sector oversight agency Ofcom triggered regulatory scrutiny.
“Every technology market, including cloud computing, has been upended by the explosive emergence of generative AI, prompted by the launch of ChatGPT,” Microsoft said.
Multibillion-dollar infrastructure investments by all three hyperscalers to build out global AI compute capacity further reflect ongoing competition in a rapidly evolving market, according to the response, which claims the report “fundamentally misjudges” the extent to which AI technologies now steer the market for cloud.
Google and AWS filed responses to the CMA on Feb. 18.
In consonance with Microsoft, Amazon’s cloud division took the position that the CMA report failed to account for evidence demonstrating “a rapid pace of innovation, declining prices and fierce competition” in cloud. However, AWS said it welcomed the report’s recommendations around software licensing requirements.
Google took a harder line against Microsoft. The company urged the CMA commence regulatory action to ease Microsoft software policies while avoiding any further action on data switching fees. AWS, Microsoft and Google pared back egress fees last year.
Microsoft castigated Google for “talking out of both sides of its corporate mouth… crowing about its growing market share even as it complains to regulators about constraints.”
