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Ofcom has referred the $500 billion cloud computing industry to the Competition and Markets Authority for an antitrust investigation after finding that Microsoft and Amazon dominate the market.
The UK’s call for further scrutiny aligns with ongoing investigations in the EU and US, prompted by customer complaints of being trapped with a single cloud provider. Regulators are concerned that market concentration may lead to higher prices and profits. France, the Netherlands, and Japan are already investigating the market.
Cloud computing is crucial for storing data and delivering internet services, especially with the growing demand for data center resources driven by artificial intelligence products. Amazon Web Services and Microsoft’s Azure collectively hold a 70 to 80 percent market share, while Google is their main competitor with a 5 to 10 percent share.
The Ofcom director responsible for the market study, Fergal Farragher, expressed concerns about the difficulty of switching or using multiple cloud providers, questioning the effectiveness of competition.
Global customer spending on public cloud services increased by 19 percent to $490.3 billion in 2022 and is projected to rise another 21 percent to nearly $600 billion this year, according to Gartner. In the UK, the CMA estimates the market value at £7.5 billion.
Ofcom’s market study concluded that customers face barriers such as high “egress fees” to leave a service and technical challenges that hinder switching providers. Additionally, tech companies offer discounts for using a single provider. The study emphasized the potential for more customers to face significant barriers as the market continues to mature.
The CMA will conduct its own investigation, which could result in market intervention. The UK’s competition regulator has been increasingly active in the tech sector in recent years.
Sarah Cardell, chief executive of the CMA, applauded Ofcom’s referral, highlighting the importance of strong competition to prevent an imbalance of market power.
Microsoft stated that it would work constructively with the CMA to ensure innovation, competition, and economic growth in the UK cloud industry. Amazon denied charging separate fees for data transfer to another provider, while Ofcom’s study contradicted this, stating that all cloud providers, including AWS, impose egress fees. AWS expressed disagreement with Ofcom’s findings and warned against unwarranted intervention that could harm customers and competition.
An organization representing Microsoft’s rivals, including AWS, called on the CMA to investigate “pernicious anti-competitive, unfair software licensing terms” in the cloud computing industry.
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