Ofcom has referred the public cloud infrastructure services market to the Competition and Markets Authority for investigation, after it completed a market study that identified features that make it more difficult for UK businesses to switch and use multiple cloud suppliers. Ofcom said, “We are particularly concerned about the position of the market leaders Amazon and Microsoft”.
Cloud computing uses data centres around the world to provide UK businesses with remote access to services such as software, storage and networking.

Ofcom we launched a study into cloud services in the UK in October 2022 to assess how well this market is working. It looked at how the market is working today and how we expect it to develop in the future “aiming to identify any potential competition concerns early to prevent them becoming embedded as the market matures”.

Ofcom said Amazon Web Services (AWS) and Microsoft had a combined market share of 70-80% in 2022. Google is their closest competitor with a share of 5-10%. Collectively these firms are known as the ‘hyperscalers’. Ofcom said competitive market forces are delivering benefits to customers – especially where providers are competing to attract new customers – in the form of innovative products and discounts, but it was concerned about:

• The charges that customers pay to transfer their data out of a cloud, which Ofcom says are at “significantly higher rates than other providers”, which can discourage customers from using services from more than one cloud provider or to switch to an alternative provider.
• Technical barriers to interoperability and portability, which can require customers to reconfigure their data and applications so they can work on different clouds. This makes it more difficult to combine different services across cloud providers or to change provider.
• Committed spend discounts, which may be structured to incentivise customers to use a single hyperscaler, even when better quality alternatives are available.

Ofcom says, “Looking ahead, if customers have difficulty switching and using multiple providers, it could make it harder for competitors to gain scale and challenge AWS and Microsoft effectively. In this scenario, we are concerned that the threat of customers switching away from the market leaders will reduce, further dampening competition for new and existing customers.”
The CMA will now conduct an independent investigation to decide whether there is an adverse effect on competition, and if so, whether it should take action or recommend others to take action.

Fergal Farragher, Ofcom’s Director responsible for the Market Study, said: “Some UK businesses have told us they’re concerned about it being too difficult to switch or mix and match cloud provider, and it’s not clear that competition is working well. So, we’re referring the market to the CMA for further scrutiny, to make sure business customers continue to benefit from cloud services.”