The UK’s cloud computing industry is under scrutiny due to concerns about its domination by Amazon and Microsoft, which collectively hold 70-80% of the market. In contrast, Google holds a much smaller 5-10% share, sparking worries about limited competition and the difficulty for businesses to switch providers. Ofcom, the media regulator, raised these concerns in April, prompting its referral of the matter to the Competition and Markets Authority (CMA) for a thorough investigation. Amazon and Microsoft pledged cooperation with the CMA during its inquiry, but Amazon disputed Ofcom’s concerns, asserting a misunderstanding of the sector.
Cloud computing, pivotal for storing data remotely, using software, streaming media, and gaming, relies on vast networks of servers primarily owned by Amazon and Microsoft. The market, estimated to be valued up to £7.5 billion in the UK in 2022, plays a crucial role for both businesses and individuals.
CMA Chief Executive Sarah Cardell emphasized the necessity of robust competition in this market, as many businesses heavily depend on cloud services. The inquiry aims to evaluate market functionality and address any shortcomings by April 2025. The CMA holds significant authority to rectify issues, potentially forcing changes in practices or divesting parts of businesses if deemed essential for market integrity.
The investigation intends to explore issues such as data egress fees, technical lock-ins, and commercial restrictions that have impacted the cloud infrastructure market. Ofcom’s concern lies in the barriers to switching providers, including fees for transferring data to competitors, discouraging users from exploring alternatives.
Ofcom’s Consumer Protection Director, Fergal Farragher, highlighted the need to address these obstacles, suggesting that limits or elimination of data transfer fees might be necessary. The referral to CMA aims to ensure a more competitive cloud services landscape, allowing players like IBM and Oracle to challenge the dominance of Amazon and Microsoft.
Microsoft expressed commitment to supporting a competitive UK cloud industry, promising active involvement in the CMA’s investigation. Conversely, Amazon contested Ofcom’s viewpoint, claiming that the reported fees were misconstrued and asserting that most customers incurred no data transfer charges.
The CMA’s investigation will be pivotal in assessing and possibly reshaping the cloud computing market in the UK, aiming to foster a more competitive landscape for businesses and consumers alike.