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Ofcom Recommends Investigation Into UK’s Cloud Infrastructure Market

By  |  July 10, 2023

The UK’s telecoms regulator, Ofcom, is recommending the cloud infrastructure market be referred to the Competition and Markets Authority for investigation, according to a newly filed interim report. In it, the watchdog states the current market is simply not working as well as it should, noting that the two major cloud providers, Amazon Web Services and Microsoft Azure, control up to 70 percent of the share alone.

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    This abysmal state of competition in the market is deeply concerning, Ofcom argues, because it is essential for digital services and the UK economy. There are, of course, deeper issues at play too — like egress fees, technical restrictions on interoperability, and committed spend discounts — that the watchdog suggests are potentially stifling competition.

    Read more: Ofcom Launches BBC Three Competition Probe

    Responding to the Ofcom report, Omdia chief analyst Roy Illsley was quick to comment: “The way customers are locked in to a cloud provider is not the real point here, let’s be frank, it is no different from legacy infrastructure vendors. However, he conceded that ‘a difference with cloud service providers is the finding that egress charges are an obfuscated way of locking customers in, as you only discover the true impact once you are in. So on that point, I do think they have a case for cloud providers to answer.”

    In spite of these findings, the big three — Amazon, Microsoft, and Google — have maintained that the concerns expressed by Ofcom are based on misperceptions about how their services and discounts work. AWS stated: “At AWS, we design our services to give customers freedom of choice and we believe the regulatory interventions proposed would be unwarranted, and could lead to significant unintended harm to customers and competition.” Microsoft, on the other hand, commented that it remains “committed to ensuring the UK cloud industry stays highly competitive, and to supporting the transformative potential of cloud technologies to help accelerate growth across the UK economy.”

    It remains to be seen how the Competition and Markets Authority will handle investigation into this issue. But it’s clear this market desperately needs intervention so as to ensure fair competition and industry growth, or else there might be a further decline in competition. The cloud infrastructure market may just be a critical area in the digital services sector for the UK economy and one that could benefit from expert regulation.