UK regulator warns of Amazon AWS and Microsoft Azure cloud dominance

Alfonso Maruccia

Posts: 599   +228
What just happened? Cloud computing has become one of the most critical technology infrastructures for many different organizations, and "hyperscaler" providers have essentially monopolized customers' interest. Ofcom looked into the current state of the market, finding some worrisome issues that should be investigated further.

Ofcom recently published a market study about the cloud computing industry in the United Kingdom, and is now proposing to refer what the organization found to the Competition and Markets Authority (CMA) for an in-depth investigation about market practices by the two biggest players: Amazon AWS and Microsoft Azure.

UK's authority for broadcasting and telecommunications said Amazon and Microsoft are the leading providers of cloud infrastructure services in the UK, with a combined market share of 60-70 percent while Google is the closest (third) competitor with a 5-10 percent market share. Ofcom refers to these organizations as hyperscalers, as the "vast majority" of UK customers use their cloud services in some form.

Ofcom's market study uncovered practices that, if left unchecked, could limit competition in the cloud business. The regulatory authority is particularly concerned about egress fees, which are the charges customers pay to transfer their data to another cloud provider, technical restrictions on interoperability between competing cloud services, and committed spend discounts structured to incentivize customers to use a single hyperscaler provider for all their cloud needs.

These market features "can make it difficult for some existing customers to bargain for a good deal with their provider," Ofcom said. The authority found indications they are already causing harm to competition, with evidence of "cloud customers facing significant price increases when they come to renew their contracts."

Some customers are also concerned about their ability to switch and use multiple providers for finding the best mix of quality and convenience for their needs. Market leader AWS and the consistently growing Azure platform provide high levels of profitability for their respective companies, Ofcom said, and this indicates there are "limits to the overall level of competition."

"We've done a deep dive into the digital backbone of our economy, and uncovered some concerning practices," by some of the biggest tech companies in the world, Ofcom's director Fergal Farragher said. High barriers to discourage switching are "already harming competition" in the fast-growing cloud market, Farragher remarked, so a more in-depth look would be needed to make sure the market is working to benefit people and businesses and not just the companies providing those services.

After publishing a redacted copy of its market study, Ofcom is now asking for feedback on the findings within and on the proposal to promote a proper market investigation by the CMA. A final report will be published "by no later than" October 5, 2023.

Permalink to story.



Posts: 4,783   +7,380
Lock-in has been the #1 anti-competitive tool in the industry since forever. How are the UK watchdogs just now figuring this out?