UK Ofcom Proposes Investigation into Amazon, Microsoft for Alleged Abuse of Market Power

UK communications regulator Ofcom has proposed an investigation into Amazon and Microsoft for alleged abuse of market power. The investigation is part of a wider probe into cloud services in the UK.

Ofcom has identified features and practices in the cloud computing sector that make it difficult for customers to switch and use multiple cloud suppliers and is particularly concerned about Amazon and Microsoft due to their market position.

Market Share of 60-70%

Ofcom's market study has found that Amazon Web Services (AWS) and Microsoft have a combined market share of 60-70%, while Google has a share of 5-10%.

The study also found that the 'hyperscalers' set egress fees at significantly higher rates than other providers, preventing customers from using services from more than one cloud provider or switching to an alternative provider.

Technical restrictions on interoperability and committed spend discounts were also identified as market features that can make it difficult for some existing customers to bargain for a good deal with their provider.

Ofcom is concerned that these constraints could make it harder for smaller cloud providers to win business and compete with the market leaders.

The regulator is recommending that the Competition and Markets Authority (CMA) conduct further investigation on the cloud infrastructure market.

The nature and extent of barriers would be examined by the CMA to see if any actions could improve how the market runs for clients and UK consumers.

The proposal takes into account the significance of cloud computing for UK consumers and enterprises as well as Ofcom's grave concerns regarding the cloud infrastructure sector.

By no later than October 5, the regulator intends to release a final report outlining its conclusions and suggestions, as well as its choice of a market investigation reference.

'High Barriers'

"We've done a deep dive into the digital backbone of our economy and uncovered some concerning practices, including by some of the biggest tech firms in the world. High barriers to switching are already harming competition in what is a fast-growing market," Fergal Farragher, Ofcom's director responsible for the market study, said in a statement.

"We think more in-depth scrutiny is needed to make sure it's working well for people and businesses who rely on these services."

For many industries across the economy, including telecommunications providers, media outlets, and government agencies, cloud computing has become essential. It makes use of data centers all around the world to offer remote access to services, including networking, software, and storage.

In October 2022, Ofcom began the research under the Enterprise Act 2002 to evaluate how well the market for cloud infrastructure services is operating.

The regulator looked at the level of competition and any factors that would prevent new technologies from entering the market or smaller businesses from growing.