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Ofcom cloud report: What interventions could the CMA take against AWS and Microsoft?

Ofcom's year-long look at the inner workings of the UK cloud market has now drawn to a close, leaving the Competition and Markets Authority left to work out what steps to take to bolster the sector’s competitiveness

Ofcom’s year-long probe into the inner workings of the UK public cloud infrastructure market has concluded with an instruction from the communications regulator for the Competition and Markets Authority (CMA) to investigate the sector further.

Ofcom’s work uncovered three types of prevailing anti-competitive behaviour and practices within the UK public cloud market, which is what prompted it to refer the sector over to the CMA for a more thorough probe.

This behaviour included the charging of egress fees when customers attempt to extricate their data from a public cloud provider’s servers, the existence of interoperability issues between competing cloud platforms and the offering of committed use discounts to incentivise cloud customers to stick with one supplier.

According to Ofcom, Amazon Web Services and Microsoft (which boast a combined market share of 70-to-80% in 2022) are both guilty of “displaying some form of” these concerning behaviours.

“We are most concerned in relation to AWS and Microsoft, given their market position and the fact they display some form of all of the above behaviours that limit competition,” said Ofcom, in its interim report.

Perhaps unsurprisingly, AWS and Microsoft both issued lengthy public responses to Ofcom’s assessment of their respective behaviours, where they both argued against Ofcom’s proposal to involve the CMA, with both parties claiming the move was unnecessary and unwarranted.

Despite their protestations, the CMA now has until April 2025 to decide what market interventions (if any) it will make to help correct some of these behaviours and level the playing field for the other providers that make up the UK cloud market.

Alex Haffner, competition partner at UK law firm Fladgate, said the CMA has a “range of tools at its disposal” to mitigate any “perceived competition-related concerns”, but it is unlikely any of them will be used in haste.

“What is interesting here is that Ofcom has chosen to ask the CMA to open a market-wide investigation, which suggests that the regulators perceive there to be structural issues with the cloud computing market that need broader investigation and consideration,” said Haffner.

“It is also a sensible approach given the wide-ranging impact that the cloud computing market has on many different industries and the broader economy, and fits with the CMA’s stated desire to target effective competition in digital markets.”

What also complicates matters slightly is that the two entities the CMA will need to take to task in its work are the largest public cloud firms in the world.

“That Amazon and Microsoft are the largest players on this market raises the stakes somewhat, although the fact that a market investigation can take 18-24 months overall means that this one will likely take on a more considered path.”

Download the full Ofcom report below

Download PDF • 3.18MB

Copyright: Computer Weekly

06 Oct 2023

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