Ofcom refers UK cloud market to CMA

Ofcom has asked the competition watchdog to investigate the UK cloud market, after it flagged concerns about the dominant position of US giants Amazon and Microsoft.

The communications regulator said its probe into cloud services, launched in October 2022, had identified features that made it more difficult for UK businesses to switch and use multiple cloud suppliers.

In particular, it was "concerned" about the position of market leaders Amazon Web Services, part of Amazon, and Microsoft. The two firms had a combined market share of between 70% and 80% in 2022, Ofcom noted. Google, their closest competitor, had a 5%-10% share.

It has therefore asked the Competition and Markets Authority to investigate further.

Fergal Farragher, the Ofcom director responsible for the market study, said: "The cloud is the foundation of our digital economy and has transformed the way companies run and grow their businesses.

"Some UK businesses have told us they’re concerned about it being too difficult to switch or mix and match cloud provider, and it’s not clear that competition is working well. So we are referring the market to the CMA for further scrutiny, to make sure business customers continue to benefit from cloud services."

Ofcom's investigation highlighted egress fees, the cost of which can discourage customers from using services from more than one provider, as well as technical barriers to interoperability and portability. Egress frees are charges paid by customers to transfer their data out of a cloud.

It also noted that committed spend discounts could incentivise customers to use only one provider, even if better quality alternatives are available.