Ofcom to investigate AWS and Microsoft over cloud duopoly suspicions

Microsoft and Amazon Web Services (AWS) have caught the attention of Ofcom, which noted that the two companies hold 70-80% share of the UK’s cloud infrastructure services market.

The figure is from 2022, and Ofcom considers it to be a potential duopoly — a situation where two firms dominate a sector while preventing competition from growing.

While Google Cloud is typically considered to be a part of the cloud giants, data shows that the company only holds about 5-10% share of the market, which Ofcom considers to be within the normal range. As a result, Google Cloud will not be targeted by the investigation.

CMA will investigate the matter

The investigation itself will be conducted by the Competition and Markets Authority (CMA), on Ofcom’s request. The CMA’s goal is to deduce whether the split of the market share is, or will have an adverse effect on competition in the cloud sector.

By now, both Microsoft and Amazon have responded to the new development. Microsoft noted that it plans to engage constructively with the CMA, but Amazon noted that it sees the move as an “unwarranted intervention.”

It is worth mentioning that this is not the first time that cloud giants have been investigated in recent years. Just last year, in September 2022, both Amazon and Microsoft, and even Google were investigated due to concerns regarding the number of businesses investing in cloud services.

Ofcom noted that under 10% of all businesses’ global IT spending was used for public cloud services in 2018. By 2022, this figure has gone up to 17%. If Ofcom had found that the market didn’t function well enough, it would have recommended a change of policy to the government. In addition, it would also recommend a market investigation to the CMA, which is exactly what is happening right now.

UK businesses shared concerns regarding the state of the market

Ofcom’s director behind the market study, Fergal Farragher, said that the cloud is the foundation of the digital economy. As such, it has transformed the way companies run and grow their respective businesses. Everything, from TV production to telecoms and even new AI innovations all depends on remote computer power that goes unseen.

He added that some businesses in the UK have shared concerns about the cloud market, noting that it is too difficult to mix and match these services, or even switch from one to the other completely. They also added that it is not clear that competition is working well, causing Ofcom’s suspicions that Microsoft and Amazon might be holding a duopoly.

With the new investigation, Ofcom is interested in several aspects, including the egress fees — the fees charged when firms want to transfer data out of the cloud; potential barriers to interoperability and portability; and committed spend discounts — the way incentives are structured for the companies’ benefit which would make it rewarding for them to use the same provider.