UK communications watchdog Ofcom is opening an investigation into the dominance held by cloud hyperscalers Amazon AWS, Microsoft Azure and Google Cloud over the public cloud market. It is part of a wider investigation Ofcom is conducting into how digital communications operate in Britain, which will also probe messaging services and smart speaker markets.
Ofcom will launch a market study under the Enterprise Act 2002 into the UK’s cloud sector. “Our study will formally assess how well this market is working,” the regulator said. “We will examine the strength of competition in cloud services generally and the position the three hyperscalers hold in the market. We will also consider any market features that might limit innovation and growth in this sector by making it difficult for other companies to enter the market and expand their share.”
“The way we live, work, play and do business has been transformed by digital services. But as the number of platforms, devices and networks that serve up content continues to grow, so do the technological and economic issues confronting regulators,” said Selina Chadha, Ofcom’s director of connectivity. “That’s why we’re kick-starting a programme of work to scrutinise these digital markets, identify any competition concerns and make sure they’re working well for people and businesses who rely on them.”
How the cloud hyperscalers dominate the market
Globally, AWS, Microsoft Azure and Google Cloud accounted for 65% of the public cloud market in Q2 2022, according to data from Synergy Research Group.
In the UK this dominance is even more pronounced, Ofcom says, pointing to Synergy figures which show the trio accounted for 81% of the UK public cloud infrastructure market by revenue last year. This covers public and private-sector organisations – AWS alone has been handed government contracts worth £600m over the past five years.
“We will look at how the market is working today and how we expect it to develop in the future – aiming to identify any potential competition concerns early to prevent them becoming embedded as the market matures,” Ofcom said in a statement.
“When we launch the market study, we will invite initial views on the UK cloud market from interested or affected parties. We plan to consult on our interim findings and publish a final report – including any concerns or proposed recommendations – within twelve months.
“If we find a market is not working well, there can be negative impacts on businesses and ultimately consumers, through higher prices, lower service quality and reduced innovation.”
If the regulator notes negative impacts, it can make recommendations to the government about necessary changes of policy, or recommend that the Competition and Markets Authority opens investigations into any potential competition concerns.
It is not the first time the cloud hyperscalers have been threatened with such action. As reported by Tech Monitor, Microsoft is changing its Azure cloud licensing after complaints from European cloud providers that it was behaving uncompetitively by imposing extra charges on customers who hosted Microsoft services on third-party cloud servers. MSFT took action to avoid the prospect of an antitrust probe from the European Union.
In Europe, Big Tech companies like the cloud hyperscalers are also going to be subject to the Digital Markets Act, which imposes additional rules on companies defined as “gatekeepers” of the digital economy, such as cloud providers.
Ofcom cloud investigation to cover WhatsApp and Zoom
The probe of cloud services is part of a wider investigation Ofcom plans for the coming months, the regulator said. It plans to “examine other digital markets, including online personal communication apps and devices for accessing audiovisual content,” the statement added.
Services such as WhatsApp, owned by Facebook’s parent company Meta, Apple’s FaceTime and video conferencing platform Zoom are also in its sights, with Ofcom keen to look at the way use of these platforms is “affecting the role of traditional calling and messaging, and how competition and innovation in these markets may evolve over the coming years. We also want to understand whether any limitations on their ability to interact with each other raises potential concerns.”
It also plans to look at smart speakers and TVs and their role as portals for accessing online content.