UK anti-competition regulator tasked with investigating microsoft and Amazondominates the cloud computing market.
Media watchdog Ofcom began the process on Thursday by referring the investigation to the Competition and Markets Authority for further investigation.
Ofcom said it had identified features that would make it more difficult for UK businesses to switch cloud providers or use multiple cloud services, calling the position of market leaders Amazon and Microsoft “particularly concerning”. ” he said.
Ofcom’s director of market research, Fergal Faragher, said: “Some UK businesses say they are concerned that switching and combining cloud providers is too difficult, so it’s unclear whether competition is working. Not,” he said. Thursday’s statement.
“That’s why we’re asking the market for further scrutiny to ensure our business customers can continue to benefit from cloud services.”
Ofcom is concerned that so-called “hyperscalers” such as Amazon Web Services and Microsoft Azure are restricting competition in the cloud computing market. They enable businesses of all types to perform critical computing tasks, such as data storage and management, content distribution, analytics, and intelligence, over the Internet rather than on servers stored on site or “on-premises.” We are a company that does this.
An Amazon spokesperson said in a statement Thursday that the company disagrees with Ofcom’s findings. Microsoft said it intends to work “constructively” with the CMA to address the regulator’s concerns.
AWS and Microsoft Azure are the largest players in the market. AWS’ cloud solutions are primarily aimed at startups, while Microsoft is prioritizing large enterprises. Ofcom estimates that AWS and Microsoft Azure account for approximately 60% to 70% of cloud spending. Amazon, Microsoft and Google together generate around 81% of the revenue for the UK cloud infrastructure services market, which is worth £15bn ($18.2bn), according to Ofcom. Estimated.
The CMA study comes amid the rapid uptake of AI. Cloud services powered by vast data centers power many power-hungry generative AI models, including OpenAI’s ChatGPT, Microsoft’s Bing Chat, and Google’s Bard.
The Competition and Markets Authority said in a statement that it welcomed Ofcom’s report, adding that the cloud space “underpins a full range of online services, from social media to AI-based models”.
“Many businesses are now completely reliant on cloud services, making effective competition in this market essential,” CMA CEO Sara Cardel said in a statement Thursday. said.
“Intense competition ensures a level playing field and prevents market power from falling into the hands of a few players, unlocking the full potential of rapidly evolving digital markets and helping people, businesses and It will ensure that the UK economy reaps maximum benefits.” ”
The CMA’s independent research group will now examine the market and identify what action, if any, should be taken. The CMA plans to conclude its investigation by April 2025.
Amazon and Microsoft respond
Amazon said in a statement that it believes Ofcom’s findings are “based on a fundamental misunderstanding of the capabilities of IT departments and the services and discounts they offer.”
Amazon Web Services (AWS), the e-commerce giant’s cloud computing arm, designs its services “to give customers the freedom to choose the technology that best fits their needs,” a company spokesperson said.
“UK businesses and the wider economy benefit from intense competition between IT providers, and the cloud has made it easier than ever to switch between providers. “AWS will continue to work constructively with the CMA.” ”
Microsoft said it was “committed to ensuring that the UK cloud industry is innovative, competitive and accelerates growth across the economy.”
“We intend to engage constructively with the CMA as it conducts its cloud services market study,” a company spokesperson told CNBC in an email.
competitive concerns
Ofcom, the UK’s agency responsible for regulating technology, broadcasting and communications, said it had identified a number of practices of particular concern in the cloud industry.
Regulators say so-called “egress fees” charged by cloud vendors such as Amazon and Microsoft prevent companies from moving data between providers or “multi-clouding” using multiple cloud providers. said that it is becoming more difficult. Egress charges are charges for cloud companies to remove company data from the cloud environment.
An AWS spokesperson said the company “does not charge additional fees to switch data” to another cloud provider. The spokesperson added that over 90% of customers do not pay for data transfer as they are given 100 gigabytes for free each month.
Ofcom also said cloud companies were introducing “technical barriers” to interoperability, the ability for different cloud platforms and services to work together and exchange data without barriers or interruptions. Officials said this would “make things even more difficult.” [for firms] You can mix and match different services between cloud providers or change providers. ”
Finally, Ofcom has sounded the alarm about committed spend discounts, incentives that give customers a discount if they spend a certain amount of money. While this reduces costs for customers, it also incentivizes businesses to use a single cloud provider for all or most of their cloud needs, even when cheaper alternatives are available.
Rival cloud companies such as Google and regulators have expressed particular concern about Microsoft Azure. In other words, unfair licensing terms are said to have “locked in” customers, forcing them to stick to Microsoft’s technology and making it difficult for them to switch. other providers.
“I think what we want is a level playing field for competition in the marketplace, and for enterprise customers who rely on the cloud to be able to easily switch and use multiple providers. I think that’s what it’s all about,” Faragher told CNBC. Thursday’s “Squawk Box Europe”.
“This will allow these rival providers to seriously challenge Amazon and Microsoft. [to] It has a portfolio with a much broader set of products that looks attractive to companies growing their business in the UK and actually using the cloud. ”
Mr Faragher added that as part of the investigation, Ofcom considered solutions including limiting or eliminating egress charges.
Microsoft’s cloud licensing terms are the subject of a separate investigation by the European Union. The EU is not formally investigating Microsoft’s Azure cloud computing platform, but it is evaluating complaints about Microsoft’s licensing terms from companies such as France’s OVHCloud.
