Competition concerns

Ofcom refers cloud computing market to CMA

Amazon web services
Amazon Web Services is in the sights of the watchdog

Media watchdog Ofcom has referred the public cloud infrastructure services market to the Competition and Markets Authority for further investigation.

Ofcom’s own study has identified features that make it more difficult for UK businesses to switch and use multiple cloud suppliers. It said it is particularly concerned about the position of the market leaders Amazon and Microsoft.

Amazon Web Services (AWS) and Microsoft had a combined market share of 70-80% in 2022. Google is their closest competitor with a share of 5-10%. Collectively, these firms are known as the ‘hyperscalers’ and the vast majority of cloud customers use their services in some form.

Cloud computing has become critical for many businesses across the UK economy – including telecoms companies, broadcasters and public sector organisations – and has transformed the way they deliver services on which we all rely every day.

It uses datacentres around the world to provide UK businesses with remote access to services such as software, storage and networking.

In October 2022, Ofcom launched a study under the Enterprise Act 2002 into cloud services in the UK to assess how well this market is working, and published its interim findings in April 2023.

Cloud computing
Cloud computing is now critical for many businesses (pic: Jaffer Nizami)

It examined the strength of competition and any features that might limit innovation and growth in this sector by making it difficult for other cloud providers to enter the market or smaller companies to expand.

Because the cloud sector is still evolving, Ofcomlooked at how the market is working today and how it is expected to develop in the future – aiming to identify any potential competition concerns early to prevent them becoming embedded as the market matures.

Fergal Farragher, Ofcom’s 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. From TV production and telecoms networks to AI innovations – all of these things rely on remote computer power that goes unseen.

“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’re referring the market to the CMA for further scrutiny, to make sure business customers continue to benefit from cloud services.”

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