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The regulator says its recent market study uncovered practices and features that could limit competition

The UK’s communications services regulator, Ofcom, is proposing to ask the country’s competition regulator to investigate the cloud services market, the agency announced this week.

Ofcom says it has reached the halfway point of its own probe into UK cloud services, and what it has discovered so far has prompted it to propose to refer the market to the Competition and Markets Authority (CMA) for further investigation.

“Our market study has provisionally identified features and practices that make it more difficult for customers to switch and use multiple cloud suppliers”, Ofcom said. “We are particularly concerned about the practices of Amazon and Microsoft because of their market position”.

What Ofcom has found

Ofcom’s study of the cloud market revealed that there are two leading providers of cloud infrastructure services in the UK: Amazon Web Services (AWS) and Microsoft, who have a combined market share of 60-70%. Google is their closest competitor with a share of 5-10%, it found. “Collectively these firms are known as the ‘hyperscalers’ and the vast majority of cloud customers use their services in some form”, Ofcom noted.

The study looked at “egress fees”, the charges that customers pay to transfer their data out of a cloud. The hyperscalers set them at “significantly higher rates than other providers”, according to Ofcom.

The study also found that cloud companies imposed “technical restrictions on interoperability” that prevent some of their services working effectively with services from other providers.

The hyperscalers also offer spending discounts in such a way as to incentivise customers to put all of their cloud business into one provider, “even when better quality alternatives are available”. This situation is exacerbated because “some customers are concerned about their ability to switch and use multiple providers where this limits their ability to mix and match the best quality services across different providers”.

The regulator has thus proposed to refer the cloud infrastructure market to the CMA to carry out a market investigation. “This would allow the CMA to further examine the nature and extent of barriers and consider if there are interventions that could improve how the market works for customers and ultimately UK consumers”, Ofcom said.