Home
 » ISP News » 
Sponsored Links

Competition Watchdog Finds UK Cloud Market “not working as well as it could”

Tuesday, Jan 28th, 2025 (5:25 pm) - Score 360
data_communication

The Competition and Markets Authority (CMA) has today published the “provisional findings” of their investigation into the UK’s public cloud infrastructure services market, which is currently dominated by Amazon (AWS) and Microsoft (Azure). The probe found that “competition is not working as well as it could” and is now shifting its focus to look at remedies.

Just to recap. Ofcom formally referred the market to the CMA in October 2023 (here), which came after the regulator found that high fees for transferring data out, committed spend discounts and technical restrictions were making it difficult for business customers to switch cloud provider or use multiple providers. Ofcom feared that, if left unchecked, “competition could deteriorate in a critical digital market for the UK economy“.

NOTE: Microsoft and Amazon, combined, hold about 70-80% of the market, while Google comes in third on 5-10%. The firms are known as “hyperscalers” and the vast majority of cloud customers use their services in some form. The market for cloud infrastructure in the UK was said to be worth around £9bn in 2023 (growing c.30% per year).

The telecoms regulator’s work focused on ‘cloud infrastructure services’, which are built on physical servers and virtual machines hosted in data centres around the world. Cloud infrastructure provides the foundation for how software applications are developed and run. This consists of product offerings like Infrastructure as a Service (IaaS), which includes storage, computing and networking, and Platform as a Service (PaaS), which includes the software tools needed to build and run applications.

Advertisement

The CMA’s “provisional view“, as published today, is that competition is not working as well as it could, and that improvements could make the cloud services markets work better for UK businesses in terms of improved prices, quality and choice. “Interventions to address some of these issues would allow UK businesses [to] get better deals from cloud providers, enabling them to contribute to economic growth,” said the CMA.

Findings of the CMA’s Cloud Inquiry

➤ Customers see many benefits of using the public cloud over on-premise IT or private cloud but they face a limited choice of providers: the two largest providers, Amazon Web Services (AWS) and Microsoft, each has a share of these markets of 30 to 40%, while Google is the next largest provider but has a much lower share of these markets.

➤ There are significant barriers to entry and expansion due to the very large capital investment needed for cloud infrastructure — this makes it harder for alternative cloud suppliers to enter and grow in these markets.

➤ Technical and commercial barriers make it harder for cloud customers to switch and multi-cloud between providers, locking them into their initial choice of provider which may not reflect their evolving needs.

➤ Microsoft is using its strength in software to make it harder for AWS and Google to compete effectively for customers who wish to use Microsoft software on the cloud — this reduces the competitive challenge to Microsoft in the supply of cloud services.

Ofcom has previously suggested that the CMA should consider imposing a broad range of remedies to tackle this, including market-opening measures, structural measures, or recommendations to Government (or other regulatory bodies) to change policy, legislation, or regulatory frameworks.

However, the CMA has previously hinted that they’re “not currently minded to prioritise further consideration of structural or operational separation remedies”, such as major one-off measures like divestment (here). Since then, they’ve been leaning more toward softer behavioural remedies (e.g. making it easier to switch companies, forcing greater informational transparency and so forth).

CMA Statement

The inquiry group proposes that the CMA board should use its new digital markets powers to consider whether to designate AWS and Microsoft with having strategic market status (SMS) in cloud services and, if so, to consider making interventions such as those we have identified in this inquiry. It believes that this would create greater competitive pressure in cloud services, unlocking benefits for UK businesses and the wider economy.

Should AWS and Microsoft be designated as having SMS, the CMA would be able to consider the interventions we have considered in this inquiry relating to egress fees, technical barriers and Microsoft’s licensing practices. We think that measures aimed at AWS and Microsoft would address our market-wide concerns by directly benefitting most UK customers and affecting the competitive conditions for other providers.

Given the size of capital investment and economies of scale required to provide cloud infrastructure services, there may be a natural limit to the number of providers who can compete effectively in these markets. For this reason, it is vital that competition between even a small number of providers works well for customers.

The CMA suggested that the detriment they identified may manifest itself in terms of UK customers paying higher prices for these services than they would if the markets were more competitive. “By way of illustration, if prices are on average 5% above those in well-functioning markets, this would in aggregate lead to UK customers paying around £430 million more per year for these services than they would in more competitive markets,” said the CMA.

Advertisement

The CMA has now opened up their provisional findings to feedback, which must be submitted by 18th February 2025. After that, they’ll need to propose related remedies and reach a final decision before the statutory deadline of 4th August 2025.

Share with Twitter
Share with Linkedin
Share with Facebook
Share with Reddit
Share with Pinterest
Mark-Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook, BlueSky, Threads.net and .
Search ISP News
Search ISP Listings
Search ISP Reviews

Leave a Reply

Your email address will not be published. Required fields are marked *

NOTE: Your comment may not appear instantly (it may take several hours) due to static caching and moderation checks by the anti-spam system. Please be patient. We will reject comments that spam, troll, post via known fake IP/proxy servers or fall foul of our Online Safety and Content Policy.
Javascript must be enabled to post (most browsers do this automatically)

Privacy Notice: Please note that news comments are anonymous, which means that we do NOT require you to enter any real personal details to post a message. By clicking to submit a post you agree to storing your entries for comment content, display name, IP and email in our database, for as long as the post remains live.

Only the submitted name and comment will be displayed in public, while the rest will be kept private (we will never share this outside of ISPreview, regardless of whether the data is real or fake). This comment system uses submitted IP, email and website address data to spot abuse and spammers. All data is transferred via an encrypted (https secure) session.
Cheap BIG ISPs for 100Mbps+
Community Fibre UK ISP Logo
150Mbps
Gift: First 3 Months Free
Vodafone UK ISP Logo
Vodafone £23.00
150Mbps
Gift: None
Youfibre UK ISP Logo
Youfibre £23.99
150Mbps
Gift: None
NOW UK ISP Logo
NOW £25.00
100Mbps
Gift: None
Virgin Media UK ISP Logo
Virgin Media £25.99
132Mbps
Gift: None
Large Availability | View All
Cheapest ISPs for 100Mbps+
BeFibre UK ISP Logo
BeFibre £19.00
150Mbps
Gift: None
Gigaclear UK ISP Logo
Gigaclear £19.00
300Mbps
Gift: None
Community Fibre UK ISP Logo
150Mbps
Gift: First 3 Months Free
toob UK ISP Logo
toob £22.00
150Mbps
Gift: None
Vodafone UK ISP Logo
Vodafone £23.00
150Mbps
Gift: None
Large Availability | View All
The Top 15 Category Tags
  1. FTTP (6150)
  2. BT (3691)
  3. Politics (2777)
  4. Business (2481)
  5. Openreach (2446)
  6. Building Digital UK (2364)
  7. Mobile Broadband (2200)
  8. FTTC (2094)
  9. Statistics (1951)
  10. 4G (1856)
  11. Virgin Media (1811)
  12. Ofcom Regulation (1615)
  13. Fibre Optic (1490)
  14. Wireless Internet (1477)
  15. 5G (1453)
Promotion
Sponsored

Copyright © 1999 to Present - ISPreview.co.uk - All Rights Reserved - Terms , Privacy and Cookie Policy , Links , Website Rules , Contact
Mastodon