{"id":34156,"date":"2023-04-05T08:15:12","date_gmt":"2023-04-05T07:15:12","guid":{"rendered":"https:\/\/www.ispreview.co.uk\/?p=34156"},"modified":"2023-04-05T08:16:53","modified_gmt":"2023-04-05T07:16:53","slug":"ofcom-set-to-refer-uk-cloud-market-for-competition-probe","status":"publish","type":"post","link":"https:\/\/www.ispreview.co.uk\/index.php\/2023\/04\/ofcom-set-to-refer-uk-cloud-market-for-competition-probe.html","title":{"rendered":"Ofcom Set to Refer UK Cloud Market for Competition Probe"},"content":{"rendered":"

Ofcom<\/a>’s ongoing probe into internet-based UK cloud services, which tend to be dominated by big providers like Amazon<\/a> (AWS) and Microsoft (Azure), has uncovered practices and features that “could limit competition<\/em>” and is proposing to refer the market to the Competition and Markets Authority (CMA) for further investigation.<\/p>\n

The regulator has been busy conducting a market study of cloud services, which was setup to examine the causes of why particular markets may not be working well in the interests of consumers – using Ofcom<\/a>’s powers as a competition authority under the Enterprise Act 2002<\/strong>.<\/p>\n

NOTE:<\/strong> Microsoft and Amazon<\/a>, combined, hold about 60-70% of the market, while Google comes in third on 5-10%. The firms are known as “hyperscalers<\/em>” and the vast majority of cloud customers use their services in some form.<\/div>\n

The study has provisionally identified features and practices that make it more difficult for customers to switch and use multiple cloud suppliers, such as high fees for transferring data out, committed spend discounts and technical restrictions.<\/p>\n

Summary of the Three Key Issues<\/strong><\/span><\/p>\n

\u27a4 Egress fees.<\/strong> These are the charges that customers pay to transfer their data out of a cloud and the hyperscalers set them at significantly higher rates than other providers. The cost of egress fees can discourage customers from using services from more than one cloud provider or to switch to an alternative provider.<\/p>\n

\u27a4 Technical restrictions on interoperability.<\/strong> These are imposed by the leading firms that prevent some of their services working effectively with services from other providers. This means customers need to put additional effort into reconfiguring their data and applications to work across different clouds.<\/p>\n

\u27a4 Committed spend discounts.<\/strong> These can benefit customers by reducing their costs, but the way these discounts are structured can incentivise customers to use a single hyperscaler for all or most of their cloud needs, even when better quality alternatives are available.<\/p><\/blockquote>\n

“We are concerned that constraints on customers\u2019 ability to use more than one provider could make it harder for smaller cloud providers to win business and compete with the market leaders<\/em>,” said Ofcom<\/a>. This is a significant step for the regulator to take, and is not something they’d do lightly.<\/p>\n

Fergal Farragher, Ofcom’s Director responsible for the Market Study, said:<\/strong><\/p>\n

“We\u2019ve done a deep dive into the digital backbone of our economy, and uncovered some concerning practices, including by some of the biggest tech firms in the world.<\/p>\n

High barriers to switching are already harming competition in what is a fast-growing market. We think more in-depth scrutiny is needed, to make sure it\u2019s working well for people and businesses who rely on these services.”<\/p><\/blockquote>\n

Ofcom are now consulting<\/a><\/strong> upon this proposal until 17th May 2023 and, after that, they intend to publish a final report that sets out our findings and recommendations, including their decision on a market investigation reference, by no later than 5th October 2023.<\/p>\n

The CMA could, if it were to find fault with the market, impose a broad range of remedies, including market-opening measures, structural measures, or recommendations to Government or other regulatory bodies to change policy, legislation, or regulatory frameworks. Ofcom says they’ve already “identified some potential interventions that could be implemented through such routes<\/em>,” although the final decision would rest with the CMA.<\/p>\n

Ofcom’s Potential Remedies<\/strong><\/span><\/p>\n

Egress fees<\/strong><\/p>\n

a) Equalise egress fees with other charges (e.g. no higher than data transfer costs within a single provider\u2019s cloud).
\nb) Place a price control that restricts egress fees to \u201cat cost\u201d charges.
\nc) Prevent providers from charging any egress fees.<\/p>\n

Interoperability and portability<\/strong><\/p>\n

a) Require cloud providers to publish more comprehensive documentation on the interoperability of their cloud infrastructure services. This would include requiring cloud providers, who adopt or mimic third party open-source software, to explain the compatibility of their cloud infrastructure services with such software.
\nb) Require cloud providers to \u2018unbundle\u2019 their own first-party services into their respective elements, with a view to allowing third-party services to interoperate with these individual elements.
\nc) Require cloud providers to ensure PaaS services from another cloud provider or ISV can interoperate with underlying first-party IaaS services in the same way as the first-party PaaS services.<\/p>\n

Committed spend discounts<\/strong><\/p>\n

a) Prohibit or restrict loyalty-inducing fee structures which risk distorting competition.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Ofcom’s ongoing probe into internet-based UK cloud services, which tend to be dominated by big providers like Amazon (AWS) and Microsoft (Azure), has uncovered practices and features that “could limit competition” and is proposing to refer the market to the Competition and Markets Authority (CMA) for further investigation.<\/p>\n","protected":false},"author":1,"featured_media":34157,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[1],"tags":[86,36,38],"class_list":["post-34156","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uk_isp_news","tag-law","tag-ofcom-regulation","tag-politics"],"share_on_mastodon":{"url":"","error":""},"yoast_head":"\nOfcom Set to Refer UK Cloud Market for Competition Probe - ISPreview UK<\/title>\n<meta name=\"description\" content=\"Ofcom's ongoing probe into internet-based UK cloud services, which tend to be dominated by big providers like Amazon (AWS) and Microsoft (Azure), has\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ispreview.co.uk\/index.php\/2023\/04\/ofcom-set-to-refer-uk-cloud-market-for-competition-probe.html\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Ofcom Set to Refer UK Cloud Market for Competition Probe - 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