{"id":40727,"date":"2025-01-28T17:25:16","date_gmt":"2025-01-28T17:25:16","guid":{"rendered":"https:\/\/www.ispreview.co.uk\/?p=40727"},"modified":"2025-01-28T17:30:16","modified_gmt":"2025-01-28T17:30:16","slug":"competition-watchdog-finds-competition-concerns-in-uk-cloud-market","status":"publish","type":"post","link":"https:\/\/www.ispreview.co.uk\/index.php\/2025\/01\/competition-watchdog-finds-competition-concerns-in-uk-cloud-market.html","title":{"rendered":"Competition Watchdog Finds UK Cloud Market “not working as well as it could”"},"content":{"rendered":"

The Competition and Markets Authority<\/a> (CMA) has today published the “provisional findings<\/em>” of their investigation into the UK\u2019s public cloud infrastructure services market, which is currently dominated by Amazon<\/a> (AWS) and Microsoft (Azure). The probe found that “competition is not working as well as it could<\/em>” and is now shifting its focus to look at remedies.<\/p>\n

Just to recap. Ofcom<\/a> formally referred the market to the CMA in October 2023 (here<\/a>), 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<\/a> feared that, if left unchecked, \u201ccompetition could deteriorate in a critical digital market for the UK economy<\/em>\u201c.<\/p>\n

NOTE:<\/strong> Microsoft and Amazon<\/a>, combined, hold about 70-80% of the market, while Google comes in third on 5-10%. The firms are known as \u201chyperscalers<\/em>\u201d 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 \u00a39bn <\/strong>in 2023 (growing c.30% per year).<\/div>\n

The telecoms regulator’s work focused on \u2018cloud infrastructure services\u2019, 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<\/strong> (IaaS), which includes storage, computing and networking, and Platform as a Service<\/strong> (PaaS), which includes the software tools needed to build and run applications.<\/p>\n

The CMA’s “provisional view<\/em>“, 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<\/em>,” said the CMA.<\/p>\n

Findings of the CMA’s Cloud Inquiry<\/strong><\/span><\/p>\n

\u27a4 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<\/a> 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.<\/p>\n

\u27a4 There are significant barriers to entry and expansion due to the very large capital investment needed for cloud infrastructure \u2014 this makes it harder for alternative cloud suppliers to enter and grow in these markets.<\/p>\n

\u27a4 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.<\/p>\n

\u27a4 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 \u2014 this reduces the competitive challenge to Microsoft in the supply of cloud services.<\/p><\/blockquote>\n

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.<\/p>\n

However, the CMA has previously hinted that they\u2019re \u201cnot currently minded to prioritise further consideration of structural or operational separation remedies<\/em>\u201d, such as major one-off measures like divestment (here<\/a>). Since then, they’ve been leaning more toward softer behavioural remedies<\/strong> (e.g. making it easier to switch companies, forcing greater informational transparency and so forth).<\/p>\n

CMA Statement<\/strong><\/p>\n

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.<\/p>\n

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\u2019s 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.<\/p>\n

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.<\/p><\/blockquote>\n

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 \u00a3430 million more per year for these services than they would in more competitive markets<\/em>,” said the CMA.<\/p>\n

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.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Competition and Markets Authority (CMA) has today published the “provisional findings” of their investigation into the UK\u2019s 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 […]<\/p>\n","protected":false},"author":1,"featured_media":28000,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[1],"tags":[472,86,36,38],"class_list":["post-40727","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uk_isp_news","tag-business","tag-law","tag-ofcom-regulation","tag-politics"],"share_on_mastodon":{"url":"https:\/\/mastodon.social\/@ispreview\/113907153172334822","error":""},"yoast_head":"\nCompetition Watchdog Finds UK Cloud Market "not working as well as it could" - ISPreview UK<\/title>\n<meta name=\"description\" content=\"The Competition and Markets Authority (CMA) has today published the "provisional findings" of their investigation into the UK\u2019s public cloud\" \/>\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\/2025\/01\/competition-watchdog-finds-competition-concerns-in-uk-cloud-market.html\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Competition Watchdog Finds UK Cloud Market "not working as well as it could" - 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