CMA to probe Amazon and Microsoft cloud market dominance

Ofcom has referred the public cloud infrastructure services market to the Competition and Markets Authority (CMA) for further investigation following its own probe into UK cloud services. It comes as an Ofcom study identified features that supposedly make it more difficult for UK businesses to switch and use multiple cloud suppliers. It said it was “particularly concerned” about the position of Amazon and Microsoft in the market. In October 2022, Ofcom launched a study under the Enterprise Act 2002 into cloud services in the UK to assess how well this market was working. It examined the strength of competition and any features that might “limit innovation and growth” in the sector by making it difficult for other cloud providers to enter the market or smaller companies to expand. It said that because the cloud sector is still evolving, it looked at how the market is working today and how it expects it to develop in the future, aiming to identify any potential competition concerns early to “prevent them becoming embedded as the market matures”. Currently, Amazon Web Services (AWS) and Microsoft are the two leading providers of cloud infrastructure services in the UK, with a combined market share of 70-80% in 2022. Google is their closest competitor with a share of 5-10%. 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 providers, 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.” Sarah Cardell, CEO of the CMA, said: “We welcome Ofcom’s referral of public cloud infrastructure services to us for in-depth scrutiny. This is a £7.5bn market that underpins a whole host of online services – from social media to AI foundation models. Many businesses now completely rely on cloud services, making effective competition in this market essential. “Strong competition ensures a level playing field so that market power doesn’t end up in the hands of a few players – unlocking the full potential of these rapidly evolving digital markets so that people, businesses, and the UK economy can get the maximum benefits.” She added: “The CMA’s independent inquiry group will now carry out an investigation to determine whether competition in this market is working well and if not, what action should be taken to address any issues it finds.” Cloud services allow remote access to computing resources on demand and over a network. They are being rapidly adopted by many businesses and have become an essential part of how many digital services are delivered to consumers. Ofcom has estimated that the market for cloud services in the UK was worth up to £7.5bn in 2022.