It has been announced that, following a report by Ofcom, the Competition and Markets Authority (CMA) is launching a market investigation into the supply of public cloud infrastructure services in the UK.
Cloud computing uses data centres around the world to provide access to services like software, storage and networking. Ofcom has referred the public cloud infrastructure services market to the CMA for investigation over if there are valid concerns over hyperscalers limiting competition and hampering innovation.
If this is the case, the CMA will also determine what interventions can take place to improve the supply of these services for UK customers.
Are larger tech companies holding a ‘monopoly’ over essential services?
The regulatory authority first recommended the CMA to investigate back in April 2023, where it surmised that its market study had “provisionally identified” practices that made it more difficult for UK customers to switch and use multiple cloud suppliers.
It cited the practices of Amazon and Microsoft in particular as, because of their market position, they could make it more challenging for existing customers to bargain for a good deal with their provider. Ofcom refers to the dominant providers as “hyperscalers,” as the majority of cloud customers use their services in some form.
Ofcom also suggested that there are already indications of harm, with evidence of cloud customers facing “significant price increases” when renewing their contracts.
Amazon and Microsoft have both told the BBC that they would work with the CMA as it conducts its investigation, however, with Amazon stating that it felt Ofcom's concerns were "based on a fundamental misconception" of the sector.
The features in which Ofcom is most concerned about are:
- Egress fees - charges that cloud consumers must pay in order to move their data out of the cloud
- Discounts - these may incentivise customers to use only one cloud provider
- Technical barriers to switching - these may prevent customers from being able to switch between different clouds, or use more than one provider
A need to create a “level playing field” within cloud services
In its 2023 to 2024 Annual Plan, the CMA has highlighted its key areas of focus for the next three years, including ensuring that effective competition in digital markets is a priority. This investigation will form an important part of its wider work in digital markets and is expected to conclude in 2025.
“Cloud has the power to democratise IT, helping companies digitise operations, enhance security and compliance, and improve agility,” says Jake Madders, Director of UK Cloud services provider, Hyve Managed Hosting. “The idea was that one of the main advantages of the cloud for business would be the ability to avoid vendor lock-in and easily scale these digital operations.”
Madders continues: “Cloud is an extremely fast-growing market globally, but in a country that sees itself as having a thriving tech industry, features that are being allowed in public cloud infrastructure such as exit fees, restrictions on collaboration between different platforms, and difficulty of switching between providers are affecting competition and stifling innovation.
“An overreliance on public cloud providers or any single cloud provider will open organisations up to increased security risk and enhanced possibility of system outages. Companies need to be able to diversify their cloud approach to add redundancy, or in other words, to spread their cloud risk, and there has to be regulation to ensure this is allowed.
“Vendor lock-in and unfair practices around software licensing have been placing limitations on the growth of other cloud services providers. It’s crucial we level the playing field with rules that apply to every player in the market and deliver value for every customer, irrespective of which cloud infrastructure they use,” says Madders.
Other magazines that may be of interest - Data Centre Magazine.
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