Microsoft and Amazon face UK investigation on cloud computing

The UK’s communications watchdog has called for an investigation into Microsoft and Amazon’s dominance of the country’s cloud computing market in the latest challenge to the tech giants from global regulators.

Ofcom said on Wednesday it was “particularly concerned” by the practices of Amazon Web Services and Microsoft, which together control between 60 and 70 per cent of the UK cloud market. It has proposed referring the sector to the Competition and Markets Authority for further investigation.

Cloud computing is dominated by Amazon and Microsoft and has become a crucial driver of revenue at the tech giants.

Growth in demand for these services, however, has slowed this year and customers have sought to cut costs, with some complaining of rising prices and the difficulty of moving between cloud providers.

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Ofcom’s move comes amid growing global scrutiny over the cloud market. Last year, Microsoft changed its licensing policies in Europe in an effort to head off potential antitrust action from regulators in Brussels.

The tech companies are already the targets of competition watchdogs in the United States, UK and European Union on multiple fronts, with investigations into Microsoft’s $75 billion (€68 million) acquisition of video games maker Activision and Amazon’s deal to buy Roomba-maker iRobot.

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Ofcom said it was concerned that, if unchecked, the concentration of cloud computing supply in the hands of a small number of large US companies could lead to British customers paying more and smaller groups being squeezed out of the market. Google is the UK’s third-largest provider of cloud services, with a share of between 5 per cent and 10 per cent.

The communications regulator has been examining the cloud sector since October of last year. In provisional findings, it has found that cloud companies are making it difficult for customers to switch provider, use multiple providers or to allow their services to “interoperate” with other cloud groups.

Ofcom has opened a consultation on its proposal and will make a final decision on whether to refer the case to the CMA by October 2023.

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“We’ve uncovered some concerning practices, including by some of the biggest tech firms in the world,” said Fergal Farragher, Ofcom’s director responsible for the market study.

“High barriers to switching are already harming competition in what is a fast-growing market. We think more in-depth scrutiny is needed.”

Noting that Ofcom has yet to publish a final report on its findings, Amazon Web Services said: “We design our cloud services to give customers the freedom to build the solution that is right for them with the technology of their choice.

“This has driven increased competition across a range of sectors in the UK economy by broadening access to innovative, highly secure and scalable IT services.”

Microsoft said: “We remain committed to ensuring the UK cloud industry stays highly competitive and to supporting the transformative potential of cloud technologies to help accelerate growth across the UK economy.” - The Financial Times