U.K. regulator Ofcom said it is preparing to ask the Competition and Markets Authority (CMA) to conduct a formal investigation of the cloud infrastructure market and specifically look at the practices of cloud leaders Amazon Web Services (AWS) and Microsoft.
Ofcom noted that many UK businesses are reliant upon cloud services and that the market is dominated by AWS, and Microsoft, which combined control about 60% to 70% of the UK market, and Google Cloud Platform (GCP), which makes up another 5% to 10% of the market.
Ofcom said its cloud services market study, which it launched last October and is only at its half-way point, uncovered concerning practices that it thinks the CMA should investigate.
When asked about Ofcom’s call for an investigation, AWS said in a statement that the company will continue to work with the regulator ahead of its final report. “The U.K. has a thriving and diverse IT industry with customers able to choose between a wide variety of IT providers. At AWS, 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,” an AWS spokesperson said.
The problem areas
Ofcom noted that there appears to be competition early in the cloud selection process and customers have some bargaining power when they first migrate to the cloud. But after that, the power shifts to the cloud provider.
Areas of particular concern, according to Ofcom, include egress fees, which are the fees customers pay to transfer their data out of the cloud. The regulator said that AWS, Microsoft and GCP charge customers significantly higher egress fees than other cloud providers and those fees discourages customers from switching to another provider or using multiple cloud providers.
Another problem area is interoperability. According to Ofcom, the three big cloud providers prevent some of their services from interoperating with services from other providers, resulting in customers having to reconfigure their data and applications so they work across different clouds. This practice also discourages companies from using multiple cloud services.
And finally, Ofcom called out the big-three cloud providers on their “committed spend discounts.” These discounts are structured to incentivize customers to use a single cloud provider for all or most of their cloud needs, even when a better alternative is available.
Moreover, Ofcom notes that these practices will not only make it harder for enterprises to use more than one cloud provider, but it also makes it difficult for smaller cloud providers to compete against the big three.
The regulatory agency added that because Microsoft and GCP all report high levels of profitability from their cloud businesses, which further indicates a need for more competition in the market.
It’s too early to predict how much of an impact Ofcom’s call for an investigation will have on the overall cloud market, but Will Townsend, senior analyst, security, carriers and enterprise networking at Moor Insights and Strategy, said he believes that it could provide an opportunity for other hyperscalers such as Oracle Cloud Infrastructure to enter the market more aggressively and provide customers with more choice.