Amazon and Microsoft Face UK Cloud Computing Competition Probe
The UK's cloud computing market is under scrutiny as media watchdog Ofcom raises concerns about the dominance of Amazon and Microsoft in the field. Together, these companies hold a substantial 70-80% share of the market, with Google as an extremely distant third at 5-10%. Ofcom has expressed concern that the lack of competition makes it challenging for businesses to switch providers.
To address these concerns, Ofcom has referred the sector to the UK's Competition and Markets Authority (CMA) for an investigation. While Amazon dismisses Ofcom's concerns as a "fundamental misconception" of the industry, both Amazon and Microsoft have shown a willingness to cooperate with the CMA's inquiry.
In 2022, the UK's cloud services market was estimated to be worth up to £7.5 billion. Cloud computing has become a crucial part of modern infrastructure that allows data storage, remote software usage, media streaming, and gaming for both businesses and individuals. It utilises large networks of remote machines stored in data centres worldwide, a significant portion of which are owned by Amazon and Microsoft.
According to CMA chief executive Sarah Cardell, effective competition is vital in this market to ensure a level playing field and maximise the benefits for people, businesses, and the UK economy. The CMA's independent inquiry group will conduct an investigation to determine whether competition is functioning effectively in the cloud computing market and propose necessary actions. The CMA has the authority to compel companies to alter their practices, block acquisitions, or divest parts of their businesses if deemed necessary to protect market integrity. The inquiry is intended to be completed by April 2025.
Fergal Farragher, Ofcom's consumer protection director, emphasised the importance of cloud computing in underpinning various digital services. However, he also pointed out the difficulties some UK businesses face in switching between providers due to obstacles like data transfer fees. Ofcom has suggested limiting or eliminating these fees to enhance competition and ensure the cloud market serves UK consumers and businesses effectively.
The CMA's inquiry into the cloud computing market aligns with the growing adoption of artificial intelligence (AI), as cloud services provide the infrastructure for power-intensive AI models. This investigation aims to foster innovation and competition, ultimately benefiting businesses and consumers alike.
