NEWS5 October 2023

Ofcom refers UK cloud services market to CMA

Media News Technology UK

UK – Regulator Ofcom has referred the UK cloud services market to the Competition and Markets Authority (CMA) for further investigation after completing its own probe into the industry.


Last year, Ofcom said it was carrying out a market study on the public cloud infrastructure services market, centred on concerns of a potential monopoly in the industry.

The regulator said it was now referring the investigation to the CMA after identifying features that make it more difficult for UK businesses to switch and use multiple cloud suppliers, as well as concerns about the position of the market leaders Amazon and Microsoft.

Ofcom found that Amazon Web Services (AWS) and Microsoft had a combined market share of 70% to 80% in 2022, with Google their closest competitor with a share of between 5% and 10%.

However, AWS has disputed the findings, and suggested the concerns raised by Ofcom were based on a “fundamental misconception of how the IT sector functions”.

Features of the market that concerned Ofcom included egress fees, which are charges that customers pay to transfer their data out of a cloud and which were set at higher rates for the top firms than their competitors.

Other issues included technical barriers to interoperability and portability, which could result in customers needing to put additional effort into reconfiguring their data and applications so they can work on different clouds, making it more difficult to combine different services across cloud providers or to change provider.

Committed spend discounts were also highlighted by Ofcom, as the way these discounts are structured can incentivise customers to use a single company for all or most of their cloud needs, even when better alternatives are available.

Ofcom aid the result of these market features was that it could be challenging for some customers to switch or use multiple cloud providers, making it difficult to bargain for a good deal with their provider, or to mix and match the best quality services across different providers.

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.

“Some UK businesses have told us they’re concerned about it being too difficult to switch or mix and match cloud provider, 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.”

An AWS spokesperson said: “We disagree with Ofcom’s findings and believe they are based on a fundamental misconception of how the IT sector functions, and the services and discounts on offer. Only a small percentage of IT spend is in the cloud, and customers can meet their IT needs from any combination of on-premises hardware and software, managed or co-location services, and cloud services.

AWS designs cloud services to give customers the freedom to choose technology that best suits their needs. UK companies, and the overall economy, benefit from robust competition among IT providers, and the cloud has made switching between providers easier than ever. Any unwarranted intervention could lead to unintended harm to IT customers and competition. AWS will work constructively with the CMA.” 

 On the subject of egress fees, the spokesperson added: “AWS does not charge separate fees for switching data to another IT provider. Customers make hundreds of millions of data transfers each day in the ordinary course of business, and over 90% of our customers pay nothing for data transfer because we provide them with 100 gigabytes per month for free.”