Ofcom to refer UK cloud market to CMA

Ofcom’s investigation into UK cloud services, which is at its halfway point, found that 60% to 70% of the market was controlled by Microsoft and Amazon Web Services (AWS), with Google the closest competitor with 5% to 10% market share.

These companies, called “hyperscalers” by Ofcom, are used by the vast majority of cloud customers in some form, and was having some negative impacts on customers, such as in their bargaining powers over pricing.

Therefore, Ofcom proposes referring the cloud infrastructure market to the CMA for a market investigation to examine any barriers and consider any interventions that could improve how the market works for customers and UK consumers.

Ofcom is also inviting feedback on its interim findings and the proposal to make a market investigation reference by 17th May 2023, with a final report on its findings and recommendations to be published before October 2023.

A statement from Ofcom added: “Competitive market forces are delivering benefits to customers – especially where providers are competing to attract new customers – in the form of innovative products and discounts. However, other features of the market give cause for concern, such as egress fees; technical restrictions on interoperability; and committed spend discounts.

“These market features can make it difficult for some existing customers to bargain for a good deal with their provider. There are indications this is already causing harm, with evidence of cloud customers facing significant price increases when they come to renew their contracts.”