Ofcom ‘concerned’ about Microsoft and Amazon domination of cloud market

Ofcom could call in the competition regulator after finding “concerns” in the cloud services market, a backbone of the online world which is dominated by two companies.

The telecoms regulator proposed on Wednesday that the Competition and Markets Authority open its own probe into the sector amid concerns customers find barriers in their way when trying to switch suppliers.

The cloud space is dominated by two players, Amazon and Microsoft, which together hold an approximate 60%-70% market share.

Ofcom said it was “particularly concerned” about the two companies’ practices because of their dominant position.

Millions of people and businesses have come to rely on cloud computing in recent years.

The cloud loosely refers to a series of massive servers around the world which users can tap into to store photographs or emails, or run software from.

Ofcom said there was still competition in the sector, with innovative products and discounts offered to new customers.

However, it was concerned for customers trying to move from one cloud supplier to another.

The massive suppliers charge “significantly higher” fees than smaller providers to move data out of the cloud and to another company’s servers, Ofcom said.

Users might also struggle to use more than one company’s services at the same time because the leading firms prevent some of their services working effectively alongside those from other suppliers.

“There is a risk that the features we have identified could lead the market to concentrate further towards the market leaders,” Ofcom said.

It said the Competition and Markets Authority would be best-placed to investigate this further.

Fergal Farragher, the Ofcom director who led its study into the sector, said: “We’ve done a deep dive into the digital backbone of our economy and uncovered some concerning practices, including by some of the biggest tech firms in the world.

“High barriers to switching are already harming competition in what is a fast-growing market.

“We think more in-depth scrutiny is needed, to make sure it’s working well for people and businesses who rely on these services.”

Ofcom said it would take feedback on its findings until mid May and would make its final decision in October.

Microsoft said: “We look forward to continuing our engagement with Ofcom on their cloud services market study.

“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.”

Amazon Web Services said: “These are interim findings and AWS will continue to work with Ofcom ahead of the publication of its final report.

“The UK 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.”