AWS decries Ofcom study as UK cloud market referred to competition watchdog

UK media and telecoms watchdog Ofcom has referred the £7.5 billion UK cloud computing market to the competition regulator, the CMA, after a study that concluded the market had features that could limit competition.

Ofcom said it was particularly concerned about the position of the market leaders Amazon and Microsoft, and alleged that the market had features that make it more difficult for UK businesses to switch and use multiple cloud suppliers.

Amazon Web Services for its part responded by saying that the Ofcom study was “based on a fundamental misconception” of how the market functions.

Ofcom said that Amazon Web Services and Microsoft dominate the UK market, with a combined share of 70-80%. Google trails in third place with a 5-10% share.

The watchdog said it had concerns about egress fees – charges that customers pay to transfer their data out of a cloud – with the two ‘hyperscalers’ charging higher rates than other providers.

It also expressed concerns about technical barriers to interoperability and portability, and discounts that incentives companies to use a single hyperscaler for all or most of their cloud needs.

“The cloud is the foundation of our digital economy and has transformed the way companies run and grow their businesses. From TV production and telecoms networks to AI innovations – all of these things rely on remote computer power that goes unseen,” said Fergal Farragher, the director responsible for the market study.

“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.”

The CMA has appointed independent panel members to an inquiry group, who will act as the decision makers on this investigation. The group will publish an issues statement setting out the proposed focus of the CMA’s investigation shortly for consultation.

The CMA investigation should conclude by April 2025 at the latest.

“We welcome Ofcom’s referral of public cloud infrastructure services to us for in-depth scrutiny. This is a £7.5bn market that underpins a whole host of online services – from social media to AI foundation models. Many businesses now completely rely on cloud services, making effective competition in this market essential,” said Sarah Cardell, CEO of the CMA.

“Strong competition ensures a level playing field so that market power doesn’t end up in the hands of a few players – unlocking the full potential of these rapidly evolving digital markets so that people, businesses, and the UK economy can get the maximum benefits.

“The CMA’s independent inquiry group will now carry out an investigation to determine whether competition in this market is working well and if not, what action should be taken to address any issues it finds.”

AWS response

Amazon Web Services has meanwhile taken issue with the Ofcom market study’s findings. The cloud provider said that it  does not charge separate fees for switching data to another IT provider, with over 90% of customers paying nothing for data transfer because AWS providesthem with 100 gigabytes per month for free.

“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,” said an AWS spokesperson.