In a landmark move that could reshape Britain's digital landscape, communications regulator Ofcom has officially escalated its concerns about the cloud computing market to the Competition and Markets Authority (CMA) for a full-scale, in-depth investigation.
The decision comes after a year-long study revealed what Ofcom describes as significant features preventing effective competition in the £7.5 billion sector. The investigation will primarily focus on the practices of tech behemoths Amazon and Microsoft, who together command a staggering 70-80% of the UK cloud market.
Barriers to Competition and Innovation
Ofcom's investigation identified several concerning practices that make it difficult for businesses to switch cloud providers or use multiple providers simultaneously. These include:
- Egress fees: High charges imposed by major providers when customers want to transfer their data out to another service
- Technical restrictions: Complicated interoperability issues that hinder working across different cloud platforms
- Committed spend discounts: Financial incentives that can lock customers into using a single provider
The Stakes for UK Businesses
"This is fundamentally about the future of digital innovation in Britain," said Fergal Farragher, Ofcom's Director responsible for the market study. "We're concerned that the market isn't working as well as it should be, potentially costing UK businesses hundreds of millions of pounds and limiting their choice and flexibility."
The CMA now has 18 months to conduct its investigation and determine whether these practices constitute anti-competitive behaviour that requires intervention. Possible outcomes could include mandatory changes to business practices, increased transparency requirements, or even structural separation of certain services.
Industry Response and Next Steps
While Amazon Web Services has expressed disappointment with Ofcom's referral, calling their concerns "fundamentally flawed," other cloud providers and industry groups have welcomed the investigation as necessary for ensuring a level playing field.
The CMA is expected to begin its investigation immediately, with preliminary findings likely to emerge within the next 12 months. The outcome could have far-reaching implications not just for cloud computing, but for the entire digital ecosystem that relies on these foundational services.
