The UK’s communications regulator is halfway through a probe into the cloud services market. Its preliminary findings revealed features and practices that hinder customer switching and the use of multiple cloud providers. 

Ofcom is also taking issue with Amazon Web Services (AWS) and Microsoft Azure’s dominant market position in the UK. According to Ofcom, the two companies hold a combined market share of 60-70%, with the closest competitor being Google holding just 5-10% of the market. 

“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,” said Fergal Farragher, Ofcom’s director responsible for the market study.

Several features in particular are raising concern with Ofcom. High egress fees set by Amazon and Microsoft discourage customers from using multiple providers. Technical restrictions on configuring data across different clouds add to customer difficulty, while committed spend discounts lead to a concentration of cloud services with a single provider. 

Ofcom finds that these practices make it challenging for users to negotiate favourable deals with providers, leading to price increases during contract renewals. Limitations on using multiple providers also make it harder for smaller companies to compete with the leaders. 

“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,” continues Farragher.

In a bid to address the issues promptly, Ofcom has proposed referring the cloud infrastructure market to the CMA for a more comprehensive investigation. Some leaders in the industry see this proposal as an impediment on innovation. 

Mark Appleton, chief customer officer at ALSO Cloud UK suggests AWS and Microsoft provide customers with choice between various technologies, and design their services to allow customers to build the solution that is right for them based on the technology of their choice. 

“Due to the rapid evolution and highly dynamic nature of cloud technology, any intervention could be negative and result in poor outcomes for UK businesses and the public sector,” said Appleton.

“Suppose, for instance, UK customers were denied discounts or innovation due to interoperability requirements prioritising portability over innovation and differentiated value-added services,” he said. 

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Cloud computing is a fast-growing, integral part of businesses in every corner of the economy. It leverages data centres globally to give users remote access to services like software, storage, and networking. 

Ofcom launched its probe last October under the Enterprise Act 2002 to evaluate the efficiency, assess competition, and scrutinise features that would impede innovation in the UK cloud infrastructure market. 

The final report with all the findings and recommendations are expected to be released before 5 October 2023.