UK watchdog Ofcom is set to launch an antitrust investigation into AWS and Microsoft over fears their dominance of the UK's cloud computing market could hinder competition.
That’s according to a report by Reuters citing two sources familiar with the matter. The report notes that the recommendation, first issued by Ofcom in April, will remain in the regulator’s final report set to be published later this week.
Between them, Amazon and Microsoft have a combined share of 60-70 per cent of the total cloud computing market, and their closest competitor, Google, boasts an additional 10 per cent.
Ofcom warned the current state of Britain's cloud computing market made it difficult for some existing customers to bargain for a good deal with their provider.
The watchdog previously said it had considered referring the market for investigation by the Competition and Markets Authority (CMA) in a report earlier this year. It warned the two tech giants were encouraging users to stick to a single provider for all their needs, greatly reducing competition.
"We are concerned that constraints on customers' ability to use more than one provider could make it harder for smaller cloud providers to win business and compete with the market leaders," the report read.
The report also raised a red flag over the practice of offering customers “committed spend discounts” to incentivise them to use a single provider for “all or most” of their cloud needs, which can make it less attractive for them to use rival providers as new needs emerge.
“As a result, we are concerned that a significant number of customers, especially those with more complex requirements, may face material barriers to switching and multi-cloud. This could leave some customers ‘locked-in’ to one of the leading providers,” the report added.
“We are most concerned in relation to AWS and Microsoft, given their market position and the fact they display some form of all of the above behaviours that limit competition.”
“Portability considerations over innovation”
In response to Ofcom's earlier suggestion, Microsoft submitted a 58-page in which it claimed the investigation could ultimately harm its consumers and the UK cloud computing market.
“It would be a particularly unfortunate outcome if UK businesses and public sector customers faced less vibrant and competitive cloud solutions on a global stage than those available to their rivals in the EU, the U.S. and China," it said.
“Given the fast-evolving and highly dynamic nature of the cloud, any intervention could very well be net negative and leave UK enterprises and public sector customers worse off – if, for example, UK customers were deprived of discounts, or of innovation through ‘interoperability requirements which favour portability considerations over innovation and differentiated value-add services,” Microsoft’s response added.
AWS gave a similar response, claiming that the concerns raised by Ofcom were “based on fundamental misconceptions about the IT sector, global networking technology, the actual interoperability of IT services, and the discounts on offer,”
“Rather than inhibiting customer choice, the cloud has made switching between IT providers easier than ever before. Conversely, the potential interventions identified in the interim report would likely dampen competition and impede innovation to the detriment of IT customers.”
It added: “We therefore do not consider that the proposal put forward in the interim report to refer ‘cloud infrastructure services’ to the UK’s Competition and Markets Authority for potential regulatory intervention is merited or appropriate.”
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