The “UK Cloud Services Market Study” final report by Ofcom, published on 5 October, has identified specific market features that can obstruct competition and limit business flexibility in the UK’s cloud services sector.
The report emphasised that two leading providers of cloud infrastructure services, Amazon Web Services (AWS) and Microsoft, had significant UK sector dominance, holding 70-80% of the cloud services market share. Their closest competitor, Google, holds a share of 5-10%. It was also noted that a diverse set of independent software vendors (ISVs) utilise hyperscalers’ (AWS, Microsoft, and Google) infrastructure while also directly competing with them.
Ofcom outlined specific market features that can deter customers, particularly those with complex needs, from switching providers or adopting multi-cloud approaches. Egress fees (charges to transfer data out of a cloud), technical barriers to interoperability, and committed spend discounts were identified as features existing as effective barriers to competition.
While acknowledging that the Digital Markets, Competition and Consumers Bill has the potential to impact the competitive landscape for cloud infrastructure services, the bill is not yet law. As provisions are currently undergoing scrutiny in Parliament, Ofcom considers it inappropriate to rely on the bill to address the competition concerns identified in the report.
As a result of this study, Ofcom has referred the cloud infrastructure market to the Competition and Markets Authority (CMA) for an independent investigation. The CMA has initiated a market investigation into the supply of public cloud infrastructure services in the UK, appointing an inquiry group to oversee the process and setting a statutory deadline of 4 April 2025. The competition regulator inquiry will assess whether adverse effects on competition exist and recommend necessary actions.
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