Ofcom has today referred the public cloud infrastructure services
market to the Competition and Markets Authority (CMA) for an
independent market investigation to further examine the market
and consider whether there are competition concerns and, if so,
what interventions can improve the supply of these important
services for UK customers.
Cloud services allow remote access to computing resources on
demand and over a network. They are being rapidly adopted by many
businesses and have become an essential part of how many digital
services are delivered to consumers. Ofcom has estimated that the
market for cloud services in the UK was worth up to £7.5 billion
in 2022.
In its market
study, Ofcom identified a number of features in the supply of
cloud services that make it more difficult for customers to
switch and use multiple cloud suppliers.
The features which Ofcom is most concerned about are:
- Egress fees – charges that cloud customers must pay to move
their data out of the cloud
- Discounts – which may incentivise customers to use only one
cloud provider
- Technical barriers to switching – which may prevent customers
from being able to switch between different clouds or use more
than one provider
Ofcom’s report also outlines concerns it has heard about the
software licensing practices of some cloud providers, in
particular Microsoft.
Sarah Cardell, CEO of the CMA, said:
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.
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.
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.
In its 2023 to 2024 Annual
Plan, the CMA outlined its areas of focus for the next three
years, which includes ensuring effective competition in digital
markets as a priority. The CMA’s market investigation into cloud
services will form an important part of its wider programme of
work in digital markets including under the incoming Digital
Markets, Competition and Consumer Bill.
The CMA will conclude its investigation by April 2025.
For more information visit the Cloud Services Market
Investigation case page.
