Ofcom, the UK’s digital regulator, has proposed referring the UK cloud services market to the Competition and Markets Authority to see if there’s any anti-competitive behaviour going on. Ofcom’s investigation has found that companies employ practices that make it hard to switch and use multiple cloud suppliers and named Amazon’s AWS and Microsoft specifically due to concerns over their dominance.
Regarding these two companies’ dominant position in the market, Ofcom states that in the UK, AWS and Microsoft share 60-70% of the market share, while Google, their closest competitor, accounts for 5-10%.
Ofcom highlighted three areas where it’s particularly concerned with the practices of cloud providers. They are as follows:
- Egress fees. These are the charges that customers pay to transfer their data out of a cloud and the hyperscalers set them at significantly higher rates than other providers. The cost of egress fees can discourage customers from using services from more than one cloud provider or to switch to an alternative provider.
- Technical restrictions on interoperability. These are imposed by the leading firms that prevent some of their services working effectively with services from other providers. This means customers need to put additional effort into reconfiguring their data and applications to work across different clouds.
- Committed spend discounts. These can benefit customers by reducing their costs, but the way these discounts are structured can incentivise customers to use a single hyperscaler for all or most of their cloud needs, even when better quality alternatives are available.
While these practices make it harder for customers to find a bargain, it also makes it harder for smaller cloud providers to compete with the bigger players. If smaller rivals are kept out by the likes of Microsoft, Amazon, and Google, Ofcom fears that we’ll see further concentration towards the market leaders.
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