UK communications regulator Ofcom raised the prospect of referring the cloud market to competition authorities, after uncovering practices by leading players it believes could hamper businesses switching to other providers or using multiple suppliers.

Ofcom is in the process of assessing the state of cloud service provision in the UK and at the halfway point published initial findings, outlining potential problems and highlighting a proposal to refer the cloud sector to the country’s Competition and Markets Authority for further assessment.

In a statement, Ofcom noted it had “provisionally identified” issues which could be deemed to limit competition in the sector, adding it is “particularly concerned about the practices of Amazon and Microsoft because of their market position”.

Ofcom’s research found Amazon Web Services (AWS) and Microsoft had a combined market share of between 60 per cent and 70 per cent in the UK, with Google next on 5 per cent to 10 per cent.

“While competitive market forces are delivering benefits to customers – especially where providers are competing to attract new customers – in the form of innovative products and discounts, other features of the market give cause for concern,” the regulator noted.

Issues cited comprised high fees to transfer data out of a cloud; technical restrictions on interoperability leading to “additional effort” to reconfigure data and applications to work elsewhere; and committed spend discounts it claims incentivises use of a single hyperscaler.

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

Ofcom’s final report on the issue, along with a potential recommendation to refer the issue to the CMA, is expected by 5 October at the latest. The regulator is inviting feedback on its initial findings until 17 May.