Microsoft, Amazon face cloud competition probe as UK regulator raises alarm

Microsoft, Amazon face cloud competition probe as UK regulator raises alarm, google cloud, aws cloud, ofcom, ofcom cloud, ofcom cloud market study

  • Ofcom's review into the cloud computing market reveals that market features hinder competition, making it harder for customers to switch and use multiple suppliers.
  • The regulator has recommended referring the case to the Competition and Markets Authority to investigate further.
  • Microsoft's cloud licensing practices for its Office productivity apps have been singled out by Ofcom for allegedly limiting customer choices to run them on cloud infrastructure other than Microsoft Azure.

U.K. regulators accused Microsoft and Amazon on Wednesday of impeding competition in the cloud services market by unfairly restricting it. This move may eventually lead to an antitrust investigation into their business practices.

Ofcom, the British media watchdog, has published the initial findings of a market study investigating the large-scale cloud services market. With the goal of identifying any potential hindrances to competition posed by firms offering public cloud infrastructure, Ofcom launched a review of the sector in September.

According to Ofcom, "Our preliminary assessment indicates that market characteristics hinder customers from switching and using several suppliers (commonly known as 'multi-cloud')," citing factors such as:

  • "Egress fees" that are significantly higher than other providers for companies to move data out of the cloud. Ofcom revealed “hyperscalers” such as Microsoft and Amazon, known as establish "egress fees" higher than other companies.
  • Leading cloud companies enforce technical constraints on "interoperability" that restrict the effectiveness of their services when used with those of other providers.
  • Incentives for customers to use a single hyperscaler for most, if not all, of their cloud requirements are offered through committed spend discounts that are designed in a specific manner.

Ofcom recommended the case be referred to the Competition and Markets Authority, the regulatory body in the U.K. responsible for guaranteeing competitive markets, for further investigation.

A representative for the CMA(Competition and Markets Authority) confirmed that they have received Ofcom's preliminary findings on their Cloud market study and are presently assessing them.

"We are prepared to conduct a market inquiry in this field if Ofcom concludes that it is necessary after completing its consultation process," stated a spokesperson.

Ofcom indicated that Microsoft, Amazon, and Google, known as "hyperscalers" because of their ability to offer computing and storage at the enterprise level, are the major participants in the vast cloud infrastructure market, which was estimated to be worth between £4.5 billion and £5.0 billion in 2021.

According to the regulator's estimate, Microsoft and Amazon's Amazon Web Services unit holds 60% to 70% of the market, with Google accounting for 5% to 10% of the overall market share.

Ofcom expressed worry about claims regarding licensing terms established by cloud providers, citing Microsoft as an instance of businesses that allegedly "employ their dominant position in software products to manipulate competition in cloud infrastructure." 

The regulator stated that they received evidence indicating that Microsoft makes it more difficult for users of its Office productivity applications to operate them on cloud infrastructure platforms other than Microsoft Azure.

In a statement, Microsoft mentioned, "We are eager to maintain our interaction with Ofcom on their market research on cloud services. We are dedicated to sustaining high competitiveness in the UK cloud industry and to fostering the transformational potential of cloud technologies to boost growth throughout the UK economy."

According to an Amazon Web Services spokesperson, "these are initial findings, and AWS will keep working with Ofcom prior to the release of its final report."

They also stated, "At AWS, we create our cloud services to grant customers the flexibility to create the appropriate solution for their needs, using the technology they prefer. This has stimulated greater competition throughout various sectors of the UK economy by extending access to cutting-edge, extremely secure, and scalable IT services."

Reuters reported last month that Microsoft offered additional adjustments to its cloud computing procedures to prevent an EU antitrust inquiry. This followed Microsoft's announcement in the previous year of changes to its cloud contract terms that made it easier for customers to utilize competing cloud services.

The EU has been examining competition concerns about the company's cloud business after receiving complaints from smaller cloud vendors, including France's OVHcloud.

Francisco Mingorance, the secretary general of the Cloud Services Providers in Europe, commented that Ofcom's conclusions regarding Microsoft's licensing practices reveal that regulators are starting to understand how Microsoft is undermining fair competition in the cloud, and he urged both national and EU antitrust authorities to launch formal investigations into the matter.

Amazon and Microsoft, two major players in the tech industry, have suffered a setback with the release of Ofcom's preliminary findings. These firms benefited greatly from the Covid-19 epidemic, as individuals were compelled to stay indoors, resulting in a surge in demand for digital means of communication and commerce.

Nonetheless, they have encountered difficulties of late, as the relaxation of pandemic regulations and an increase in interest rates have harmed the outlook for technology stocks. During the fourth quarter of 2022, Amazon, Microsoft, and Alphabet all reported a slowdown in their cloud divisions.

Post a Comment

0 Comments