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Ofcom’s Scrutiny on Public Cloud Market Dominance: Analysis & Implications

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The public cloud infrastructure services domain of the UK has caught the attention of Ofcom, the country’s communications regulator. Ofcom has tasked the Competition and Markets Authority (CMA) with a meticulous examination of the market stronghold of leaders Amazon and Microsoft.

This decision by Ofcom follows a thorough study scrutinizing the UK’s cloud services provision. The focus was to decipher whether these markets were functioning optimally or inviting regulatory intervention. The inquiry highlighted that two primary cloud infrastructure service providers, Amazon Web Services (AWS) and Microsoft (Azure), command a shared market stake of 70% to 80% as of 2022. This puts Google, the nearest rival with a market share ranging between 5% to 10%, far behind.

Several instances were discovered to be potentially snubbing market competition. Factors like expensive data transfer fees, expenditure discounts, and technical hurdles impeding the switch could limit competition. The resultant effect of these challenges is a difficulty for consumers to change their cloud providers or use more than one provider concurrently.

The regulator voiced worries about further long-term deterioration of the level of competition in the sector. This led Ofcom to refer the scrutiny of the public cloud infrastructure services to the CMA, calling for an exhaustive market assessment.

The next move hinges on the CMA’s findings. The authority will independently ascertain any adverse influence on competition and decide on whether to undertake action or suggest others to do so. Fergal Farragher, Ofcom director, stated transparently to CNBC, “I think what we’d like to see is a fair playing field for competition in the market, and I think that’s all about making sure that the business customers who rely on the cloud can switch and use multiple providers easily.”

This action by Ofcom isn’t startling. An earlier Ofcom report hinted towards the market tilting dangerously out of balance. It mentioned, “We are concerned that constraints on customers’ ability to use more than one provider could make it harder for smaller cloud providers to win business and compete with the market leaders.”

Amazon, predictably, had issues with the report. The company claimed that the Ofcom document was “based on a fundamental misconception of how the IT sector functions.”

The CMA has delegated the study to an independent investigation group. The team is expected to wrap up its work by April 2025.

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