Ofcom is proposing to refer the cloud infastructure market to the UK Competition and Markets Authority for further investigation and possible regulatory action.
A new study on the cloud infrastructure market by Ofcom reveals that Amazon Web Services (AWS) and Microsoft have a combined market share of 60-70%. Google is their closest competitor with a share of 5-10%. Collectively these firms are known as the ‘hyperscalers’ and the vast majority of cloud customers use their services in some form.
The features and practices undertaken by these hyperscaler make it more difficult for customers to switch and use multiple cloud suppliers. We are particularly concerned about the practices of Amazon and Microsoft because of their market position.
Ofcom lists the following causes for concern:
- 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.