Amazon and Microsoft’s cloud computing dominance to be investigated by competition watchdog – business live

That was quick. Britain’s competition regulator has announced that it is indeed launching a market investigation into the supply of public cloud infrastructure services in the UK, following Ofcom’s referral.

The Competition and Markets Authority (CMA) says it has appointed independent panel members to an inquiry group, who will act as the decision makers on this investigation.

They will publish “an issues statement” soon, which will lay out the proposed focus of the CMA’s investigation, for consultation.

The CEO of the CMA, Sarah Cardell (who has already tangled with Microsoft over its takeover of Activision Blizzard) says:

We welcome Ofcom’s referral of public cloud infrastructure services to us for in-depth scrutiny. This is a £7.5bn market that underpins a whole host of online services – from social media to AI foundation models. Many businesses now completely rely on cloud services, making effective competition in this market essential.

Strong competition ensures a level playing field so that market power doesn’t end up in the hands of a few players – unlocking the full potential of these rapidly evolving digital markets so that people, businesses, and the UK economy can get the maximum benefits.

The CMA’s independent inquiry group will now carry out an investigation to determine whether competition in this market is working well and if not, what action should be taken to address any issues it finds.

It’s around a year since Ofcom announced it would examine the world’s biggest tech companies’ dominance in areas such as cloud computing, messaging and smart devices.

And today Fergal Farragher, the Ofcom director responsible for that market study, says it’s not clear that there is effective competition in the cloud computing world.

Farragher says:

“The cloud is the foundation of our digital economy and has transformed the way companies run and grow their businesses. From TV production and telecoms networks to AI innovations – all of these things rely on remote computer power that goes unseen.

Some UK businesses have told us they’re concerned about it being too difficult to switch or mix and match cloud provider, and it’s not clear that competition is working well. So, we’re referring the market to the CMA for further scrutiny, to make sure business customers continue to benefit from cloud services.”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

British media regulator Ofcom has called for an antitrust investigation into Amazon and Microsoft’s dominance of the UK’s cloud computing market.

Following a probe into UK cloud services, Ofcom has decided to refer the public cloud infrastructure services market to the Competition and Markets Authority for further investigation, it announced this morning.

Ofcom are concerned that it is hard for UK businesses to switch and use multiple cloud suppliers.

And it points the fingers at two of the largest tech giants, saying “We are particularly concerned about the position of the market leaders Amazon and Microsoft.”

Amazon Web Services (AWS) and Microsoft had a combined market share of 70-80% in 2022, Ofcom says, followed by Google with a share of 5-10%. The vast majority of cloud customers use the services of these ‘hyperscalers’ in some form, Ofcom says.

Ofcom says there are three areas of 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 barriers to interoperability and portability. These can result in customers needing to put additional effort into reconfiguring their data and applications so they can work on different clouds. This makes it more difficult to combine different services across cloud providers or to change provider.

• 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.

As a result, Ofcom have now asked the CMA to carry out an independent investigation to decide whether there is an adverse effect on competition, and if so, whether it should take action or recommend others to take action.

More details and reaction to follow…

Also coming up today

Some calm has returned to the financial markets after yesterday’s nervy bond sell-off.

Asia-Pacific shares are higher today, recovering from Wednesday’s losses, as concerns over high interest rates ease.

As we blogged yesterday, UK long-term borrowing costs hit their highest level in 25 years on Wednesday morning, while US Treasury yields hit a 16-year high. But the rout abated after a surprisingly small rise in US private sector jobless claims was announced.

By the end of the day there was relief across financial markets, but for how long?

Jim Reid of Deutsche Bank says:

After a fraught start we saw bonds and equities rally back following a tough few days.

However, the recovery accelerated with bad employment data, so the answer to how to get out of the recent rout was clearly the return of bad news is good news.

The agenda

• 7am BST: German trade balance

• 9am BST: UK car sales for September

• 9.30am BST: UK construction PMI survey for September

• 1.30pm BST: US weekly jobless claims data

• 1.30pm BST: US trade data for August