Microsoft and AWS caution Ofcom against referring UK cloud market over to CMA

Microsoft and AWS caution Ofcom against referring UK cloud market over to CMA
Written by Techbot

As the UK cloud market braces itself for the publication of Ofcom’s final report into the state of the market, Amazon and Microsoft’s responses to regulator’s interim findings have been made public

Caroline Donnelly


Published: 07 Jul 2023 17:15

Microsoft and Amazon Web Services (AWS) are calling on communications regulator Ofcom to hold off on getting the Competition and Markets Authority (CMA) to probe the UK cloud infrastructure services market for proof of anti-competitive behaviour, it has emerged.

Ofcom has published in full the responses it has received to the interim report it published in April 2023 that shared its initial round of findings about the how the UK cloud infrastructure services market operates.

As reported by Computer Weekly at the time, the interim report featured accusations from Ofcom that both Microsoft and AWS use anti-competitive behaviours that may financially disadvantage UK consumers and business.

These behaviours allegedly include charging customers egress fees to transfer their data out of the cloud and imposing interoperability restrictions that mean customers have to put “additional effort into reconfiguring their data and applications to work on different clouds”, Ofcom stated.

The report also raised a red flag over the practice of offering customers “committed spend discounts” to incentivise them to use a single provider for “all or most” of their cloud needs, which can make it less attractive for them to use rival providers as new needs emerge.

“As a result, we are concerned that a significant number of customers, especially those with more complex requirements, may face material barriers to switching and multicloud. This cloud leave some customers ‘locked-in’ to one of the leading providers,” the report added.

“We are most concerned in relation to AWS and Microsoft, given their market position and the fact they display some form of all of the above behaviours that limit competition.”  

Ofcom also used the interim report to confirm it is consulting on whether to refer the market over to the CMA for further investigation after uncovering evidence of behaviours and features of both platforms that appear to make it difficult for customers to switch between providers or add further ones to their roster of cloud partners.

Among the 30 or so responses Ofcom has received in the wake of its interim report are two lengthy submissions from Microsoft and AWS, in which both parties outline their misgivings about Ofcom’s suggestion of getting the CMA to take a closer look at the market.

The AWS response runs to 14 pages and claims the concerns raised by Ofcom are “based on fundamental misconceptions about the IT sector, global networking technology, the actual interoperability of IT services, and the discounts on offer,” its response stated.

“Rather than inhibiting customer choice, the cloud has made switching between IT providers easier than ever before. Conversely, the potential interventions identified in the interim report would likely dampen competition and impede innovation to the detriment of IT customers.”

It added: “We therefore do not consider that the proposal put forward in the interim report to refer ‘cloud infrastructure services’ to the UK’s Competition and Markets Authority for potential regulatory intervention is merited or appropriate.”

Microsoft, meanwhile, submitted a 58-page response in which it claimed the case for referring the market to the CMA “is not made out” and could stand to leave public and private sector cloud users worse off in the long-run.

“Given the fast-evolving and highly dynamic nature of cloud, any intervention could very well be net negative and leave UK enterprises and public sector customers worse off – if, for example, UK customers were deprived of discounts, or of innovation through ‘interoperability requirements which favour portability considerations over innovation and differentiated value-add services,” the company response stated.

“It would be a particularly unfortunate outcome if UK businesses and public sector customers faced less vibrant and competitive cloud solutions on a global stage than those available to their rivals in the EU, the US and China.”

Computer Weekly contacted Ofcom for clarification on when the final version of its report into the state of the UK cloud infrastructure services market, but received no response at the time of publication.

Other respondents to Ofcom’s interim report include fellow hyperscale cloud giant Google, who said in its response that it was of the view that “competition in UK cloud services is generally working well, as evidenced by the broad set of [cloud service providers]” that offer cloud infrastructure, platform and software services today.

Its response also sought to play down the significance of egress fees, but did back Ofcom’s take that “technical interoperability barriers erected by certain legacy providers” do make it difficult for customers to switch between providers and make use of multicloud setups.

“We share the wider industry’s concern that the unfair licensing practices and commercial strategies deployed by certain legacy on-premises IT providers are causing significant harm to the cloud sector and UK customers at this critical inflection point by creating commercial lock-ins,” said Google Cloud in its response.

“Google believes these unfair licensing practices, which Ofcom considers to be beyond the scope of its market study, represent the most significant barrier to interoperability and multicloud in the market. Google welcomes Ofcom’s continued engagement with this issue together with the CMA.”

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