Ofcom is set to examine the position of Amazon, Microsoft, and Google in cloud services as part of an investigation into whether the digital communications markets are working well for people and businesses in the UK.
As part of this, Ofcom will launch a market study in the coming weeks under the Enterprise Act 2002 into the UK’s cloud sector. It underlined that the largest providers of cloud services, also known as hyperscalers, are Amazon Web Services (AWS), Microsoft, and Google. The three firms generate around 81% of revenues in the UK public cloud infrastructure services market.
The regulator’s study will assess how well the market is working and examine the strength of competition in cloud services generally, including the position the three hyperscalers hold in the market. It will also consider any market features that might limit innovation or growth in the sector by making it difficult for other companies to enter the market and expand their share.
Ofcom will examine how the market is working today as well as how it expects it to develop in the future, hoping to identify any potential competition concerns early to prevent them from becoming embedded as the market matures. The regulator is hoping to publish a final report, including its concerns or proposed recommendations, within twelve months.
If it finds a market is not working well, it said there can be negative impacts on businesses and ultimately consumers, through higher prices, lower service quality, and reduced innovation. If this happens, Ofcom can make several decisions including making recommendations to the government to change regulations or policy, taking competition or consumer enforcement action, or making a market investigation reference to the Competition and Markets Authority (CMA).
“As the sector regulator, and with our powers to explore potential competition issues under the Enterprise Act, Ofcom’s job is to make sure that communications markets are working well for consumers and businesses,” said the regulator. “That includes keeping pace with disruptive developments in our sectors – such as new and emerging technologies, or changes in commercial models and supply chains.”
Ofcom added that digital innovations also create a risk of new types of harm, so is taking a close look at the sector in line with its duty to promote competition for the benefit of communications consumers.
Ofcom added that over the next year, it will also start a broader programme of work to examine other digital markets, including online personal communication apps and devices for accessing audiovisual content.
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“We are interested in how services such as WhatsApp, FaceTime and Zoom are affecting the role of traditional calling and messaging, and how competition and innovation in these markets may evolve over the coming years,” said Ofcom. “We also want to understand whether any limitations on their ability to interact with each other raises potential concerns.”
It will also look at the nature and intensity of competition among digital personal assistants and audiovisual “gateways”, including connected televisions and smart speakers, through which people access traditional TV and radio, as well as online content.
"Ofcom’s probe is welcome news for the UK tech sector. For far too long, the big three cloud providers have dominated the market without necessarily delivering for their users," said Mark Boost, CEO of Civo. "We have reached a point where IT teams view choosing AWS or Azure or Google Cloud as the only option for their organisation, hooked in by the scale and sheer amount of services on offer.”
“I hope that Ofcom’s work will be the start of a process to create a fairer and more competitive cloud market. This needs to be built on the core principles users want from the cloud: a reliable, fairly priced service that is low on complexity and offers the fast launch times essential for the modern developer," added Boost.
