In a significant milestone that could eventually result in an antitrust investigation into their business practices, UK regulators accused Microsoft and Amazon on Wednesday of unjustly limiting competition in the cloud services sector.
The British media authority, Ofcom, released the preliminary findings of a market study evaluating the enormous cloud services sector. To determine if companies providing public cloud infrastructure impede competition, Ofcom launched a probe into the market in September.
According to Ofcom, the market features that make it more difficult for customers to switch between and utilize various suppliers (“multi-cloud”) limit competition. Ofcom claimed that “hyper scalers” like Microsoft and Amazon set their egress prices “significantly higher” than most other providers. “Egress fees” are what cloud vendors charge businesses to transport data out of a cloud.
Leading cloud providers have technical “interoperability” limitations that prevent some of their services from integrating well with those of other providers. Discounts for committed spending that encourage clients to employ a single hyper scaler for all or the majority of their cloud requirements.
The regulator suggested submitting the issue to the Competition and Markets Authority (CMA), a UK regulator ensuring markets are competitively healthy.
A CMA representative stated, “We received preliminary findings from Ofcom today about its Cloud market study and are in the process of reviewing them.” If Ofcom decides it is necessary once its consultation process is complete, “We stand ready to conduct a market investigation into this area.”
The biggest players in the massive cloud infrastructure market, which Ofcom estimates will be worth between £4.5 billion ($5.6 billion) and £5.0 billion in 2021, are Microsoft, Amazon, and Google, collectively known as “hyper scalers” due to their capacity to offer computing and storage at enterprise scale.
According to the regulator, Microsoft and Amazon’s Amazon Web Services division control 60% to 70% of the market, with Google holding 5% to 10% of the overall market share.
Specifically citing Microsoft as an example of a company allegedly “using their strong position in software products to distort competition in cloud infrastructure,” Ofcom stated that it was concerned about claims regarding license requirements set by cloud vendors.
According to information the regulator claimed to have obtained, Microsoft makes it more difficult for users of its Office productivity products to operate such apps on cloud infrastructure other than Microsoft Azure.
In a statement, Microsoft said: “We look forward to continuing our cooperation with Ofcom on their market study on cloud services. We are steadfast in our commitment to maintaining the UK cloud market’s high competition level and fostering the revolutionary potential of cloud technologies to accelerate economic growth throughout the country. These are interim results, and AWS will continue cooperating with Ofcom before publishing its full report, according to a representative for Amazon Web Services.
The company continued, “At AWS, we design our cloud services to allow clients the freedom to build the best solution for them, using the technology of their choice. This has boosted competition in various industries within the UK economy by increasing access to cutting-edge, highly secure, and scalable IT services.
According to Reuters, Microsoft reportedly offered more adjustments to its cloud computing policies last month to avoid being the subject of an EU antitrust inquiry. This follows Microsoft’s announcement of several revisions to its cloud contract conditions last year, effectively making it easier for users to utilize competitive cloud services.
Following complaints from France’s OVHcloud and other smaller cloud vendors, the EU has investigated potential competition issues with the company’s cloud business.
According to Francisco Mingorance, secretary general of the Cloud Infrastructure Service Providers in Europe, Ofcom’s findings regarding Microsoft’s licensing practices demonstrate that regulators are “waking up to how Microsoft continues to distort fair competition in the cloud.” He advised national and EU antitrust authorities to open formal investigations.
The interim Ofcom conclusions are a setback for Microsoft and Amazon, two technology industry titans. Due to the Covid-19 pandemic forcing people indoors and increasing demand for more digital ways to stay connected and conduct business, several companies have fared well.