The Competition and Markets Authority is to investigate the UK public cloud infrastructure services market.
Ofcom has referred the market to the competitions regulator over concerns that providers are making it too expensive or difficult to switch.
The investigation will consider whether there are competition concerns and, if so, what interventions can improve the supply of these important services for UK customers.
Cloud services allow remote access to computing resources on demand and over a network. They are being rapidly adopted by many businesses and have become an essential part of how many digital services are delivered to consumers. Ofcom has estimated that the market for cloud services in the UK was worth up to £7.5 billion in 2022.
In its market study, Ofcom identified a number of features in the supply of cloud services that make it more difficult for customers to switch and use multiple cloud suppliers.
The features which Ofcom is most concerned about are egress fee charges that cloud customers must pay to move their data out of the cloud; discounts which may incentivise customers to use only one cloud provider; and technical barriers to switching.
Ofcom’s report also outlines concerns it has heard about the software licensing practices of some cloud providers, in particular Microsoft.
“We welcome Ofcom’s referral of public cloud infrastructure services to us for in-depth scrutiny,” said Sarah Cardell (pictured), CEO of the CMA.
“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.”
The CMA has appointed independent panel members to an inquiry group, who will act as the decision makers on this investigation.
The investigation will form part of its wider programme of work in digital markets including under the incoming Digital Markets, Competition and Consumer Bill.
The CMA will conclude its investigation by April 2025.