Ofcom said this plan comes at the halfway point of its investigation, with the regulator also inviting feedback on its interim findings.
Fergal Farragher, consumer protection director, Ofcom, led the market study. He explained, “We’ve done a deep dive into the digital backbone of our economy, and uncovered some concerning practices, including by some of the biggest tech firms in the world.
“High barriers to switching are already harming competition in what is a fast-growing market. We think more in-depth scrutiny is needed, to make sure it’s working well for people and businesses who rely on these services.”
During the course of Ofcom’s initial probe, it has found there are two leading providers of cloud infrastructure services in the UK: Amazon Web Services (AWS) and Microsoft. These two providers have a combined market share of 60-70 per cent. Google is their closest competitor with a share of 5-10 per cent.
Ofcom said that competitive market forces are delivering benefits to customers in the form of innovative products and discounts. However, other features of the market have given Ofcom “cause for concern”, with the regulator pointing to egress fees; technical restrictions on interoperability; and committed spend discounts.
An Ofcom spokesperson added, “These market features can make it difficult for some existing customers to bargain for a good deal with their provider. There are indications this is already causing harm, with evidence of cloud customers facing significant price increases when they come to renew their contracts.
“We have proposed to refer the cloud infrastructure market to the CMA to carry out a market investigation. This would allow the CMA to further examine the nature and extent of barriers and consider if there are interventions that could improve how the market works for customers and ultimately UK consumers.”
Feedback on Ofcom’s interim findings, as well as on its proposal to make a market investigation reference into the supply of cloud infrastructure services in the UK, can be submitted until 17 May 2023.
Ofcom has said it intends to publish a final report setting out findings and recommendations, including a decision on a market investigation reference, by no later than 5 October 2023.