A recent study by British communications regulator Ofcom noted that Amazon Web Services (AWS) and Microsoft have a number of features and practices in their cloud services that could hamper the ability of some customers to switch to other cloud providers or use multiple providers at any given time.
This prompted the regulator to formulate a provisional plan referring both tech companies to the United Kingdom’s Competition and Markets Authority (CMA) as they could be hampering competition within the online cloud services sector by preventing interoperability with other platforms.
Ofcom also cited how these firms are using their current market position against smaller players in the cloud sector.
Three Points of Concern
The Ofcom report pointed out three problem areas: higher than normal switching fees, technical restrictions regarding interoperability, and committed discounts. The report explained that these could make it harder for current customers to bargain with their cloud services providers on top of substantial price increases when they renew their contracts.
At present, AWS and Microsoft’s Azure cloud arm collectively hold around 60% to 70% of the UK cloud market. Google, on the other hand, lags far behind with around five to ten percent of the total market share.
This has led to a serious imbalance in the cloud industry. Between 2018 and 2021, the number of non-tech giant cloud providers dropped from a high of 30% to a mere 19%.
Based on Ofcom’s findings, this type of market dominance will make it more difficult for smaller players to go against market leaders. In turn, this would just consolidate the giants’ total revenue and significantly increase their market share.
Ofcom has advised both companies and other involved parties that they have up to May 17th to respond to its call for a consultation. In any case, the regulator is set to make a final decision as to whether or not to refer these parties to the CMA by October 5th of this year.
But Ofcom is not the only government regulator that is calling out tech’s biggest firms for trying to suppress smaller competitors.
Microsoft is currently facing an antitrust probe from the European Union in light of a complaint filed by the non-profit group Cloud Infrastructure Services Providers in Europe last November. The company apparently offered customers discounted rates on its Office product stack as a reward for opting for Azure as its cloud solution.