Ofcom to probe dominance of big three public-cloud players
Communications regulator will examine whether the current market conditions stymie innovation and opportunities for smaller players
Regulator Ofcom is launching an investigation aimed at determining whether a public-cloud market that has long been dominated by Google, Microsoft and Amazon Web Services is “working well for consumers and businesses”.
As part of its remit to safeguard fair and effective competition, the watchdog has announced it is to undertake a “market study” of the UK’s public-cloud landscape. Such exercises are undertaken when there is cause to believe that “particular markets may not be working well in the interests of consumers”, the regulator indicated.
The study will examine the current “strength of competition” in the provision of public-cloud services, with a particular focus on the position of the big three players.
Between them, the trio account for more £4 in every £5 spent on public-cloud services in the UK, with AWS accounting for 41% of the market, ahead of Microsoft on 25% and Google on 16%.
This means that, in 2021, all other suppliers held a collective market share of just 19% – a figure which has fallen from 30% since 2018, according to data from Synergy Research Group cited by Ofcom.
This increased dominance has also been reflected in the growing volume and worth of public-sector contracts won by the public-cloud giants in recent years – in particular AWS.
Under the terms of a public sector-wide commercial agreement offering base discounts of 18% on hosting services, numerous government departments have signed three-year deals with AWS in recent years, collectively worth hundreds of millions of pounds.
Ofcom said that its probe will “consider any market features that might limit innovation and growth in this sector by making it difficult for other companies to enter the market and expand their share”.
“We will look at how the market is working today and how we expect it to develop in the future – aiming to identify any potential competition concerns early to prevent them becoming embedded as the market matures,” Ofcom added.
A consultation conducted as part of the study will invite submissions from cloud providers themselves, as well as any “interested or affected parties” that wish to contribute. Ofcom said that it has worked closely with the Competition and Markets Authority in planning the investigation, and will continue to do so over the coming months.
The communications watchdog intends to publish a final report of its findings with a year. This will include any concerns it wishes to raise, or recommendations for further action.
The study of the public-cloud landscape comes as part of a wider programme of work dedicated to digital markets, as part of which Ofcom will also take a closer look at the markets for smart devices and messaging apps.
In the latter the case, the regulator is to examine potential consumer or market issues caused by the lack of interoperability between the likes of WhatsApp, FaceTime and Zoom.
Its work on smart devices, meanwhile, will encompass digital personal assistants – such as Amazon Alexa or Google Home – and will include “analysis of consumer behaviour [and] future developments, as well as the role and business models of major players and their bargaining power with content providers”.
Ofcom’s director of connectivity Selina Chadha said: “The way we live, work, play and do business has been transformed by digital services. But as the number of platforms, devices and networks that serve up content continues to grow, so do the technological and economic issues confronting regulators. That’s why we’re kick-starting a programme of work to scrutinise these digital markets, identify any competition concerns and make sure they’re working well for people and businesses who rely on them.”
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