Cloud Web Services, Amazon Web Services, Microsoft and Google face a new investigation by the UK’s telecoms watchdog, Ofcom. The regulator, under the powers afforded by the Enterprises Act 2022, will launch a market study in the coming weeks at the three companies in order to ensure that digital communications markets operate effectively.
Ofcom said the UK cloud services market is worth £15 billion, but at the moment only three companies (AWS, Microsoft and Google) generate 81% of revenue from the infrastructure services market specifically.
Google estimates that the market at the moment consists of the following distributions: AWS (40%), Microsoft (25%), Google (16%) and others (19%).
The investigation forms part of a new program of work being implemented by Ofcom, which will see its efforts invested in making “digital communications work for all”. The Program of Action is Ofcom’s acknowledgment that the way individuals and businesses in the UK buy products, obtain information and use public services has been changed by the Internet.
She points out that they need to consider how companies use digital infrastructure and services as much as they do the cables, masts and satellites they have focused on in the past.
The new study, focused on cloud computing service providers, will assess how well the market for infrastructure cloud services is working, and will examine the strength of competition in cloud services in general. Ofcom will also consider any market features that may limit innovation and growth in the sector, by making it more difficult for other companies to enter the market and expand their share.
As the cloud sector continues to develop, we’ll look at how the market operates today and how we expect it to evolve in the future – with the goal of identifying any potential competition concerns early on to prevent them from coalescing as the market matures.
When we launch the market study, we will invite initial views of the UK cloud market from interested or affected parties. We plan to consult on our interim findings and publish a final report – including any proposed concerns or recommendations – within twelve months.
If we find that the market is not performing well, there can be negative effects on businesses and eventually consumers, through higher prices, lower quality of service, and reduced innovation.
The regulator said it will consider one of the following steps if the market is not doing well:
Make recommendations to the government to change regulations or policy
Take competition or consumer enforcement action
Make a market survey reference to the Competition and Markets Authority (CMA)
Accepting pledges instead of conducting a market survey reference
Ofcom has partnered with the Capital Markets Authority to plan the market study, and will continue to do so during the life of the project.
Communication applications and devices
In addition to the cloud infrastructure portion, Ofcom will also start a broader program of work to examine other digital markets, including digital communication applications and devices for accessing audiovisual content.
The regulator said it was interested in how services like WhatsApp, FaceTime and Zoom could affect the role of traditional calling and messaging, and how competition and innovation in these markets could develop over the coming years. Specifically, it’s curious to understand if any restrictions on their ability to interact with each other raise potential concerns (eg you can’t use WhatsApp to video call someone using FaceTime, you have to use the same app).
In addition, Ofcom will also explore the “nature and intensity of competition” between always-on digital and audiovisual personal assistants – such as connected TVs and smart speakers. She wants to better understand the dynamics of competition in this sector and determine if there are any potential areas that may require further formal examination.
She said her work would include analyzing “consumer behavior, future developments, as well as the role and business models of key players and their bargaining power with content providers.”
Selena Shada, Director of Communications at Ofcom said:
The way we live, work, play and do business has changed through digital services. But as the number of platforms, devices and networks serving content continues to grow, so do the technological and economic problems facing regulators.
That’s why we’ve started a program of work to examine these digital markets, identify any competition concerns and make sure they work well for the people and businesses that depend on them.