Cloud services competition probe to be launched by Ofcom

A probe into the dominance of technology titans Amazon, Microsoft and Google in cloud services is being launched by watchdog Ofcom to check on the strength of competition in the sector.

The regulator is set to launch a market study in the “coming weeks” that will assess how well the market is working, as well as any barriers to new entrants into the sector.

The three so-called hyperscalers – Amazon Web Services (AWS), Microsoft and Google – together account for around 81% of revenue in the UK public cloud infrastructure services market, according to Ofcom.

It is also set to launch a broader investigation into digital communications over the year ahead that will cover messaging services such as WhatsApp, FaceTime and Zoom, as well as smart speakers and connected televisions.

Selina Chadha, Ofcom’s director of connectivity, 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.”

Ofcom’s cloud services investigation will look into any features that might limit innovation and growth in the sector by making it difficult for other companies to enter the market and expand their share.

It is working closely with the Competition and Markets Authority (CMA) on the study and said it aims to consult on its interim findings and publish a final report within a year.

If it finds competition is not working as it should be and that businesses and consumers are being affected, it can take enforcement action, recommend regulation or policy changes to the Government or refer the issue to the CMA for further investigation.

The use of cloud services has exploded in recent years.

In 2018, less than 10% of all businesses’ global IT spending was for public cloud services, but this surged to 17% last year amid increased remote working during the pandemic.

Some experts forecast it will reach 45% of businesses’ IT spend by 2026, according to Ofcom.

The watchdog’s wider probe into messaging services and smart speakers will look at how these are affecting the role of traditional calling and messaging, as well as how competition is working now and may evolve over the coming years.

Ofcom said: “Another future area of focus for Ofcom is the nature and intensity of competition among digital personal assistants and audiovisual ‘gateways’ – such as connected televisions and smart speakers – through which people access traditional TV and radio, as well as online content.

“We will explore competition dynamics in this sector and identify whether there are any potential areas that require more formal examination.”