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Ofcom launches cloud market study

October 6, 2022

By Colin Mann

Having earlier announced it was to examine the position of Amazon, Microsoft and Google in cloud services, as part of a new programme of work to ensure that digital communications markets are working well for people and businesses in the UK, comms regulator Ofcom has formally launched a market study under the Enterprise Act 2002 into the UK’s £15 billion cloud services market. It is inviting initial views from interested parties, including cloud providers, independent software vendors, suppliers of professional services and customers.

Ofcom is seeking input on how the market is developing and the nature of competition, particularly in cloud infrastructure services and cloud ecosystems.

Ofcom says that cloud computing is a huge and fast-growing market, which uses remote servers to offer services such as software, storage and computing power. It has become an essential part of how products are delivered to telecoms users, as well as viewers and listeners of TV, radio and audio content.

The largest providers of cloud services – known as ‘hyperscalers’ – are Amazon Web Services (AWS), Microsoft and Google. Collectively, these three firms generate around 81 per cent of revenues in the UK public cloud infrastructure services market.

The study will formally assess how well this market is working. Ofcom will examine the strength of competition in cloud services generally and the position the three hyperscalers hold in the market. It will also 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.

Because the cloud sector is still evolving, Ofcom will look at how the market is working today and how it expects it to develop in the future – aiming to identify any potential competition concerns early to prevent them becoming embedded as the market matures.

If Ofcom finds a market is not working well, there can be negative impacts on businesses and ultimately consumers, through higher prices, lower service quality and reduced innovation. In these circumstances, it can take one or more of the following steps:

  • make recommendations to government to change regulations or policy;
  • take competition or consumer protection enforcement action;
  • make a market investigation reference to the Competition and Markets Authority (CMA);
  • accept undertakings in lieu of making a market investigation reference.

Ofcom’s call for inputs closes on November 3rd 2022. It plans to consult on its interim findings and publish a final report – including any concerns or proposed recommendations – within twelve months.

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