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CMA clarifies scope of cloud services market investigation

Written by Thu 19 Oct 2023

The Competition and Markets Authority (CMA) has published an issues statement outlining the proposed initial scope of its market investigation into cloud services. 

The statement highlighted three features of the market Ofcom was most concerned about plus the impact, if any, of software licensing practices on cloud competition. 

The CMA’s investigation will examine: 

  • If technical barriers are making switching providers and multi-cloud difficult for customers and whether these barriers are contributing to the lock-in of customers to a single provider. 
  • Whether egress fees act as a barrier to switching and multi-cloud, contribute to unpredictable costs for customers and hinder competition between cloud providers. 
  • If the discount structures employed by established cloud providers hinder new entrants and the growth of other cloud providers, causing lasting damage to competition. 
  • The nature of the software licensing practices of the relevant cloud providers and whether these practices disincentivise customers from using rival cloud providers or raise barriers to entry in the market. 

“Cloud services are an essential part of how businesses in the UK operate and they underpin many aspects of our daily activities, from banking to communications. This is why effective competition in this market is so important,” said Kip Meek, Chair of the CMA’s inquiry group. 

The CMA set out ‘early views’ of potential remedies for issues found within the investigation. Examples include requiring cloud providers to increase the degree of standardisation, capping egress fees by comparison to the costs incurred by the cloud provider, and increasing pricing transparency of cloud services that are sold to customers as part of a larger bundle. 

“As our understanding of the market(s) and the potential issues develops, we expect our consideration of potential remedies to evolve,” said the CMA in the issues statement. 

Ofcom’s market study prompted the CMA to investigate due to identified barriers in the market, making it challenging for UK businesses to switch and employ multiple cloud providers.  

Ofcom expressed specific concern about Amazon and Microsoft’s dominant positions in the UK’s £7.5 billion ($9.1 billion) cloud services market. 

The CMA’s independent inquiry group is seeking input from interested parties on the issues identified and any other concerns that warrant investigation. 

The consultation is open until Thursday 9 November 2023. The inquiry group will factor in received views during its ongoing investigation, with a final decision expected by April 2025. 

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Written by Thu 19 Oct 2023

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