Britain’s competition regulator said Thursday it’s launching an investigation of market leaders Amazon.com and Microsoft over cloud services.
The U.K. Competition and Markets Authority is launching the probe after a referral from the Office of Communications, which found Amazon’s
AMZN,
AWS and Microsoft
MSFT,
had a combined market share between 70% and 80% in the U.K. last year for cloud infrastructure, which was worth as much as £7.5 billion ($9.1 billion).
While there is competition between cloud providers when attracting new customers, a report found it’s hard for customers to switch and use multiple suppliers.
In particular, Ofcom said it was concerned about egress fees, which are the charges customers pay to transfer their data out of a cloud; a lack of interoperability and portability; and committed spend discounts that are structured to use a single provider.
In a statement, Amazon said the regulator has a “fundamental misconception” on how the IT sector functions. “Only a small percentage of IT spend is in the cloud, and customers can meet their IT needs from any combination of on-premises hardware and software, managed or co-location services, and cloud services,” said the company, which adds that it does not charge separate fees for switching data to another provider.
Microsoft said it will “engage constructively” with the regulator and that it committed to ensure the U.K. cloud industry is innovative and highly competitive.
Alphabet’s
GOOGL,
Google is the main challenger in the U.K., with a share between 5% and 10%. Other competitors include Oracle
ORCL,
and IBM
IBM,
what Ofcom calls “distant” because of the difficulty of building a rival ecosystem of products delivered of a global network of data centers.
In the most recent quarter, AWS accounted for 70% of Amazon’s operating income, and what Microsoft calls its Intelligent Cloud accounted for 43% of its operating income.
The U.K. cloud inquiry is happening at the same time Google is facing an antitrust trial in the U.S., where Microsoft is the government’s star witness.
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