Enterprise

AWS and Microsoft in UK crosshairs as Ofcom mulls cloud market investigation

Comment

AWS Logo
Image Credits: Ron Miller/TechCrunch

U.K. regulator Ofcom is preparing to refer the local cloud infrastructure market for an in-depth investigation, with the practices of Amazon and Microsoft in particular firmly in focus.

The news comes some six months after Ofcom first revealed it was kickstarting a market study into the £15 billion U.K. cloud market.

It’s worth noting that Ofcom’s consultation, which involves soliciting stakeholder feedback from across the cloud industry, is only at its halfway point. But Ofcom said that it has “provisionally identified” practices that make it more difficult for businesses to switch between cloud providers, or even use multiple providers, which is why it is “proposing” to refer the U.K. cloud services market to the Competition and Markets Authority (CMA) for a formal investigation.

“We’ve done a deep dive into the digital backbone of our economy, and uncovered some concerning practices, including by some of the biggest tech firms in the world,” Fergal Farragher, Ofcom’s director responsible for the market study, said in a press release. “High barriers to switching are already harming competition in what is a fast-growing market. We think more in-depth scrutiny is needed, to make sure it’s working well for people and businesses who rely on these services.”

Friction

The crux of the problem, according to Ofcom, is that Amazon, Microsoft and Google collectively account for more than 80% of cloud revenues in the U.K., and they may enforce policies, fees and other restrictions that make it difficult for other smaller providers to gain traction. These include so-called “egress fees,” which are often opaque fees that cloud companies charge whenever a company transfers data out of the cloud and moves it elsewhere — this is often seen as an unscrupulous means to lock customers in, as the costs are typically higher than what it costs to transfer data into, or within, a single provider’s cloud.

Elsewhere, Ofcom also points to issues around interoperability, whereby the big cloud firms create their products so that they don’t play nicely with competing providers — this can put a considerable resource-drain on companies looking to adopt a hybrid cloud approach. Related to this, Ofcom also says that the big cloud vendors often offer “committed spend discounts,” which while reducing the customers’ costs, also encourages them to stick with a single vendor even if better alternatives may exist.

Ofcom notes in its initial findings:

These market features can make it difficult for some existing customers to bargain for a good deal with their provider. There are indications this is already causing harm, with evidence of cloud customers facing significant price increases when they come to renew their contracts.

From 2018 to 2021, the “others” category in the U.K. cloud market fell from 30% to 19%, while in tandem the so-called big-three “hyperscalers” gained significant market share, or remained around the same. Microsoft has actually seen the biggest growth, rising from 17% to 25% over the four-year period, while Google jumped from 12% to 16% market share. AWS, meanwhile, has fallen marginally from 41% to 40%, but remains by far the single biggest cloud provider.

Market share of supply by revenue in UK public cloud infrastructure services market
Market share of supply by revenue in U.K. public cloud infrastructure services market. Image Credits: Ofcom / Synergy Research Group

While all three of the big-name cloud players are part of its focus, Ofcom’s report seems to pinpoint AWS and Microsoft specifically, given that they reportedly account for cloud revenue spend of between 60% and 70% between them.

Moreover, Ofcom is quick to stress that its focus lies not so much on competition at the signing-up stage, it’s more about how difficult things become to switch after a company has signed up. The report notes:

We provisionally find that there is evidence of active competition for new customers, and that some customers are likely to have some bargaining power when first migrating to the cloud. However, once a customer makes its initial choice of cloud provider, their bargaining power is reduced, and the balance of power shifts to the initial cloud provider – most often AWS or Microsoft.

Dark cloud

Across the water in mainland Europe, a similar episode has also been unfolding. Cloud Infrastructure Services Providers in Europe (CISPE), a not-for-profit trade association, filed an antitrust complaint against Microsoft back in November, alleging that Microsoft was using its dominance in business software to tether its customers to Azure. It’s worth noting that Amazon’s AWS is a member of CISPE, and AWS has a clear interest in trying to stymie any gains Microsoft makes on its lucrative cloud business.

However, other smaller players in the cloud space, including France’s OVHcloud, have also been making noises about Microsoft’s practices to European regulators, with reports emerging last week that Microsoft was close to agreeing to a deal to placate them — prompting Google, of all companies, to accuse Microsoft of anti-competitive practices.

In response to today’s announcement from Ofcom, CISPE Secretary General Francisco Mingorance said that it’s “clear that Ofcom recognises the potential for Microsoft’s unfair software licensing practices to distort competition in the cloud market,” a statement that conveniently ignores CISPE-member AWS’s involvement in Ofcom’s initial market study.

“More and more customers, competitors and regulators are waking up to the ways in which Microsoft continues to distort fair competition in the cloud,” Mingorance said. “Private deals are unlikely to solve these sector-wide issues. Based on the mounting evidence, it is important that both national and EU authorities open formal investigations into Microsoft’s unfair software licensing practices as an urgent competition issue.”

Ofcom’s market study is still at its halfway point, and is subject to additional feedback based on Ofcom’s provisional findings, with stakeholders given a firm May 17, 2023 date to submit responses. The final report and recommendations is expected “no later than” October 5. 

More TechCrunch

Founder-market fit is one of the most crucial factors in a startup’s success, and operators (someone involved in the day-to-day operations of a startup) turned founders have an almost unfair advantage…

OpenseedVC, which backs operators in Africa and Europe starting their companies, reaches first close of $10M fund

A Singapore High Court has effectively approved Pine Labs’ request to shift its operations to India.

Pine Labs gets Singapore court approval to shift base to India

The AI Safety Institute, a U.K. body that aims to assess and address risks in AI platforms, has said it will open a second location in San Francisco. 

UK opens office in San Francisco to tackle AI risk

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

18 hours ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

3 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

3 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies