UK regulator slams AWS, Microsoft for cloud interoperability hurdles

UK communications regulator Ofcom has announced a provisional plan to refer Amazon Web Services (AWS) and Microsoft to the country’s Competition and Markets Authority (CMA) over “significant concerns” that they are allegedly harming competition in online cloud services and abusing their market positions with practices that make interoperability difficult.

A market study carried out by Ofcom has provisionally identified features and practices that make it difficult for customers to switch or use multiple cloud suppliers, the regulator wrote on its website, adding that it was “particularly concerned” about the practices of Amazon and Microsoft because of their market position.

Three areas were highlighted as being a particular cause for concern: high switching fees, technical restrictions on interoperability, and committed spend discounts.

“These market features can make it difficult for some existing customers to bargain for a good deal with their provider,” Ofcom said, noting that cloud customers already face significant price increases when they renew their contracts.

Currently, Amazon Web Services (AWS) and Microsoft Azure have a combined UK market share of between 60% and 70%, while the next nearest competitor, Alphabet-owned Google, has between 5% and 10% share, according to Ofcom.

Consequently, between 2018 and 2021, the percentage of cloud providers that were not AWS, Microsoft, or Google fell from 30% to 19%, causing Ofcom to note that such levels of market dominance could potentially make it harder for smaller cloud providers to compete with the market leaders, further consolidating the big providers’ revenue and market share.

The involved companies and other interested parties have until May 17 to respond to Ofcom’s consultation, while the regulator will make a final decision on whether to refer the sector to the CMA by October 5.

“We look forward to continuing our engagement with Ofcom on their cloud services market study,” Microsoft said in a statement. “We remain committed to ensuring the UK cloud industry stays highly competitive, and to supporting the transformative potential of cloud technologies to help accelerate growth across the UK economy.”

A spokesperson for AWS also confirmed the company will continue to work with Ofcom ahead of the publication of the final report.

Cloud provider practices spark international concern

Microsoft is also facing a potential antitrust probe from the EU after the not-for-profit Cloud Infrastructure Services Providers in Europe (CISPE) filed an antitrust complaint in November last year concerning Microsoft’s practice of offering customers discounts on its Office product stack in return for using its Azure cloud solution.

However, it was reported last week that Microsoft has approached a number of smaller European cloud providers, including Aruba, OVHcloud, and Danish Cloud Community, with an agreement to  change its cloud computing practices in order to avoid the antitrust probe.

“Ofcom’s move should not really come as a surprise. The industry needs increased standardization and interoperability,” said Ivo Ivanov, CEO of Germany-based internet exchange operator DE-CIX, in a media statement. “Whilst companies are aware of the amazing benefits that cloud technology offers, problems such as high egress fees, lack of interoperability and vendor lock-ins create a new set of challenges. Companies have taken the easy option of using one cloud, resulting in cloud concentration. Working with only one cloud provider can lead to a single point of failure.”

Ivanov noted that financial services have been particularly impacted by cloud concentration, since companies in that sector have been required by regulators to find ways to overcome dependency on single cloud service providers.