Ofcom said it has received evidence showing that Microsoft is making it less attractive for purchasers to run its office applications on cloud infrastructure aside from Microsoft Azure.
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Microsoft AND Amazon were accused by UK regulators on Wednesday of unfairly restricting competition within the cloud services market, in a major development that might eventually lead to an antitrust investigation into their business practices.
Ofcom, the UK’s media watchdog, has published preliminary results of a mass market study of the cloud services market. Ofcom launched a review of the sector in September, searching for to determine whether corporations offering public cloud infrastructure pose any barriers to competition.
“Our initial view is that competition is constrained by market characteristics that make it difficult for purchasers to switch and use multiple providers (often known as ‘multi-cloud'”),” Ofcom said. These market characteristics include:
- Cloud providers ‘outbound fees’ charge corporations for cloud data transfer – Ofcom said so-called ‘hyperscalers’ similar to Microsoft and Amazon set their outbound fees ‘considerably higher’ than most other providers.
- Technical limitations on “interoperability” by leading cloud corporations that prevent a few of their services from working effectively with those of other providers.
- Commitment discounts structured to encourage customers to use one hyperscaler for all or most of their cloud needs.
The regulator has proposed to refer the matter for further investigation to the Competition and Markets Authority, the UK regulator tasked with ensuring healthy competition within the markets.
“We received preliminary findings from Ofcom today in reference to a cloud market study and are within the strategy of reviewing them,” a CMA spokesperson told CNBC via email.
“We stand ready to conduct a market study on this area if Ofcom determines that it is required following the conclusion of the consultation process.”
Microsoft, Amazon and Google, sometimes referred to as “hyperscalers” for his or her ability to deliver enterprise-scale computing and storage, are the largest players within the £4.5 billion (5.6 billion) cloud mass infrastructure market billion dollars). to £5.0bn in 2021, according to Ofcom.
According to the regulator, Microsoft and Amazon Web Services occupy between 60% and 70% of the market share, with Google accounting for five% to 10% of the full market share.
Ofcom said it was concerned about allegations of licensing terms set by cloud providers, specifically pointing to Microsoft for example of corporations allegedly “using their strong software position to distort competition in cloud infrastructure”.
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The regulator said it had received evidence showing Microsoft was making it difficult for purchasers of office applications to run on cloud infrastructure aside from Microsoft Azure.
Microsoft in a press release said: “We glance forward to continuing our partnership with Ofcom in cloud market research. We remain committed to ensuring that the UK cloud industry stays highly competitive and to supporting the transformative potential of cloud technologies to speed up the expansion of the UK economy as an entire.”
A spokesperson for Amazon Web Services told CNBC: “These are interim arrangements and AWS will proceed to work with Ofcom pending the publication of the ultimate report.”
“At AWS, we design our cloud services to give customers the liberty to construct the precise solution for them with the technology of their alternative,” they added. “This has led to increased competition in lots of sectors of the UK economy by broadening access to modern, highly secure and scalable IT services.”
Last month Microsoft he reportedly proposed further changes to its cloud computing practices to avoid an EU antitrust investigation, according to Reuters. It comes after Microsoft announced a series of changes to its cloud contract terms last yr, effectively making it easier for purchasers to use competing cloud services.
The EU investigated competition concerns concerning the company’s cloud business following complaints from France’s OVHcloud and other smaller cloud providers.
Francisco Mingorance, secretary general of cloud providers in Europe, said Ofcom’s findings on Microsoft’s licensing practices show regulators are “waking up to the ways Microsoft continues to distort fair competition within the cloud” and really useful opening national and EU bodies antitrust formal investigation into the matter.
Ofcom’s interim findings are a blow to Amazon and Microsoft, the 2 titans of the tech world. These corporations have coped well with the Covid-19 pandemic as people have been forced to stay at home, driving demand for more digital ways to stay connected and do business.
Nonetheless, they’ve recently faced struggles as pandemic restrictions have been lifted and better rates of interest have hurt the outlook for tech stocks. Amazon, Microsoft and Alphabet reported a slowdown of their cloud units in Q4 2022.
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