Big tech groups face probe by UK regulator over cloud services

The UK has launched a probe into the cloud market to assess whether Amazon, Microsoft and Google are limiting competition and innovation, as it steps up its scrutiny of Big Tech.

AWS, Microsoft Azure and Google, referred to as “hyperscalers” because of the size of the data centres used to process and store data, generate about 81 per cent of revenues in the £15bn UK cloud market, having increased their share from 70 per cent in 2018, according to Ofcom, the communications regulator.

“We will examine the strength of competition in cloud services generally and the position the three hyperscalers hold in the market,” it stated on Thursday.

“Because the cloud sector is still evolving, we will look at how the market is working today and how we expect it to develop in the future — aiming to identify any potential competition concerns early to prevent them becoming embedded as the market matures.”

Microsoft said: “We are aware of Ofcom’s cloud services market study and look forward to contributing.”

European authorities have stepped up their scrutiny of the impact of Big Tech and video streaming companies on domestic markets. Earlier this year, the UK’s Competition and Markets Authority launched an investigation into whether Google “abused” its dominant position in the ad tech market.

Cloud computing allows individuals and companies to process and store data remotely, without relying on any of their own server and computing equipment. These services have increasingly been outsourced to hyperscaler cloud providers in recent years, which have developed complex networks of data centres around the world and tend to offer more competitive pricing for services than in-house data centres.

If the investigation, which will take up to 12 months, finds any evidence of market ill health, the regulator could recommend that the government change its rules, take competition enforcement action or call on the CMA to investigate further.

Ofcom will also seek to start a broader probe into apps and devices for accessing audiovisual content, including WhatsApp, FaceTime and Zoom, to understand how these services are affecting traditional telecoms services such as voice calls and messaging.

Paul Stone, senior counsel at Charles Russell Speechlys, an international law firm, said the probe “may act as a catalyst for a full-blown market investigation, which could have a significant impact on big tech firms”.

“Given that Ofcom appear to be concerned about market entry, measures they could implement include limiting any exclusivity arrangements used by the ‘hyperscalers’ or requiring interoperability with new players,” he added.

Amazon and Google did not respond to a request for comment.

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