Ofcom can make recommendations to the government to change regulations and involve the Competition and Markets Authority (CMA) if the market isn’t working well
Ofcom will look into the position of Amazon, Microsoft and Google in the UK’s £15bn cloud services market.
Under the Enterprise Act 2002, Ofcom will launch a market study into the UK’s cloud sector and assess how well the market is functioning.
The investigation is part of a new programme of work to ensure that digital communications markets are working well for people and businesses in the UK.
Amazon Web Services (AWS), Microsoft and Google are the largest of the cloud services and are known as ‘hyperscalers’ and they collectively produce around 81 per cent of revenues in the UK public cloud infrastructure services market.
Ofcom will examine the competition in cloud services, the position the three hyperscalers hold in the market, any market features that could limit innovation and growth by stopping other companies from entering the market, and how the market is working today and how it can develop in the future.
Ofcom will also start a wider programme of work in the next year to examine more digital markets and will look into how services such as Whatsapp, FaceTime and Zoom are affecting the role of calling and messaging.
PP Foresight analyst Paolo Pescatore commented: “Each area needs to be independently assessed. Ultimately Ofcom is concerned with the dominance of a small number of players which has seen their share grow significantly.
“It is becoming increasingly harder for new entrants or any emerging player to compete given the established position of the big ones.
“In cloud there are fewer providers with the market dominated by AWS with Microsoft Azure and Google Cloud challengers competing in large part by price.
“Timing is interesting as people have shown a strong appetite to buy and use a slew of connected devices such as smart speakers and messaging services.
“These have been highly sought after during the pandemic and have now become the norm in everyday usage.
“Therefore, it is hard to see what Ofcom will do if the big tech companies are stifling competition. We might see restrictions, incentives to foster new players.”