UK Regulators Eye Cloud Services Market: Microsoft and AWS in the Spotlight

The UK's Competition and Markets Authority (CMA) has raised concerns about the state of competition in the local cloud services sector, with Amazon Web Services (AWS) and Microsoft Corp (MSFT) under scrutiny. In a provisional decision, the CMA found that the market is dominated by these two tech giants, with AWS holding a 40-50% share and Microsoft a 30-40% share. Google, the third-largest player, trails behind with a much smaller market share.

The CMA's investigation, launched in October 2023, revealed high levels of market concentration and barriers to entry, making it difficult for alternative cloud suppliers to enter and grow in these markets. Customers face a limited choice of suppliers, with technical and commercial barriers making it harder for them to switch or multi-cloud between providers. Egress fees, charged for the transfer of data between providers, also reduce the ability and incentives for customers to switch or use multiple cloud providers.

Microsoft's dominance in software products, such as SQL Server, Windows 10 and 11, Visual Studio, and others, has been identified as a factor that could harm competition by making it harder for AWS and Google to compete effectively for customers who wish to use Microsoft software on the cloud.

The CMA's provisional findings suggest that competition in the UK cloud services market is not working as well as it could be, potentially leading to higher prices, reduced consumer choice, and less innovation. To address these concerns, the CMA proposes designating AWS and Microsoft with strategic market status (SMS) in relation to their digital activities in cloud services. This designation would enable the CMA to tackle conduct deemed to undermine fair competition and intervene to address specific competition problems in the cloud services market.

The CMA's proposed interventions could directly benefit the majority of UK customers by improving prices, quality, and choice. Measures aimed at AWS and Microsoft could also produce wider indirect effects by altering competitive conditions for other providers, encouraging more competition in the market and leading to better deals and more choices for UK businesses. More effective competition in cloud services would incentivise providers to improve services and innovate, contributing to economic growth.



In conclusion, the CMA's investigation into the UK cloud services market highlights the dominance of AWS and Microsoft, as well as the barriers to entry and expansion that hinder competition. By proposing the designation of these tech giants with strategic market status, the CMA aims to address market-wide concerns and benefit UK customers. As the investigation progresses, it will be crucial to monitor the developments and assess the potential impact of the CMA's interventions on the cloud services market and the broader economy.