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The UK’s communications regulator, Ofcom, is set to launch a market study examining the position of Amazon, Microsoft and Google in the cloud services market.
The market study is expected to launch in the coming weeks to see whether competition works well in the £15bn UK cloud sector.
It will focus on the largest providers of cloud services, known as “hyperscalers”, such as Amazon Web Services (AWS), Microsoft and Google. These three firms together have an 81 percent share of the UK public cloud infrastructure services market, according to the regulator.
The inquiry comes in response to the rapid growth in the use of cloud services.
According to Ofcom, less than 10 percent of all businesses’ global IT spending was for public cloud services in 2018, climbing to 17 percent last year. The regulator also claims that analysts expect it could reach 45 percent of businesses’ IT spend by 2026.
“The way we live, work, play and do business has been transformed by digital services. But as the number of platforms, devices and networks that serve up content continues to grow, so do the technological and economic issues confronting regulators,” said Selina Chadha, Ofcom's director of connectivity.
“That’s why we’re kick-starting a programme of work to scrutinise these digital markets, identify any competition concerns and make sure they’re working well for people and businesses who rely on them,” she added.
Ofcom’s investigation will formally assess how well the market is working, the strength of competition in cloud services generally and the position the three hyperscalers hold in the market.
It will also look at market features that might limit innovation and growth in this sector by making it difficult for other companies to enter the market and expand their share.
Ofcom has 12 months to wrap up the inquiry. Should it identify competition concerns, it could make regulators or policy recommendations to the government or make a market investigation reference to the Competition and Markets Authority (CMA). Ofcom may also start an enforcement action in light of its findings or accept undertakings from the companies to fix the issues identified by the regulator.
The move is part of Ofcom’s broader strategy to ensure digital communication services work well for everyone and deliver the outcomes consumers expect.
Cloud and payments
Businesses have been increasingly relying on third-party providers to deliver services vital to the financial system.
In April, SWIFT announced that it will enable financial institutions to connect to its network and applications through the three top public cloud providers AWS, Google and Microsoft.
The top UK fintech firms, Checkout.com, Revolut and Monzo, all use cloud services, which are often seen as a way to give businesses flexibility and easy scalability.
Card giants Visa and Mastercard have also both invested in cloud technology to improve the payments journey they can provide to merchants.
Although the use of cloud services in the financial sector is growing, an earlier Bank of England survey shows that the market is highly concentrated, raising concerns of widespread disruption if one of the cloud providers was hacked or failed.
In 2020, for example, 65 percent of UK banks that used cloud services used the top two providers.
Consequently, in early June, the UK government proposed a critical third-party regime that would enable regulators to ensure the resilience of services provided by cloud providers to firms in the finance sector.
The proposed regulation would give financial regulators the ability to exercise a range of powers in respect of any material services that a designated critical third party provides to the finance sector.
