Microsoft and Amazon Web Services

UK Pushes for Stronger Oversight of Microsoft and AWS Cloud Services

The UK’s Competition and Markets Authority (CMA) seeks expanded regulatory authority over Microsoft and Amazon Web Services (AWS) in the cloud computing sector. Following a 16-month investigation, the CMA’s preliminary findings suggest that the cloud services market “is not working as well as it could.” The investigation focused on AWS and Microsoft, which control 30-40% of the market, far outpacing Google, the third-largest provider, with a 5-10% share.

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The CMA raised significant concerns about barriers to entry for alternative cloud providers and limitations on customers’ ability to switch providers due to “technical and commercial barriers,” such as high data transfer fees. It also criticized Microsoft for leveraging its dominant software market position to disadvantage competitors like AWS and Google in cloud services.

Cloud spending in the UK has grown by 30% annually, reaching £9 billion ($11 billion) in 2023. The CMA noted that even a 5% price increase above a competitive market rate could cost UK businesses an additional £430 million ($535 million) annually, with greater costs as the market grows.

The CMA’s findings highlight the limited number of providers capable of competing effectively due to the substantial capital investment and economies of scale required in cloud infrastructure. To address this, the CMA has proposed applying Strategic Market Status (SMS) designation to AWS and Microsoft’s cloud services under the UK’s new Digital Markets, Competition and Consumers (DMCC) Act. This designation would empower the CMA to enforce pro-competition regulations, targeting areas such as egress fees, technical barriers, and Microsoft’s licensing practices.

In addition to its cloud market findings, the CMA recently launched separate investigations into Google’s search practices and mobile ecosystems, as well as Apple’s operations, to determine whether they also warrant SMS designation.

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