The hyperscaler clouds Amazon Web Services, Microsoft and Google are facing a new investigation by the British communications watchdog, Ofcom. Under the powers of the Enterprise Act 2022, the regulator will launch a market study of the three companies in the coming weeks to ensure that digital communications markets are functioning effectively.
Ofcom said the UK cloud services market is worth £ 15 billion, but that currently only three companies (AWS, Microsoft and Google) generate 81% of revenue from the infrastructure services market, specifically.
Google estimates that the market currently consists of the following distribution: AWS (40%), Microsoft (25%), Google (16%) and others (19%).
The investigation is part of a new work program undertaken by Ofcom, which will see it invest its efforts to make “digital communications work for everyone”. The work program is Ofcom’s acknowledgment that the way people and businesses in the UK buy products, get information and use public services have been transformed by the internet.
He notes that he has to look as much at how companies use digital infrastructure and services as the cables, masts and satellites he has focused on in the past.
The new study focusing on hyperscale cloud providers will assess how well the market for infrastructure cloud services is performing and examine the strength of competition in cloud services in general. Ofcom will also consider any market characteristics that could limit innovation and growth in the industry, making it difficult for other companies to enter the market and expand their share.
As the cloud industry is still evolving, we will examine how the market works today and how we expect it to develop in the future, with the aim of identifying any competition concerns early to prevent them from becoming established as the market matures.
When we launch the market study, we will invite first views on the UK cloud market from interested or interested parties. We plan to consult on our interim results and publish a final report, including any concerns or proposed recommendations, within twelve months.
If we find that a market is not performing well, there can be negative impacts on businesses and ultimately on consumers, due to higher prices, lower quality of service and reduced innovation.
The regulator said it will consider one of the following steps if the market is not performing well:
- Make recommendations to the government to change regulations or policies
- Engage in competitive or counteracting actions with consumers
- Refer to the Italian Competition Authority (CMA) for the market survey
- Accept commitments instead of referring to a market survey
Ofcom has engaged with the CMA in planning the market study and will continue to do so throughout the project.
Communication apps and devices
In addition to the cloud infrastructure part, Ofcom will also launch a broader work program to examine other digital markets, including digital communication apps and devices for accessing audiovisual content.
The regulator said he is interested in how services like WhatsApp, FaceTime and Zoom are affecting the role of traditional calling and messaging and how competition and innovation in these markets could evolve in the coming years. Specifically, it is curious to understand if any limitations to their ability to interact with each other indicate potential concerns (eg you cannot use WhatsApp to video call someone using FaceTime, you have to use the same application).
In addition to this, Ofcom will also explore the “nature and intensity of competition” between personal digital assistants and audiovisuals like connected televisions and smart speakers. He wants to better understand the dynamics of competition in this industry and identify if there are potential areas that may need more formal examination.
He said his work will include analyzing “consumer behavior, future developments, as well as the role and business models of key players and their bargaining power with content providers.”
Selina Chadha, Ofcom’s Director of Connectivity, said:
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 deliver content continues to grow, so do the technological and economic issues facing regulators.
That is why we are embarking on a program of work to look into these digital markets, identify any competition concerns and make sure they are working well for the people and companies that rely on them.