Alexa, are AWS, Google and Microsoft dominant in cloud, asks Ofcom

Alexa, are AWS, Google and Microsoft dominant in cloud, asks Ofcom

Selina Chadha Ofcom.jpg

The UK regulator, Ofcom, is starting three investigations into the cloud-based services that are taking over the telecoms market.

First, it will examine the position of Amazon Web Services (AWS), Microsoft and Google in cloud services, as part of what it says is a new programme of work to ensure that digital communications markets are working well for people and businesses in the UK.

“We will examine the strength of competition in cloud services generally and the position the three hyperscalers hold in the market,” said the regulator this morning.

It wasn’t clear what Ofcom’s possible options might be, said Paolo Pescatore of PP Foresight . “It is hard to see what Ofcom will do if the big tech [companies] are stifling competition. We might see restrictions [or] incentives to foster new players,” he told Capacity.

He said AWS is dominant in the market with “Microsoft Azure and Google Cloud competing in large part by price”.

The regulator said the cloud study will start “in the coming weeks” under the Enterprise Act 2002.

Selina Chadha (pictured), 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 serve up content continues to grow, so do the technological and economic issues confronting regulators.”

She added: “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.”

On the cloud study, Ofcom said AWS, Microsoft and Google generate around 81% of revenues in the UK public cloud infrastructure services market.

“Our study will formally assess how well this market is working. We will examine the strength of competition in cloud services generally and the position the three hyperscalers hold in the market. We will also consider any 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.”

Though the study is determinedly UK-only, the results will have significance in all digital markets. Ofcom will invite initial views on the UK cloud market from interested or affected parties once it actually starts the probe.

“We plan to consult on our interim findings and publish a final report – including any concerns or proposed recommendations – within 12 months.”

At the same time Ofcom said it “will also start a broader programme of work to examine other digital markets, including online personal communication apps and devices for accessing audiovisual content”.

It specifically mentioned WhatsApp – owned by Meta, which also owns Facebook and Instagram – as well as FaceTime, part of Apple, and independently owned Zoom.

It said they “are affecting the role of traditional calling and messaging” and said it will look at “how competition and innovation in these markets may evolve over the coming years”.

Ofcom added: “We also want to understand whether any limitations on their ability to interact with each other raises potential concerns.”

The regulator has noticeably not given a timescale for when it wants to start or expects to finish the messaging study.

Even further away, it seems, is what it calls “another future area of focus” for the regulator, “the nature and intensity of competition among digital personal assistants and audiovisual ‘gateways’ – such as connected televisions and smart speakers – through which people access traditional TV and radio, as well as online content.”

Pescatore said: “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.”

He added: “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.”

Ofcom said it has a number of options: to make recommendations to government, to take competition or consumer enforcement action, or to make a market investigation reference to the Competition and Markets Authority (CMA), or to accept undertakings in lieu of making a market investigation reference.

“We have engaged closely with the CMA in planning the market study, and will continue to do so during the course of the project. Ofcom will lead the market study, drawing on our strong expertise in communications markets and reflecting that cloud is increasingly becoming an important element of the infrastructure of the internet,” said the regulator.

 

 


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