Ofcom, the regulator that oversees the U.K.’s telecommunications sector, is proposing to launch an investigation into the local public cloud market.

The proposal was released today. It calls for the probe to be conducted by the Competition and Markets Authority, or CMA, the U.K.’s antitrust regulator. But Ofcom’s suggestion is only tentative: It will make a final decision on whether to refer the matter to the CMA later this year.

“High barriers to switching are already harming competition in what is a fast-growing market,” said Ofcom Consumer Protection Director Fergal Farragher. “We think more in-depth scrutiny is needed, to make sure it’s working well for people and businesses who rely on these services.”

Ofcom, which also oversees the U.K.’s broadcasting sector and postal services, began investigating the local cloud market last October. The market is led by Amazon Web Services Inc., Microsoft Corp. and Google LLC. The companies together account for 65% to 80% of cloud spending in the U.K., Ofcom estimates.

The regulator has identified three main areas of concern in the companies’ business practices. Cloud providers charge a so-called egress fee when customers move data out of their platforms to external infrastructure. According to Ofcom, the three hyperscalers charge “significantly higher rates than other providers.” It’s concerned that the cost of moving data out of hyperscalers’ platforms may make it more difficult for customers to switch providers.

Ofcom has also taken issue with the cloud giants’ discount policies. Customers of AWS, Microsoft and Google Cloud can access significant price reductions if they make long-term spending commitments. Discounts exceed 70% in some cases.

According to Ofcom, such so-called committed spend discounts may negatively impact market competition. The concern is that they encourage customers to run all or most of their workloads on a single cloud even when there are better alternatives.

Besides hyperscalers’ pricing policies, the regulator has also taken issue with their approach to product interoperability. Some of their services don’t work well with rival offerings. The result, it stated today, is that making applications work across multiple clouds requires additional effort on customers’ part.

Ofcom believes the business practices flagged by its probe may negatively impact hyperscalers’ customers and rivals. According to the regulator, some customers are finding it challenging to build multicloud environments and “bargain for a good deal with their provider.” Additionally, it believes that the business practices in question are also making it more difficult for hyperscalers’ smaller rivals to compete.

“We design our cloud services to give customers the freedom to build the solution that is right for them, with the technology of their choice,” AWS said in a statement. “This has driven increased competition across a range of sectors in the UK economy by broadening access to innovative, highly secure, and scalable IT services.”

Microsoft also reacted to the proposal for a market investigation. “We remain committed to ensuring the U.K. cloud industry stays highly competitive, and to supporting the transformative potential of cloud technologies to help accelerate growth across the U.K. economy,” Microsoft stated. 

Ofcom’s findings are preliminary. Officials plan to release the final report by Oct. 5, along with a decision on whether to recommend a probe into the cloud market. If the recommendation is made, the probe will be carried out not by Ofcom but the CMA, the U.K.’s antitrust regulator.

Photo: Unsplash