The UK's cloud market is a place of regulatory scrutiny these days as the Competition and Markets Authority (CMA) launches a full-scale investigation into the practices of major cloud infrastructure providers.

The probe is a response to concerns that these hyperscalers, including Amazon's AWS, Microsoft, and Google, may hinder businesses' ability to switch cloud providers or use multiple services. Given the recent accusations around Amazon’s pricing habits, is anyone really surprised?

The Egress Fee Dilemma and Interoperability Concerns

The investigation centers on practices such as "egress fees", non-transparent charges for transferring data out of a cloud provider's ecosystem. This can deter businesses from switching providers. They’re essentially a fee for ending your relationship. Much like an electronic divorce payment. Additionally, the CMA will scrutinize interoperability, where cloud services are designed to be incompatible with rivals, making multi-cloud approaches challenging.

“Many businesses now completely rely on cloud services, making effective competition in this market essential,” CMA's CEO Sarah Cardell said in a statement. “Strong competition ensures a level playing field so that market power doesn’t end up in the hands of a few players — unlocking the full potential of these rapidly evolving digital markets so that people, businesses, and the UK economy can get the maximum benefits.”

Following Ofcom’s referral, we are investigating the supply of public cloud infrastructure services in the UK.

Cloud services allow remote access to computing resources on demand and over a network.

Read more: https://t.co/pOPX4F0Sn0 pic.twitter.com/7k3ikWBlE6

— Competition & Markets Authority (@CMAgovUK) October 5, 2023

Competition and Market Dynamics

AWS and Microsoft, leaders in cloud revenue in the UK, face particular scrutiny. Ofcom's initial findings suggested that as much as 80% of cloud revenue was attributed to them, whatever the percentage, it’s certainly a lot. This isn’t so much a monopoly, it’s more like there are only two options in town. The investigation will also assess "committed spend discounts", which may discourage businesses from adopting a multi-cloud strategy. Essentially, you’re limited to two choices, and they’re, allegedly, making life difficult if you want to use two providers or, heaven forbid, leave them.

The Road Ahead

Microsoft's software licensing practices, related to its dominance in business software, are under scrutiny, but Ofcom, the UK regulator in charge of all sorts of communications, including internet safety, left it to the CMA to decide whether further investigation is warranted. The CMA's final report will outline the areas of focus and is expected in due course.

Industry Response and Final Verdict

The CMA aims to conclude the investigation by April 2025, providing clarity on the regulatory landscape for cloud providers in the UK. AWS and Microsoft have expressed willingness to cooperate. It seems like businesses around the UK will be waiting for quite some time.