Ofcom has formally launched a market study under the Enterprise Act 2002 into the UK’s £15 billion cloud services market. The regulator is inviting initial views from interested parties, including cloud providers, independent software vendors, suppliers of professional services and customers. It is seeking input on how the market is developing and the nature of competition, particularly in cloud infrastructure services and cloud ecosystems.

Ofcom explains that cloud computing is a huge and fast-growing market, which uses remote servers to offer services such as software, storage and computing power. It has become an essential part of how products are delivered to telecoms users, as well as viewers and listeners of TV, radio and audio content.

The largest providers of cloud services, known as “hyperscalers”, are Amazon Web Services (AWS), Microsoft and Google. Collectively, these three firms generate around 81% of revenues in the UK public cloud infrastructure services market.

Ofcom’s study will formally assess how this market is working. It will examine the strength of competition in cloud services generally and the position the three hyperscalers hold in the market. Ofcom 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.

Because the cloud sector is still evolving, Ofcom will look at how the market is working today and how it expect it to develop in the future, aiming to identify any potential competition concerns early to prevent them becoming embedded as the market matures.

Ofcom explains that where a market is not working well, there can be negative impacts on businesses and ultimately consumers, through higher prices, lower service quality and reduced innovation. In these circumstances, Ofcom can take one or more of the following steps:

• make recommendations to the Government to change regulations or policy;
• take competition or consumer protection enforcement action;
• make a market investigation reference to the Competition and Markets Authority (CMA); and
• accept undertakings in lieu of making a market investigation reference.

The call for inputs closes on 3 November 2022. Ofcom plans to consult on the interim findings and publish a final report, including any concerns or proposed recommendations, within twelve months. To access the call for views, click here.