AWS, Microsoft Push Back Against Plans to Refer UK Cloud Market to Competition Regulator
Ofcom’s investigation identified practices that make it “difficult for customers to switch and use multiple cloud suppliers.”
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AWS said that rather than inhibiting customer choice, the cloud has made switching between IT providers easier than ever before.
“Conversely, the potential interventions identified in the interim report would likely dampen competition and impede innovation to the detriment of IT customers.”
It added: “We therefore do not consider that the proposal put forward in the interim report to refer ‘cloud infrastructure services’ to the UK’s Competition and Markets Authority for potential regulatory intervention is merited or appropriate.”
AWS said there are “thousands of providers delivering value to customers through easily accessible, low cost, high-quality, innovative IT services, and switching between them is easier than ever before. At AWS, we design our services to give customers freedom of choice and we believe the concerns expressed in the Interim Report are based on fundamental misconceptions about how the IT sector functions and the services and discounts on offer. The regulatory interventions proposed would be unwarranted, and could lead to significant unintended harm to customers and competition.”
The UK’s third biggest cloud provider, Google Cloud, also weighed in. It noted that the UK cloud services market “is generally working well.”
It said the benefits of cloud computing in the UK are reinforced “by strong competition across all layers of cloud services.”
As such, it said a Market Investigation Reference (MIR) “would be inappropriate and would place a disproportionate burden on smaller CSPs.”
Instead it advocates for a standalone investigation under the Competition Act 1998.
“This approach would enable the CMA to resolve the issue promptly whilst also mitigating against the significant resource burden that an MIR would place on smaller CSPs, including Google, who do not engage in [limiting competition].”
Microsoft, meanwhile, said referring the UK cloud market to the CMA could leave public and private sector cloud users worse off.
“Given the fast-evolving and highly dynamic nature of cloud, any intervention could very well be net negative and leave UK enterprises and public sector customers worse off … If, for example, UK customers were deprived of discounts, or of innovation through ‘interoperability requirements which favour portability considerations over innovation and differentiated value-add services.’
“It would be a particularly unfortunate outcome if UK businesses and public sector customers faced less vibrant and competitive cloud solutions on a global stage than those available to their rivals in the EU, the US and China.”
Conversely, BT agrees with Ofcom’s broad recommendation for a market investigation reference. It said it welcomed Ofcom’s interim report, describing it as an “important step for the market to work well for competition and customers.”
“Technical interoperability and portability are crucial. There are a number of quick wins, such as greater transparency and unbundling,” it said.
“Egress fees are not justified and, at a minimum, they must be transparent, easily accessible and predictable at the start of the contract for its duration. Greater ability to predict costs at the outset would help reduce barriers to switching.
“We understand concerns about committed spend discounts, but think other interventions (on interoperability and egress fees) will have a greater impact on competition.”
TechUK said it welcomes discussion on interoperability and portability as these are central to maximising the value of cloud computing.
It added that it is supportive of open-source technologies and standards. It cited the Cloud Native Computing Foundation, which is working to support the development of vendor-neutral technologies with the support of all major cloud providers.
TechUK however has asked for clarification and detail regarding Ofcom’s decision to include all platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) within a broad category of ‘cloud infrastructure services.’
“This grouping has raised some questions about what this could mean for third-party PaaS providers offering services not directly tied to the underlying infrastructure.
“It would be helpful for Ofcom to clarify the reasoning for grouping IaaS and PaaS,” it said.
Virgin Media O2 also said it would be harmful to the UK cloud market if users were hindered from switching suppliers or using multicloud architecture.
“That could harm competition both directly and indirectly. The direct effect is to limit options available to users, as moving away from existing supplier will be costlier or more complex. The indirect effect is to give rise to higher barriers for entry and expansion. Jointly, these effects risk reducing competition in cloud markets and, in turn, deteriorating outcomes available to users,” it said.
The network provider said it supports initiatives aimed at reducing such barriers. It added that the concerns identified by Ofcom merit a more in-depth investigation.
“Whilst we have not yet experienced the concerns identified, this could be because we have had no need to switch supplier or multicloud. Our cloud requirements are developing, and being able to switch or multicloud will be important for us to take advantage of cloudification going forward.
“As the CMA has the power and expertise to review competition in cloud markets and decide on which – if any – remedies can improve how these markets deliver for its users, we support Ofcom proposal to refer cloud markets to the CMA for a market investigation.”
Virgin Media O2 also said it would be harmful to the UK cloud market if users were hindered from switching suppliers or using multicloud architecture.
“That could harm competition both directly and indirectly. The direct effect is to limit options available to users, as moving away from existing supplier will be costlier or more complex. The indirect effect is to give rise to higher barriers for entry and expansion. Jointly, these effects risk reducing competition in cloud markets and, in turn, deteriorating outcomes available to users,” it said.
The network provider said it supports initiatives aimed at reducing such barriers. It added that the concerns identified by Ofcom merit a more in-depth investigation.
“Whilst we have not yet experienced the concerns identified, this could be because we have had no need to switch supplier or multicloud. Our cloud requirements are developing, and being able to switch or multicloud will be important for us to take advantage of cloudification going forward.
“As the CMA has the power and expertise to review competition in cloud markets and decide on which – if any – remedies can improve how these markets deliver for its users, we support Ofcom proposal to refer cloud markets to the CMA for a market investigation.”
Amazon Web Services (AWS) and Microsoft are pushing back against plans to refer the UK cloud market to the Competition and Markets Authority (CMA).
AWS has claimed the “regulatory interventions proposed would be unwarranted, and could lead to significant unintended harm to customers and competition.”
AWS and Microsoft Dominate UK Cloud Market
In April, UK communications regulator Ofcom accused the cloud giants of stifling innovation within the £15 billion (US $16.9 billion) UK cloud market. It said it had “identified features and practices that make it more difficult for customers to switch and use multiple cloud suppliers.”
It singled out the practices of AWS and Microsoft, due to their market dominance. The pair have a combined market share of 60-70% in the UK.
Ofcom highlighted three areas of concern:
Egress fees: Ofcom found the hyperscalers set these charges at significantly higher rates than other providers. The cost of egress fees can discourage customers from using services from more than one cloud provider or switch to an alternative provider.
Technical restrictions on interoperability: Imposed by the leading firms, the regulator said these prevent some of their services working effectively with services from other providers. This means customers need to put additional effort into reconfiguring their data and applications to work across different clouds.
Committed spend discounts: The regulator noted these can benefit customers by reducing their costs; however, it found that the way the discounts are structured can incentivize customers to use a single hyperscaler for all or most of their cloud needs, “even when better quality alternatives are available.”
Cloud Providers Fighting Back
Ofcom invited feedback on its interim findings, and its proposal to refer the UK cloud market to the CMA.
That feedback is now in – and the cloud providers are arguing back. AWS said that the UK economy has “benefited from robust competition among IT providers.”
AWS’ full response to the proposal is 14 pages in length – with Microsoft’s running to a whopping 58 pages. Here, we have summarized what it said, plus that of the other big IT and cloud players, like Microsoft, Google, BT and Tech UK. See the slideshow above for more.
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