Amazon and Microsoft, the two dominant cloud providers, face an antitrust investigation in Britain after the communications regulator said some aspects of the market, including fees to switch supplier, were a cause for concern.
Ofcom, which started looking into cloud services last year, said it was particularly worried about the practices of Amazon Web Services (AWS) and Microsoft because of their market positions, and planned to ask the competition regulator to investigate.
Amazon and Microsoft have a combined market share of 60-70%. Alphabet's Google, their closest competitor, has just 5-10%.
Ofcom said technical restrictions and discounts to encourage customers to use a single provider for all their needs even when better quality alternatives were available could also be anti-competitive.
"High barriers to switching are already harming competition in what is a fast-growing market," Ofcom director Fergal Farragher said.
"We think more in-depth scrutiny is needed to make sure it's working well for people and businesses who rely on these services."
The fast-growing, multi-billion-dollar cloud computing business has attracted attention from regulators in Europe as well as Britain.
Microsoft has offered to change its practices to settle antitrust complaints filed by smaller cloud computing rivals to EU antitrust regulators, a person with direct knowledge of the matter said last month.
Google however said such a move would not solve broader concerns about Microsoft's licensing terms.
Both Microsoft and AWS said they would continue to work with Ofcom ahead of the publication of its final report in October.
"We remain committed to ensuring the UK cloud industry stays highly competitive, and to supporting the transformative potential of cloud technologies to help accelerate growth across the UK economy," said a Microsoft spokesperson.
AWS said customers in Britain were able to choose between a wide variety of providers.
"At AWS (Amazon Web Services), 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," an AWS spokesperson said.
"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."
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
