18 Oct 2023

CMA publishes details of cloud market investigation

The Competition and Markets Authority (CMA) has published an Issues Statement outlining initial proposals for its investigation into the supply of cloud infrastructure services in the UK. This follows the publication of Ofcom’s final report on its recent cloud market study.

Key Issues

The CMA is proposing to focus on the following issues identified by Ofcom:

(a) the presence of technical barriers that may hinder customers’ ability to set up a multi-cloud architecture and switch cloud providers;
(b) the presence of fees connected with the transferring of data outside of a cloud provider’s infrastructure which may constitute a barrier to multicloud and switching. Ofcom calls these egress fees;
(c) the discounts offered by some cloud providers which are conditional on customers committing to a certain level of spend with them. Ofcom calls these committed spend discounts. These may increase barriers to multicloud and switching; and
(d) the software licensing practices by some cloud services providers which may reduce competition or raise barriers to entry.

In addition, the CMA will conduct an analysis of cloud service providers’ profitability to assess whether prices of cloud services may be above those that would be found in a competitive market.

The Issues Statement also contains a list of potential remedies and we are keen to understand how these might impact techUK members.

techUK response

Cloud computing has become an essential component of the UK economy, transforming how we live and work, and techUK supports an open and competitive market that facilitates customer switching and the use of multiple providers.

One of the core strengths of cloud computing is the flexibility it offers to customers that enables more agile business practices. This has had a transformational impact on the market for compute, data storage and networking, and been a catalyst for innovation and economic growth.

It is vital that any regulatory intervention strikes an appropriate balance between reinforcing competition, supporting multi-cloud and customer switching, and ensuring the UK continues to benefit from ongoing investment in the cloud infrastructure that will be needed for the UK to make the most of emerging technologies like AI and quantum computing.

techUK encourages all members to participate in the CMA investigation and will be hosting a series of industry roundtables in the coming months to explore the issues raised in this statement.

Next Steps

The CMA is seeking input on the extent to which the issues it has identified should be in scope of the investigation or have been mischaracterised, or if there are further issues that should be considered that have not been identified.

The deadline for submissions on the issues statement is Thursday 9 November 2023.

techUK encourages all members to respond via: [email protected]

techUK will continue to engage with our members and the CMA in the coming months and we encourage all members with views on the issues outlined above to contact [email protected]