Amazon and Microsoft’s “concerning” dominance in the cloud services market could require investigation by the UK’s competitions regulator, Ofcom has said.

The Competitions and Markets Authority (CMA) was told it may want to look into the sector after the media watchdog identified issues of its own with how it is skewed towards the US tech giants.

Cloud services essentially provide computing power remotely. Most of us think of the cloud as somewhere we keep files and photos without taking up storage space on our phones.

But cloud services are also the backbone of websites and online platforms – and many businesses rely on those provided by Amazon Web Services (AWS) and Microsoft Azure.

They have 60-70% of the market share, Ofcom said.

When such a service has issues, it can have a knock-on impact on its customers. For example, Disney+ and Netflix have been knocked over by previous AWS outages.

Ofcom director Fergal Farragher described cloud services as “the digital backbone of our economy”.

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‘More scrutiny needed’

Ofcom said it was “particularly concerned” about how Amazon and Microsoft used their position to charge “significantly higher” fees than smaller competitors for customers who want to switch provider.

It also said the companies prevent some services from working effectively alongside those from rivals. Less-known providers include IBM and Oracle, while Google (5-10% market share) is another player in the space.

Ofcom said Amazon and Microsoft’s practices could see the market “concentrate further” towards them.

Mr Farragher added: “We think more in-depth scrutiny is needed, to make sure it is working well for people and businesses who rely on these services.”

Consumer group Which? said Ofcom was “right to raise concerns”, warning the “excessive influence” of tech giants “shut out smaller competitors” and “leads to less choice and potentially higher costs for consumers”.

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Ofcom to report back by October

Ofcom said it would take feedback on its findings until mid-May and make a final recommendation in October.

The CMA, which recently dropped concerns over Microsoft’s £56bn deal for games giant Activision Blizzard, would likely not decide whether to investigate until then.

Microsoft said it would continue to engage with Ofcom’s study.

“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,” it added.

Amazon said: “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.

“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.”

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