The UK’s competition watchdog is gearing up to announce new measures aimed at shaking up the cloud industry, dominated by Amazon and Microsoft. After months of investigation into the sector, the Competition and Markets Authority (CMA) is expected to roll out behavioral remedies to fix anti-competitive practices. Here’s what we know so far.
Why Is the UK Regulator Concerned?
The cloud infrastructure market is worth billions, and right now, it’s largely controlled by two American tech giants: Amazon Web Services (AWS) and Microsoft Azure. The CMA is worried that these companies are making it difficult for competitors to thrive by imposing high fees and creating barriers that make it tough for customers to switch cloud providers.
The key issues the CMA wants to address include:
- Egress fees: These are fees charged when a company wants to move its data from one cloud provider to another. Some critics argue these fees are unfair and hinder competition.
- Licensing and Volume Discounts: Some practices related to licensing and bulk-buy discounts are seen as anti-competitive.
- Interoperability: The difficulty of moving data and services between different cloud providers is another sticking point.
What Does the CMA Plan to Do?
The CMA has been investigating this issue since 2022, when the UK telecoms regulator Ofcom first looked into the dominance of Amazon, Microsoft, and Google in the cloud market. Ofcom then referred the issue to the CMA, which has been exploring how to level the playing field ever since.
Now, it’s expected that the CMA will announce its plans in the next two weeks. While it’s not clear exactly what these “behavioral remedies” will look like, some ideas have already been floated.
Possible Solutions: Price Caps and Easier Switching
One major suggestion is to impose price controls on egress fees, making it harder for Amazon and Microsoft to charge excessively for moving data. The CMA could also require these companies to make it easier for customers to switch between cloud providers, removing technical barriers that lock companies into one system.
Another potential remedy could impact Microsoft’s pricing. The CMA is considering forcing Microsoft to apply the same pricing to its productivity software (like Microsoft Office and Teams), regardless of which cloud it’s hosted on. This could drastically alter Microsoft’s current pricing structure and create more competition in the market.
Will Google Be Affected?
While Amazon and Microsoft are the main focus of the CMA’s investigation, there’s a chance Google may not be included in these remedies. Google’s cloud business is smaller than its rivals, so the CMA may not find it as necessary to address competition concerns there.
The CMA’s Strategy: Behavioral vs. Structural Remedies
The CMA has previously hinted that it’s more interested in behavioral remedies rather than drastic structural remedies like breaking up companies or forcing them to sell parts of their businesses.
Behavioral remedies are changes that companies must make to how they operate, such as improving their pricing or adjusting their practices to make it easier for consumers to switch providers. This approach allows companies to remain intact but forces them to play by fairer rules.
A Controversial Measure: Price Control on Microsoft
One of the most contentious ideas is requiring Microsoft to apply the same pricing for its software products, no matter which cloud provider they are hosted on. This would force Microsoft to adjust its pricing structure, which could have a major impact on its business model, especially since it has long used its cloud dominance to push customers into its ecosystem.
What’s Next for the CMA?
As the CMA prepares to announce its provisional decision, Sarah Cardell, the CMA’s CEO, is expected to discuss the regulator’s plans in a speech at Chatham House in London. She’s also been under pressure from some UK political leaders, including Prime Minister Keir Starmer, who has criticized the CMA for holding back economic growth. Despite this, Cardell is likely to defend the regulator’s actions and explain the reasoning behind using behavioral remedies to address market imbalances.
In 2025, the CMA plans to review whether behavioral remedies should become a more common tool in approving deals in other sectors as well.
Conclusion: Will These Moves Shake Up the Cloud Industry?
The UK’s competition regulator is taking a big step in trying to resolve the growing concerns over the dominance of Amazon and Microsoft in the cloud industry. With billions of dollars at stake and the potential to reshape the entire market, the CMA’s forthcoming behavioral remedies could have major implications for the future of cloud computing.
As we wait for the official announcement, it’s clear that the CMA is serious about tackling anti-competitive practices in this crucial sector. If these proposed remedies are put in place, they could lead to a more competitive cloud market, benefiting both businesses and consumers in the long run.
