The British Ofcom investigates Amazon, Microsoft and Google for cloud dominance

UK media regulator Ofcom is investigating Amazon, Microsoft and Google’s tight grip on the cloud computing industry.

In the coming weeks, the watchdog will launch a study to examine the position of public cloud infrastructure providers and potential barriers to competition.

The probe announced on Thursday will focus on so-called “hyperscalers” such as Amazon Web Services, Microsoft Azure and Google Cloud, which allow companies to access computing power and data storage from remote servers rather than hosting it on their own private infrastructure.

Further action could be taken by the regulator if it finds that the companies are harming competition. Selina Chadha, director of connectivity at Ofcom, said the regulator has yet to agree on whether the cloud giants are involved in anti-competitive behaviour. Ofcom said it would complete its review and publish a final report within 12 months, detailing any concerns and proposed recommendations.

Amazon, Microsoft and Google were not immediately available for comment when contacted by CNBC.

The review will be part of Ofcom’s broader digital strategy, which regulates the broadcasting and telecoms industry in the UK

It also plans to explore other digital markets over the next year, including personal messaging and virtual assistants like Amazon’s Alexa. Ofcom said it was interested in how services like Meta’s WhatsApp, Apple’s Facetime and Zoom have impacted traditional calling and messaging, as well as the competitive landscape in digital assistants, connected TVs and smart speakers.

“Digital services have transformed the way we live, work, play and do business,” Ofcom’s Chadha said in a statement on Thursday. “But as the number of platforms, devices and networks delivering content grows, so do the technological and economic problems regulators face.”

“That’s why we’re launching a work program to examine these digital markets, identify competition concerns, and ensure they work well for the people and businesses that rely on them,” she added.

Ofcom has been chosen to enforce tough new rules to monitor harmful content online. However, the legislation known as the Online Safety Bill is unlikely to come into force any time soon after Liz Truss replaced Boris Johnson as Prime Minister. As the Truss government grapples with a plethora of issues in the UK – not least the cost of living crisis – regulating online safety is expected to move to the bottom of the list of policy priorities for the government.

The move complements efforts by other regulators to rein in big tech companies via the perceived stranglehold they have on various parts of the digital economy.

The Competition and Markets Authority has several active investigations into Big Tech companies and would like additional powers to ensure a level playing field in all digital markets. The European Commission, meanwhile, has fined Google billions of dollars over alleged antitrust violations, is investigating Apple and Amazon in separate cases, and has enacted landmark digital laws that could transform the internet giants’ business models.

Amazon has a comfortable lead in the cloud infrastructure services market, with its Amazon Web Services division generating billions in profits each year. In 2021, AWS had revenue of $62.2 billion and operating income of over $18.5 billion.

Microsoft’s Azure is the first runner-up, while Google is the third-largest player. Other firms, including China’s IBM and Alibaba, are also running their own cloud arms.

Together, Amazon, Microsoft and Google generate around 81% of revenue in the UK cloud infrastructure services market, according to Ofcom, which estimates the market at £15bn ($16.8bn).

Microsoft recently announced a series of changes to its cloud contract terms that effectively make it easier for customers to use competing cloud platforms as well as Microsoft. The Redmond, Washington-based company has faced complaints from competitors in Europe that it is restricting market choice.