The UK’s cloud computing market is under investigation due to concerns about the dominance of Amazon and Microsoft, according to media watchdog Ofcom.

The two tech giants reportedly make up 70-80% of the sector in the UK, while Google, their closest rival, holds only 5-10% of the market share.

Ofcom expressed concerns in April about the lack of competition in the cloud computing sector, making it challenging for businesses to switch providers.

To address these concerns, Ofcom has referred the matter to the UK’s Competition and Markets Authority (CMA) for further investigation.

Both Amazon and Microsoft have stated that they will cooperate with the CMA during its investigation. However, Amazon has expressed its belief that Ofcom’s concerns are based on a “fundamental misconception” of the cloud computing sector.

Cloud computing involves the storage of data online, allowing users to access it from anywhere and at any time. It has become an essential infrastructure for businesses and individuals alike, enabling data storage, remote software usage, streaming, and gaming.

In 2022, the UK’s cloud services market was estimated to be worth up to £7.5 billion, with many businesses relying on these services for their operations.

Ofcom’s referral of the market to the CMA reflects the importance of ensuring effective competition in the cloud services sector.

CMA Chief Executive Sarah Cardell emphasized the significance of strong competition in digital markets, stating that it prevents market power from concentrating in the hands of a few players and allows the UK economy to benefit fully from rapidly evolving digital markets.

The CMA will conduct its independent inquiry and expects to conclude its investigation by April 2025. If necessary, the CMA has the authority to enforce changes in practices, block acquisitions, or require companies to divest parts of their businesses to preserve market competition.

One of the issues Ofcom raised is the difficulty some UK businesses face when trying to switch cloud providers. Obstacles to switching include data transfer fees, which can deter users from seeking alternative services.

Ofcom suggests that these fees should be limited or eliminated to promote competition.

The investigation aims to ensure that the cloud services market serves UK consumers and businesses effectively. Ofcom hopes that dominant players like Amazon and Microsoft will face competition from rivals such as IBM and Oracle.

A Microsoft spokesperson expressed commitment to maintaining a competitive UK cloud industry and supporting growth across the economy, while Amazon argued that Ofcom’s findings were based on a misunderstanding of the sector, highlighting the flexibility of IT spending that allows customers to choose from various services, including on-premises, co-location, and cloud services.

Amazon also noted that it provides customers with 100 gigabytes of data transfer per month for free.