UK Cloud Market Under Scrutiny: Why Regulators Are Investigating AWS and Microsoft
The digital infrastructure that powers countless UK businesses is now the focus of a major investigation. The UK’s top competition regulator is launching a full-scale probe into the public cloud services market, with a sharp focus on its two dominant players: Amazon Web Services (AWS) and Microsoft Azure.
This move by the Competition and Markets Authority (CMA) follows initial findings from the communications regulator, Ofcom, which raised significant concerns about how the market operates. With AWS and Microsoft controlling a combined 70-80% of the UK’s public cloud market, regulators are examining whether this concentration of power is stifling competition and harming customers.
This investigation is a critical development for any business that relies on cloud services. Here’s what you need to know about the issues at stake and what it could mean for you.
The Core Concern: Market Dominance and High Barriers to Entry
The investigation centers on the power held by “hyperscalers”—the handful of large companies with the vast global infrastructure needed to provide comprehensive cloud services. The primary concern is that the dominance of AWS and Microsoft creates an environment where it’s difficult for smaller cloud providers to compete and challenging for customers to switch between providers.
The CMA will spend the next 18 months digging into several key practices that may be limiting choice and locking customers into a single ecosystem.
Key Issues Under the Microscope
Regulators have highlighted three main areas that could be distorting the market and creating unfair conditions for businesses.
High Data Transfer Fees (Egress Fees)
One of the most significant barriers for customers is the cost associated with moving their data out of a cloud provider’s network. These are known as egress fees. While uploading data is often free, downloading it or transferring it to a different provider can be prohibitively expensive. This practice can create a powerful form of vendor lock-in, making businesses hesitant to switch providers or adopt a multi-cloud strategy due to the high costs involved.Restrictive Software Licensing Practices
The investigation will also scrutinize software licensing rules. Ofcom’s initial report noted that some companies—with Microsoft being a key example—allegedly structure their software licenses in a way that makes it more expensive to use their essential business products (like Windows Server or Microsoft 365) on a rival’s cloud. These pricing incentives can effectively penalize customers for not using Azure, pushing them away from other competitive options.Technical Barriers and Incompatible Technology
Beyond costs, technical complexities can make switching providers a daunting task. The services and tools offered by one provider are often not directly compatible with those of another. This lack of interoperability means a company can’t simply lift and shift its operations. The process requires significant technical resources, planning, and investment, further discouraging businesses from seeking better alternatives.
What This Means for Your Business: Actionable Steps
While the outcome of the investigation is a long way off, its launch is a clear signal that change may be on the horizon. Businesses that rely on cloud services should see this as an opportunity to become more strategic.
Here are some steps you can take now:
- Audit Your Cloud Costs: Take a close look at your cloud spending. Pay special attention to egress fees to understand how much it would cost to move your data. This knowledge is power in any future negotiation.
- Review Your Contracts: Understand the terms of your agreements, particularly any long-term commitments or committed spend discounts that may limit your flexibility.
- Explore a Multi-Cloud Strategy: Even if you don’t switch primary providers, investigate how a multi-cloud or hybrid-cloud approach could offer more resilience and cost-effectiveness. This investigation may eventually make such strategies much more viable.
- Stay Informed: Keep an eye on the progress of the CMA’s investigation. Any resulting remedies or rule changes could directly impact your budget, operations, and IT strategy.
The Path Forward: A Fairer Digital Marketplace
The CMA’s investigation represents a pivotal moment for the UK’s cloud computing market. The ultimate goal is to ensure the market remains competitive, innovative, and fair. If the regulator finds that current practices are harming competition, it has the power to impose remedies.
For businesses across the UK, this could lead to a more balanced playing field, with lower costs, greater choice, and increased flexibility in how they use the cloud services that are so essential to the modern economy.
Source: https://datacentrereview.com/2025/08/aws-microsoft-to-face-competition-probe-as-cma-concludes-uk-cloud-market-investigation/
