UK Watchdog Targets Cloud Giants: What New Regulations Mean for Microsoft and AWS
The digital landscape in the United Kingdom is on the cusp of a major transformation. The UK’s communications regulator, Ofcom, has announced significant plans to address the overwhelming market dominance of Amazon and Microsoft in the cloud computing sector. This move could reshape how businesses across the country interact with essential cloud services.
At the heart of the issue is the sheer market power wielded by Amazon Web Services (AWS) and Microsoft Azure. Together, these two tech giants control an estimated 70-80% of the UK’s public cloud infrastructure market. While their services are integral to modern business, regulators are concerned that this duopoly stifles competition, inflates costs, and ultimately harms customers.
To counter this, Ofcom is proposing to designate both companies with a ‘strategic market status’ (SMS). This new classification, part of the forthcoming Digital Markets, Competition and Consumers Bill, would grant the regulator unprecedented powers to enforce new rules of conduct on these firms.
Key Concerns Driving the Crackdown
Ofcom’s investigation has highlighted several practices that create an unfair playing field and make it difficult for customers to switch providers. These anti-competitive tactics effectively “lock in” businesses, limiting their flexibility and bargaining power.
The primary areas of concern include:
- Prohibitive Egress Fees: These are the charges that companies must pay to move their data out of a cloud provider’s network. Critics argue that these fees are often excessively high and not reflective of the actual cost, creating a significant financial barrier for any business looking to switch to a competitor or adopt a multi-cloud strategy.
- Restrictive Software Licensing: The investigation found that some cloud providers’ software licensing terms can be unfair. For example, a company might face significantly higher costs to use essential business software on a rival’s cloud platform, creating a powerful incentive to stay within a single provider’s ecosystem.
- Technical Barriers to Interoperability: A lack of technical compatibility between different cloud platforms makes it complex and costly for businesses to use services from multiple providers simultaneously or to migrate their operations smoothly from one to another.
What ‘Strategic Market Status’ Means for the UK
The proposed SMS designation is not just a label; it’s a tool for enforcement. If the proposal is finalized, Ofcom will have the authority to impose legally binding ‘conduct requirements’ aimed at fostering a more competitive market.
This could mean forcing AWS and Microsoft to:
- Increase transparency in their pricing and service terms.
- Make it easier for customers to switch to other providers without facing punitive costs or technical hurdles.
- Ensure their services are more compatible with those of rival platforms.
- Overhaul unfair software licensing practices that penalize customers for using competing clouds.
This regulatory action mirrors similar efforts in other parts of the world, including the European Union’s Digital Markets Act, indicating a global trend towards holding major technology platforms more accountable.
Actionable Advice for Businesses
While these regulations are still in the proposal stage, with a final decision expected by October, businesses can take proactive steps now to mitigate risks associated with cloud vendor lock-in.
- Conduct a Cloud Cost Audit: Take a deep dive into your cloud spending. Pay close attention to data transfer and egress fees to understand the true cost of moving your data.
- Explore a Multi-Cloud Strategy: Rather than relying on a single provider, investigate how a multi-cloud or hybrid-cloud approach could give you more flexibility, better pricing, and increased resilience.
- Review Your Contracts: Scrutinize the terms of your agreements with cloud providers. Understand the policies around software licensing, data portability, and any potential switching costs.
- Stay Informed: Keep a close eye on these regulatory developments. A more competitive market could soon present new opportunities for cost savings and innovation.
The coming months will be crucial in determining the future of the UK’s cloud market. For businesses, this potential shift represents a long-overdue move toward a fairer, more transparent, and competitive digital environment.
Source: https://go.theregister.com/feed/www.theregister.com/2025/07/31/cma_aws_microsoft_sms/
