UK regulator says Microsoft and AWS monopoly damages cloud competition

AWS and Microsoft are harming competition in the UK cloud market because of their dominant positions, according to a regulator’s long-running investigation.

Back in 2023, the Competition and Markets Authority (CMA) began its analysis of the UK cloud market, and two years on a panel has concluded that AWS and Microsoft’s dominant positions may well be detrimental to competition.

“We think outcomes for customers would be better if cloud markets were more competitive,” the regulator said in a summary report. “These outcomes would include more consistently competitive prices, greater prevalence of switching and multi-cloud use and potentially higher quality and innovation.”

According to the report, Microsoft and AWS between them hold up to 40% of the UK infrastructure as a service market, while Google has up to 10%; the report noted that the platform as a service market was less concentrated, with Microsoft at around 30%, AWS at 20% and Google up to 10%. The total market is worth about £10.5 billion annually, with spending growing by 30% annually, the report said.

The report emphasized that customers face commercial and technical barriers to switching cloud providers, with fewer than 1% managing to shift to a new provider each year. The CMA said technical challenges included a lack of latency between clouds, incompatible interfaces, and insufficient transparency from providers, while egress fees paid to transfer data to another cloud provider was another major barrier.

“These reduce the ability and incentives for customers to switch or multi-cloud, particularly smaller customers and those with large proportions of stored data for whom fees are highest relative to their total cloud spending,” a summary report noted. “They also reduce the incentives of suppliers to compete for their rivals’ customers.”

Microsoft licensing singled out

While the report found fault with the dominance of both Microsoft and AWS, it took specific umbrage with Microsoft’s software licensing practices, saying they influenced customers’ choice of cloud.

The CMA said Microsoft has “significant market power” because of the dominance of its existing software products such as Windows Server and Microsoft 365, adding that the investigation found differences in price and quality when customers use such software on Azure versus AWS or Google clouds, with some products simply not available.

“For example, the input price paid to Microsoft by AWS and Google for some of these products can be higher than Microsoft’s customer-facing price for some cloud customers,” the summary report noted. “AWS and Google pass through at least some of the input costs of Microsoft software, and customers generally perceive them to be more expensive than Microsoft.”

Microsoft last year agreed a €20 million settlement with Cloud Infrastructure Service Providers in Europe (CISPE) to avoid an EU investigation into its cloud practices in Europe.

Slow to break up Microsoft and AWS monopoly?

The CMA panel said it was “vital that competition works well” in the cloud market, calling for “targeted and bespoke interventions”.

So what’s next? The CMA is going to… investigate further. The market regulator is considering whether it will daub Microsoft and AWS with “strategic market status” – but it won’t start such work until next year as it lacks capacity.

If they are deemed to have strategic market status, that will allow the CMA to take action. “Measures aimed at Microsoft and AWS would address market-wide concerns,” the CMA group said.

Nicky Stewart, senior advisor to the Open Cloud Coalition, told Reuters: “Given the alarming anticompetitive behaviour it has identified, the current plan to start this process in early 2026 is nowhere near sufficient.”

Microsoft and AWS disagree — but Google’s happy

Perhaps unsurprisingly, both Microsoft and AWS found fault with the findings, both agreeing that the CMA failed to see that the market was actually very competitive, thank you very much.

An AWS spokesperson said that the report ignores the “robust competition” in the UK cloud market.

“The action proposed by the inquiry group is unwarranted and undermines the substantial investment and innovation that have already benefited hundreds of thousands of UK businesses,” the AWS statement added. “It risks making the UK a global outlier at a time when businesses need regulatory predictability for the UK to maintain international competitiveness.”

A Microsoft spokesperson reportedly agreed: “The CMA panel’s most recent publication misses the mark again, ignoring that the cloud market has never been so dynamic and competitive, with record investment and rapid, AI-driven changes.”

And what about Google? “Its recommendations fail to cover Google, one of the fastest-growing cloud market participants,” the Microsoft spokesperson added.

Equally unsurprisingly, Google found much to like about the CMA’s findings, with Chris Lindsay, Google Cloud’s VP for Customer Engineering in EMEA, quoted as saying that “swift action” was essential to ensure a fair price and “unleash choice”.

He added: “The conclusive finding that restrictive licensing harms cloud customers and competition is a watershed moment for the UK.”

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