UK preps for deeper dive into AWS and Microsoft's cloud dominanceUK preps for deeper dive into AWS and Microsoft's cloud dominance

An in-depth investigation by the Competition and Markets Authority (CMA)'s independent inquiry group has provisionally concluded that competition in the cloud market is not functioning as well as it could be, and that closer scrutiny of the top two players – Amazon Web Services (AWS) and Microsoft – might be warranted.

More specifically, the inquiry group has called on the CMA to use its new powers under the Digital Markets, Competition, and Consumers Act (DMCCA) to see whether AWS and Microsoft meet the threshold for designation as holding strategic market status (SMS) when it comes to their cloud services activities.

The DMCCA is broadly similar to the EU's Digital Markets Act (DMA), which gives lawmakers the power to categorise tech giants as gatekeepers to the various sectors in which they operate.

An entity in receipt of the dubious honour of SMS can expect to find itself subject to much tighter rules that are designed to rein it in, and stop it from snuffing out its smaller rivals.

While this has yet to happen to AWS and Microsoft, based on what the CMA probe has turned up so far, SMS is likely to feature in their respective futures.

It found that AWS and Microsoft each claims a 40% share of the UK market, with the next-largest rival – Google Cloud – sitting a distant third.

It also identified various technical and commercial barriers that make it difficult for customers to switch cloud provider, locking them into services that don't necessarily reflect their evolving business needs. This doesn't necessarily apply to Google, which rather shrewdly scrapped charges for customers leaving its cloud services – so-called egress fees – this time last year.

Meanwhile, the CMA also asserts there are "significant barriers to entry and expansion" in the UK cloud market due to the large sums of money it costs to build and operate data centres.

In addition, Microsoft in particular is leveraging its strong position in the software market to make it harder for AWS and Google to compete for customers that want to use Microsoft software in the cloud.

"Cloud services underpin most business operations, providing vital infrastructure to businesses and organisations across the UK economy. Our provisional view is that competition in this market is not working as well as it could be. So, we propose that the CMA considers investigating the largest cloud service providers using its new digital markets powers," said Kip Meek, chair of the CMA inquiry panel.

"Effective competition in the delivery of these vital services could drive choice, quality and competitive prices – not only helping UK businesses but boosting innovation, productivity, growth and investment across the UK economy," he said.

Microsoft and AWS don't necessarily need to lawyer up just yet though.

Aside from the very tentative choice of wording by the CMA's panel, there will now be a consultation on its provisional findings, and final recommendations aren't due until early August.That leaves plenty of time for the finest legal minds at AWS and Microsoft to hone their arguments.