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Amazon and Microsoft face probe over cloud dominance in the UK

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A UK competition watchdog is investigating the dominance of Amazon and Microsoft in the cloud computing market.

The move comes after media regulator Ofcom raised concerns about the anti-competitive practices of these tech giants in the sector.

Ofcom said this makes it challenging for UK businesses to switch cloud providers or use multiple services.

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Ofcom has referred the issue to the Competition and Markets Authority (CMA) for further scrutiny.

It cites some UK businesses' difficulty in switching or combining services from different cloud providers. 

The watchdog is particularly worried about the market positions of Amazon and Microsoft.

They’re often called "hyperscalers" due to their substantial influence in the cloud computing market.

Amazon Web Services (AWS) and Microsoft Azure, the cloud computing divisions of Amazon and Microsoft dominate the UK's cloud market.

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According to Ofcom estimates, they’re responsible for approximately 60 to 70 percent of cloud spending. 

The CMA's investigation coincides with the rapid adoption of artificial intelligence, which heavily relies on cloud services. 

These services enable tasks such as data storage, content delivery, and analytics to be performed over the internet rather than on local servers.

The CMA welcomes the referral from Ofcom and aims to ensure the maintenance of effective competition in the cloud computing market.

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It recognizes the significance of cloud services in supporting various online activities, including social media and AI models.

The CMA's independent inquiry group will assess the market and determine the requirement of any corrective actions.

Probe to finish in April 2025

The probe will conclude by April 2025, and the CMA has the authority to enforce changes in practices, block acquisitions, or divest parts of businesses if necessary.

Amazon said Ofcom's findings are “based on a fundamental misconception of how the IT sector functions, and the services and discounts on offer.”

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Amazon says it designs its cloud services to offer customers flexibility in selecting the technology that best suits their needs.

Ofcom's concerns cover various practices within the cloud industry.

It includes "egress fees" cloud vendors charge for data transfer, technical barriers to interoperability, and committed spend discounts encouraging customers to stick with a single provider.

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Microsoft is also facing scrutiny from the European Union regarding its cloud licensing terms. 

While not a formal investigation into Microsoft's Azure cloud platform, the EU has been reviewing complaints about the company's licensing terms.

It’s mainly with alleged unfair practices that may discourage customers from switching to other providers.

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