Microsoft and Amazon Web Services (AWS) market dominance is stifling the UK cloud sector! Yeah, yeah, yeah – cue comments about the Pope’s religion of choice, Dolly Parton’s sleeping arrangements, ursine defecatory proclivities etc etc etc.
But this time it’s official, according to the country’s anti-trust regulator. Excellent, so tough action can be expected to correct this situation, yes? Er…not so much. See that long, long road over there? Let’s see how far down it we can kick this thing!
It’s a conclusion and an outcome that probably surprises very few people. Ever since it was announced that the UK Competition and Markets Authority (CMA) was to conduct an investigation at the behest of regulator Ofcom way back in October 2023, Microsoft and AWS have been firmly in its sights. Ofcom said at the time:
Ofcom has reasonable grounds to suspect that a feature or a combination of features of the markets for the supply of those goods and services in the United Kingdom prevents, restricts or distorts competition. In particular, conduct which may create barriers to switching and multi-cloud.
With the two vendors found to be each commanding 40% of UK cloud spending of £10.4 billion, with Google coming a distant third, that suspicion was deemed to be correct by the CMA.
Domineering
The CMA had particular criticism for Microsoft, noting that it charges both AWS and Google to use its software:
Microsoft has significant market power in relation to several software products because customers are unable or unwilling to switch away from them and Microsoft has moderate to high market shares in respect of each of them. These software products are important inputs to cloud services, such that Microsoft has the potential to harm AWS and Google when customers purchase cloud services that incorporate them…Microsoft does not make certain products available to AWS and Google through their licensing agreements, and customers with existing licences cannot bring these to AWS and Google in most instances. These restrictions mean that AWS’ and Google’s competitive offerings are directly affected by Microsoft’s licensing practice.
Microsoft’s licensing practices are adversely impacting the competitiveness of AWS and Google in the supply of cloud services, particularly in competing for customers that purchase cloud services which use the relevant Microsoft software as an input. As a result, Microsoft faces weaker competitive constraints from AWS and Google, its most significant competitors, which is reducing competition in cloud services markets.
In terms of a remedy, the CMA report’s main recommendation is that, under the UK Digital Markets, Competition and Consumers Act 2024, both Microsoft and AWS could be designated as Strategic Market Suppliers (SMS):
This would enable the CMA to impose targeted and bespoke interventions to address the concerns we have identified, including with respect to features where there are specification risks around the design of effective market interventions. The CMA’s powers under the DMCC Act have been specifically designed to be effective in digital markets and, if the CMA was to designate Microsoft and AWS with SMS, it would be able to address the concerns we have identified with conduct requirements or other interventions. Measures aimed at Microsoft and AWS would address market-wide concerns by directly benefitting most UK customers and producing wider indirect effects by altering the competitive conditions for other providers.
OK, sounds good, let’s do it ASAP! Er, not so fast there. Remember, in UK political circles, it takes a long time to do things quickly – and this is going to be no exception. What happens now is the question of whether to open a further probe into whether the two firms should be declared SMS will be considered. How long that takes remains to be seen, but whatever happens, it’s not going to be until some time next year as there are other investigations still ongoing.
A cynic might at this point ponder whether the idea of not rocking the boat too much with two US suppliers that have the UK cloud economy in a neck lock might be a case of better to threaten a big stick than actually to use it in earnest. Either way, it looks as though any future restrictions on Microsoft and AWS activities and practices will be something for 2027. Or 2028. Or even, if we can get away with it, a problem for the next Government?
Through the looking glass
Not that this effective stay of execution made any difference to the public tantrums being thrown by the two US vendors at being ticked off by the Brits. Microsoft sniffed:
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.
Meanwhile AWS officially warned that action would risk making the UK “a global outlier at a time when businesses need regulatory predictability” and said:
The inquiry group’s final report disregards clear evidence of robust competition in the UK’s IT services industry, which cloud computing has revolutionised by dramatically reducing costs and expanding customer choice and flexibility.
Now, you may note the word ‘officially’ doing a bit of heavy lifting there. That’s because there was a lot more to come from AWS. Literally minutes after the CMA recommendations were published came an unsolicited email from the company offering “some additional perspective on attributable background”. What that meant, it said, was, “You can’t quote the information directly; however, you can use…and attribute to AWS”.
Hang on, I replied, if I can say the information’s come from AWS, why can’t I put your brand name to it? This resulted in the said “additional perspective” being sent to me – NB: I didn’t at any point request it – with further ‘clarification’ that, “you can say in your piece – According to AWS…(AWS bolding) – but you can’t directly quote AWS from the background points”.
Now that we were well and truly through Alice’s Looking Glass, I had a quick scan of the “additional perspective” which basically consisted of a bit of Microsoft bashing, some self-congratulatory PR puff about AWS pricing and investments, and sniping that requiring cloud services to be fully interoperable would actually be a bad thing and stifle innovation without benefiting customers. No evidence was presented to support that last one, just more assertions.
All of that is what AWS want you to know, but they don’t want me to write down and put ‘AWS says…’ in front of it. Why not? Surely everything that’s been sent out to lots and lots of journalists is true and demonstrably accurate? And given this lengthy email came, unsolicited, within minutes of the CMA report, it must have been prepared quite some time in advance and signed off on by the various vested interests and stakeholders before before being mass-mailed to heaven knows how many media and analysts, so it must represent the company’s position.
So, again, why doesn’t AWS want to have its name cited next to direct quotes from their own content, content that it was so keen for me to see that it didn’t even wait for me to ask for it to be sent over, let alone agree to any ludicrous caveats about how I might use the “additional perspective”.
At such times, there’s nothing to beat a closed question that needs only an initial ‘yes’ or ‘no’ response. So, in the interests of fairness, I asked AWS at 1.44 pm yesterday the following:
Is the information being offered over as background something AWS would stand by in court? Or to a [UK Government] Select Committee? If it is, why can’t you put your company’s name to it?
As of midday today – when this is being written – I can’t provide you with a ‘yes’ or ‘no’ as AWS has apparently ignored the email. Deafening silence for the best part of 24 hours. That seems very strange given all that AWS has been asked to do is to confirm that it is entirely comfortable with the accuracy and validity of comments that it is offering up to the media to broadcast…just not with ‘AWS says…’ anywhere near it. Surely it must be? Otherwise, what’s the point of sending them into the public domain? It can’t be to undermine the CMA conclusions while trying not to get dirty fingers in the process. So, why? If AWS decides to answer my straight question, I’ll update this article.
My take
Look, I’m all for having a go at emulating the White Queen from Through The Looking Glass and trying to believe “six impossible things before breakfast”, but the engagement with AWS yesterday was one of the most bizarre encounters I’ve had in 35 years in this game.
We’ve all had off-the-record briefings before, of course, but this background spoon-feeding of claims and assertions, that in their own right are pretty harmless and certainly don’t merit this level of paranoia around them, smacks of control freakery of the highest order. In fact, it’s the sort of behavior you might expect from the big kid in the playground who’s not been told ‘no’ for a long, long time and who now finds his or her dominance being challenged – all of which rather seems to validate further the CMA conclusions…and that certainly wasn’t the plan I’m sure.
By contrast, Microsoft has displayed an almost dignified restraint so far. As well it might as nothing much has changed on the back of the CMA findings and nothing is likely to change any time soon. As a country, the UK has now told AWS and Microsoft that they’re on the naughty step and that it’s now going to have to have a jolly good long think about what to do next and then decide after that what ought to be done next – at some point, in the future, when the time is right etc etc.
In the meantime, Microsoft this week announced that its Azure cloud offering is running at a 34% per annum growth rate, topping $75 billion in fiscal 2025. Still, small potatoes compared to AWS annual run rate of north of $111 billion. There’s always a silver lining, eh?