Amazon Web Services (AWS) and Microsoft are facing allegations of employing scare tactics to dissuade the UK’s Competition and Markets Authority (CMA) from enforcing changes to their business models. This comes amid the CMA’s investigation into anti-competitive practices in the cloud infrastructure sector.
The investigation was prompted by Ofcom’s findings of potential monopolistic behavior by the two tech giants. Initiated in October 2023, the probe aims to determine whether AWS and Microsoft’s actions are restricting competition in the UK cloud market, including examining their discount schemes and licensing practices.
A major focus of the investigation is Microsoft’s licensing rules and the use of committed spend discounts (CSAs) by both AWS and Microsoft. These discounts, which reward long-term contracts, may be distorting buyer behaviors and limiting customers’ ability to switch providers.
Another area of scrutiny is whether technical barriers and data egress fees are creating additional obstacles for customers, making it more difficult and expensive to transition between cloud providers, thus stifling competition.
Both AWS and Microsoft have submitted feedback to the CMA, expressing concerns that changing their business models could reduce their investments in the UK. Microsoft argued that CSAs help foster competition by lowering prices and supporting infrastructure investments.
Any restrictions on these discounts, they claim, would result in higher prices, less competition, and decreased investments in UK cloud infrastructure. Similarly, AWS warned that intervention would disrupt their revenue predictability, leading to more cautious investment strategies and higher costs for customers.
AWS and Microsoft Accused of Using Scare Tactics to Deter UK Regulators Amid Cloud Competition Probe
AWS further contended that offering committed spend discounts is a common and competitive practice, not one that should be regulated. They argued that restricting such discounts would place UK customers at a disadvantage compared to their international counterparts, potentially driving business away from the UK to more favorable regions.
AWS warned that this could harm the UK’s competitiveness on the global stage and impede growth in the country’s cloud sector.
However, some industry experts disagree with AWS and Microsoft’s defense of their discount schemes. The UK government’s One Government Value Agreement (OGVA), a committed spend discount program, has drawn criticism for locking public sector entities into long-term, expensive contracts with AWS.
Since its inception in 2020, the OGVA has facilitated contracts worth billions of pounds, raising concerns about how easily public sector organizations can exit these deals, potentially limiting competition.
Critics argue that these discount schemes undermine market competition by discouraging other cloud providers from entering the space. Nicky Stewart, a former government IT head, highlighted that AWS’s discounts lock customers into inflexible contracts, contradicting the original promise of cloud computing—scalability and pay-as-you-go pricing.
Stewart also criticized Microsoft’s veiled threats regarding UK investment cuts, arguing that these companies are trying to pressure the CMA into backing down.
Some analysts suggest that AWS and Microsoft are using their entrenched market positions to influence both regulators and the government. For instance, Owen Sayers, an independent IT consultant, pointed out that these companies likely feel confident due to their extensive government contracts and strong positions within the public sector.
He also noted that the new UK government’s efforts to fast-track data center approvals could be benefiting the cloud giants, giving them further leverage.
Mark Boost, CEO of cloud service provider Civo, also criticized the impact of committed spend discounts on competition. He argued that while these discounts may seem beneficial at first glance, they create long-term costs by locking customers into single providers.
Boost believes the CMA should expand its investigation to examine cloud credits, which, like committed spend discounts, can trap customers in costly, hard-to-exit arrangements. He urged the CMA to implement measures that limit the overuse of such discounts and enhance transparency in cloud service contracts.
