Ofcom Announces UK Digital Services Market Study • The Register

The UK will look into the role of Amazon, Microsoft and Google in the country’s £ 15 billion ($ 16.97 billion) cloud services market, with communications regulator Ofcom warning it will step in if issues are identified. of competition.

Ofcom, otherwise known as The Office of Communications, said it is opening a study on the role of the big three cloud service providers in the cloud market, as part of a new effort to ensure digital communications markets work well for people. and local businesses.

It will also look into the messaging and smart device markets, looking at services like WhatsApp and Zoom, as well as the smart speakers that are now featured in many households, with as many as 11% of UK consumers owning one, according to data from YouGov.

“The way we live, work, play and do business has been transformed by digital services,” said Ofcom’s director of connectivity, Selina Chadha. “That’s why we are embarking on a program of work to look into these digital markets, identify any competition concerns and make sure they work well for the people and companies that rely on them.”

Ofcom noted that cloud services are a huge market that is still growing, citing tech analyst Gartner’s predictions that up to 45% of some companies’ IT spending globally will be on public cloud by 2026, compared to less than 10% in 2018.

Market study on the Big Three

The regulator is therefore launching a market study “in the coming weeks” that examines the role of AWS, Microsoft and Google, which together account for around 81% of revenue in the UK public cloud services market, he says. This is done as part of Ofcom’s position as a competition authority under the UK Government’s Enterprise Act 2002.

Ofcom said it intends to examine the strength of competition with the cloud services market, with the aim of identifying anything that could limit innovation and growth by making it difficult for other companies to enter the industry and expand their share of market.

But the goal is to look beyond how markets work today and consider how they might develop in the future, so as to prevent any competition problems and prevent them from establishing themselves as the market matures, Ofcom said.

The regulator will invite initial views on the UK cloud market from “interested parties or interested parties” and said it will consult on interim results before publishing a final report outlining any concerns or recommendations proposed within twelve months of the start of the study.

If Ofcom discovers that the market is not functioning as it believes it should, it can recommend that the UK government make changes to regulations or policies, refer the issues to the UK Competition and Markets Authority (CMA), or take law enforcement or enforcement action. consumer contrast itself.

Paul Stone, Senior Counsel at Charles Russell Speechlys law firm, said this investigation is a sign of the growing scrutiny of the technology sector by UK regulators and could serve as a catalyst for a larger-scale market investigation. which could have a significant impact on large tech companies.

UKCloud chief Simon Hansford said so the reg welcomes Ofcom’s review of online infrastructure services. “We hope Ofcom’s work will pave the way on a level playing field that will benefit the UK cloud hosting industry, thereby creating a vibrant, competitive and innovative market that returns to the UK, in terms of revenue for the taxation, local job creation and economic and social value. “

In addition to cloud services, Ofcom will also look at other digital markets, including online personal communication apps and devices for accessing online content, such as connected TVs and smart speakers. The latter are used to access traditional television and radio services as well as online content.

Specifically, the regulator said it would look at the effect VoIP services like WhatsApp, FaceTime and Zoom are having on traditional calling and messaging and how competition and innovation in these markets could evolve in the coming years. Interoperability between these messaging and communication services was also highlighted as an area of ​​concern.

A future area of ​​concern for Ofcom is the level of competition between digital personal assistants and the devices that embody them, such as connected TVs and smart speakers. This will examine consumer behavior, as well as examine the roles of key players, their business models, and the effects of their bargaining power with content providers.

Services like WhatsApp and Zoom are now competing with traditional telecom services, while smart TVs and smart speakers play a central role in how content is distributed and discovered by consumers, Ofcom said.

Telecom industry analyst Paolo Pescatore of PP Foresight said this is a wide-ranging investigation for Ofcom and each area will need to be assessed independently.

“Ultimately, Ofcom is concerned about the dominance of a small number of players who have seen their share grow significantly,” said Pescatore, with particular reference to the cloud, “it is becoming increasingly difficult for new entrants or any emerging player compete given the established position of the greats “.

On smart devices, Pescatore said people have shown a “strong appetite” to purchase and use a slew of connected devices such as smart speakers and messaging services, especially during the pandemic, and these have now become the norm in everyday use. .

“Therefore, it is difficult to see what Ofcom will do if it decides that big technologies are stifling competition. We may see restrictions, incentives to promote new players,” he added. ®