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Context
Industry press has been reporting on a market study recently completed by Ofcom into Cloud computing suppliers. Ofcom has provisionally identified features and practices that make it more difficult for customers to switch and use multiple cloud suppliers. While there may be some crossover in relation to price-walking and barriers to switching, which have both been discussed by the FCA previously, the Financial Services industry as well as the wider business community are increasingly moving towards cloud-based solutions.
Key points to note
Cloud computing has become critical for many businesses across the economy – including telecoms companies, broadcasters and public sector organisations – and has transformed the way they deliver services. It uses data centres around the world to provide remote access to services such as software, storage and networking.
Ofcom’s concerns focus on three practices:
- Data egress fees, which are fees that suppliers charge customers to transfer data out of the cloud to another provider and, in some cases, move services within their own cloud environment;
- Technical restrictions which hinder interoperability and portability; and
- Committed spend discounts to encourage customers to switch to the cloud initially and to continue to move further services to the cloud.
The report finds that these practices in combination are particularly influencing larger customers to concentrate all of their cloud infrastructure services in the hands of one cloud provider. Ofcom is also concerned that if the UK market continues on its current trajectory, competition, choice and barriers to entry for smaller suppliers will be further restricted.
Ofcom has proposed to refer the cloud infrastructure market to the Competition and Markets Authority (CMA) to carry out a market investigation. This would allow the CMA to further examine the nature and extent of barriers and consider if there are interventions that could improve how the market works for customers and ultimately UK consumers.
Next actions
None – for information and awareness.