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Google and AWS turn on Microsoft as UK competition watchdog probes cloud industry

Nothing to see here say rivals – except Microsoft’s licensing practices

Photo by Stock Birken / Unsplash

AWS and Google have both hit out at Microsoft during a probe by the UK's Competition and Markets Authority into the state of the UK's cloud market.

The agency began its investigation into the competitive cloudscape last year, sharing its initial thoughts in a working paper produced last month and published this week, which noted that Microsoft and AWS had “considerable power”.

But it also said that the Azure owner's licensing practices may affect customers’ choice of cloud provider, "at least for running Microsoft workloads, and possibly more widely."

The interim document also noted the high barriers to entry in the market, the impact of committed spend agreements and discounting, and the effect of egress fees.

While these give plenty of food for thought, it was the licensing issue that Google and AWS seized on in their own responses, as shown in the “responses to working papers” disclosed by the CMA this week.

AWS declared on the first page of its 33-page response that “One exception to the well-functioning nature of the market for IT services is Microsoft’s licensing practices. We are encouraged by the CMA’s attention on this topic and its emerging views.”

Otherwise, it said, “The evidence in the working papers presents a clear picture of a market for IT services that is well functioning, innovative, dynamic, highly competitive, and produces considerable benefits for customers.”

It took issue with some of the CMA’s “emerging views that do not have a solid basis in the evidence before the CMA or the law”, such as those on discounting practices or committed spend agreements (CSAs). It also argued that “on-premises IT solutions exercise significant competitive constraints on cloud services providers.”

Google, too, insisted all was hunky dory competition-wise – except for Microsoft’s licensing. It said CSA remedies were not necessary, but “in the event the CMA decides to impose a CSA-focused remedy, Google Cloud supports the CMA’s emerging view that any restrictions should be limited to those players with market power.” Or, to put it another way, not Google.

Google also insisted data transfer fees did not raise competition concerns “on a standalone basis” adding that standard fees were “consistently trending down and make up only a de minimis portion of customers’ total cloud spend”.

Moreover, it said, “Google Cloud’s ability to charge fair and reasonable data transfer fees is fundamental to maintaining a high-quality offering that is capable of challenging providers with significant market power.”

IBM, in a brace of submissions, said it didn’t believe price controls were warranted for egress fees, and was leary of restrictions on pricing. Banning CSAs would make it harder for customers to make long-term decisions, it claimed.

However, it added: “IBM believes that greater transparency would improve competitive conditions in the cloud market and help customers with the procurement process.”

The only significant cloud provider not to throw its hat in the ring was Microsoft.

However, last month it said: “Our licensing terms enable our customers and other cloud providers to run and offer Microsoft software on every cloud.” It said its products were available on Google and AWS, “and as recent earnings reports demonstrate, both continue to compete effectively and grow cloud revenue rapidly.”

Presumably not a lot has changed since then – except the EU’s decision to investigate Microsoft’s bundling of Teams with its Office suite.