Britain’s ambitions to transform itself into a global powerhouse for artificial intelligence rest on a foundation that has begun to visibly fracture: the country’s cloud services market, now overwhelmingly dominated by Amazon Web Services (AWS) and Microsoft Azure. As the UK’s Competition and Markets Authority (CMA) stands poised to deliver its final recommendations after a landmark investigation, the coming days could decide not just the future of cloud competition in Britain, but also its role in shaping an innovative, fair, and AI-driven digital economy.
The UK government has been vocal about its intention to become a leader in AI research, development, and deployment. But the practical execution of these plans leans heavily on access to robust, cost-effective, and open cloud infrastructure. Business leaders, academics, and government strategists all recognize a core reality: most cutting-edge AI workloads—model training, inference, real-time analytics—are only cost-effective and even technically feasible on hyperscale cloud platforms.
According to recent provisional findings from the CMA, AWS and Microsoft jointly constitute approximately 80 percent of UK cloud spending. Independent analyses from Ofcom and Synergy Research confirm these proportions—positions cemented by years of aggressive expansion, deep vertical integration of services, and the kind of customer lock-in that only deep technical and contractual entanglements can breed. For British startups and established enterprises alike, these two giants set the rules, the prices, and the boundaries of what’s possible—often at the expense of true market innovation.
The repertoire available to the CMA is extensive:
Inaction, or worse, a protracted referral of enforcement to the forthcoming Digital Markets Unit (DMU), could paralyze reform for up to two years. During this time, the cloud market could further ossify around the two US hyperscalers, diminishing the likelihood that subsequent intervention will meaningfully shift the competitive landscape. Technical standards, ecosystem partnerships, and even workforce training will become ever more anchored to AWS and Azure’s proprietary systems.
For AI in particular, the risk is acute. The rapid uptick in machine learning deployment—across finance, healthcare, retail, research, and defense—means that future cloud contracts will be larger, more complex, and even deeper integrated into the fabric of everyday business and public sector functions. If these contracts are locked into today’s restrictive conditions, the UK may find itself hamstrung just as global AI competition reaches fever pitch.
Industry expert Bill McCluggage, a former UK government CIO, argues that the CMA “already possesses the mandate, evidence, and legal powers; hesitation would undermine its credibility and the government’s digital competition agenda.” In other words, this is not a time for caution, but for clarity, speed, and resolve.
Microsoft, in particular, claims the CMA is “ignoring AI’s role” and that delayed intervention is prudent given the sheer velocity of technological change. Yet critics point out that it is exactly this velocity—in compute requirements, in deployment of specialized AI accelerators, in the pervasive need for proprietary data and skillsets—that deepens lock-in and reinforces incumbency. The bigger AI becomes, the harder it gets for new competitors to catch up without a meaningful shift in the regulatory calculus.
Furthermore, where Microsoft has already imposed globally controversial licensing changes—such as “shared responsibility” terms or “bring your own license” restrictions—new innovation is often stifled or steered toward its own cloud, undercutting the very premise of competition.
The status quo, however, favors hyperscalers not just because of their scale but also the breadth of their integrated platforms—machine learning APIs, data warehousing, edge computing, and prepackaged compliance systems. These integrations, while powerful, are almost always restricted by proprietary architectures and non-standard data management systems.
Small and midsize enterprises, along with public research bodies, often lack the technical and financial leverage to negotiate bespoke migration clauses or to achieve contractual parity with hyperscalers. When exit is so heavily penalized, the practical result is a two-tier system: the largest incumbents reap preferential pricing and flexibility, while the rest of the market is corralled.
This action, completed in a matter of months after the regulator’s final order, transformed UK banking. It enabled the rapid rise of challenger banks and fintechs, expanded consumer choice, and, according to data from the Open Banking Implementation Entity, contributed directly to new jobs and billions of pounds in new market growth.
The principal takeaway: where market structure enables incumbents to use vertical integration or technical lock-in to foreclose competition, robust and binding regulatory intervention can, if implemented swiftly and enforced ruthlessly, tip the balance toward innovation.
For AI startups, the stakes are existential. As workloads scale and the complexity of integrations deepen, so too does the cost of inertia. This is not just an issue of cost, but of national strategic interest: if the UK cannot guarantee a level playing field in cloud, its dream of becoming an AI superpower will remain just that—a dream.
The UK, uniquely, has both the legislative mandate and a track record of having triggered industry-wide change. By acting now on cloud, Britain could stake a genuine claim as both an AI leader and an architect of the future digital economy.
Missed opportunities for timely intervention will be paid for in lost innovation, higher costs, and diminished national competitiveness. For the UK’s AI ambitions to be realized, and for cloud customers of all sizes to benefit from genuine market competition, the CMA must wield its new powers with determination, speed, and a refusal to be cowed by arguments for delay.
Anything less risks not just the UK’s digital ambitions, but its place in the coming AI-driven global order. The time for decisive action is now.
Source: theregister.com Time for the CMA to strike hard – or risk losing cloud
The UK government has been vocal about its intention to become a leader in AI research, development, and deployment. But the practical execution of these plans leans heavily on access to robust, cost-effective, and open cloud infrastructure. Business leaders, academics, and government strategists all recognize a core reality: most cutting-edge AI workloads—model training, inference, real-time analytics—are only cost-effective and even technically feasible on hyperscale cloud platforms.According to recent provisional findings from the CMA, AWS and Microsoft jointly constitute approximately 80 percent of UK cloud spending. Independent analyses from Ofcom and Synergy Research confirm these proportions—positions cemented by years of aggressive expansion, deep vertical integration of services, and the kind of customer lock-in that only deep technical and contractual entanglements can breed. For British startups and established enterprises alike, these two giants set the rules, the prices, and the boundaries of what’s possible—often at the expense of true market innovation.
The Anatomy of Cloud Concentration
What does this market dominance look like in practical terms? The CMA’s investigation, as well as corroborating industry feedback, points to a constellation of anti-competitive strategies now under heavy scrutiny:- Punitive Exit Fees: Both AWS and Microsoft Azure impose high costs and operational hurdles on customers seeking to migrate to rival platforms. These exit barriers effectively dissuade experimentation and limit the ability for businesses to pivot or diversify their cloud strategies, undermining the core dynamic of competition.
- Vendor Lock-in through Proprietary APIs and Features: Core cloud services are often accessible only through proprietary toolchains or APIs, creating a situation where workloads, data, and even staff expertise become tightly bound to one ecosystem. Interoperability suffers, switching costs skyrocket, and new entrants face near-insurmountable technical hurdles.
- Preferential Licensing: Microsoft’s licensing practices in particular have come under fire for favoring its Azure cloud over competing providers. For instance, its “bring your own license” terms, as analyzed by the CMA and numerous independent tech legal experts, disadvantage organizations that wish to run Microsoft software on clouds other than Azure, essentially steering customers toward its own platform.
- Limited Technical Interoperability: Unlike the Open Banking shaking up finance, cloud computing contracts and interfaces remain siloed, with precious little in the way of standardized data formats, migration tools, or open APIs for cross-provider portability.
CMA’s New Teeth: Can the Regulator Bite?
Fortunately for advocates of open competition, the CMA has recently gained new powers under the Digital Markets, Competition and Consumers Act 2024. The law equips the regulator with tools described as “targeted interventions,” including the authority to designate firms with Strategic Market Status (SMS). AWS and Microsoft are first in line for this designation, which would unlock a suite of potential remedies.The repertoire available to the CMA is extensive:
- Mandated Interoperability Standards: The regulator could compel hyperscalers to adopt and publish open APIs and standardized data schemas, making it far easier for SME’s, public sector bodies, and innovators to move data and workloads between providers.
- Banning or Capping Exit Fees: By directly limiting or outlawing the financial penalties associated with leaving a cloud provider, the CMA can reduce lock-in and force vendors to compete on price, quality, and innovation, rather than inertia.
- Curbing Discriminatory Licensing: Perhaps the most contentious issue is Microsoft’s licensing regime, which has been widely criticized, including by rival providers like Google Cloud and Oracle, for manipulation of software terms to favor Azure. Statutory remedies could include making Microsoft’s licensing terms uniform across all platforms—ensuring fair access.
- Mandatory “Exit Support Services” and No-Tying Clauses: The CMA could insist that providers deliver standardized support for migrations (e.g., tooling, data export, validation), alongside rules that ban tying additional services or discounts to exclusive use.
What’s at Stake: Delay or Decisive Action
Where the debate now rages—and where leading voices in UK digital policy are urging vigilance—is whether the CMA will move fast and forcefully, or risk the diluting effects of delay.Inaction, or worse, a protracted referral of enforcement to the forthcoming Digital Markets Unit (DMU), could paralyze reform for up to two years. During this time, the cloud market could further ossify around the two US hyperscalers, diminishing the likelihood that subsequent intervention will meaningfully shift the competitive landscape. Technical standards, ecosystem partnerships, and even workforce training will become ever more anchored to AWS and Azure’s proprietary systems.
For AI in particular, the risk is acute. The rapid uptick in machine learning deployment—across finance, healthcare, retail, research, and defense—means that future cloud contracts will be larger, more complex, and even deeper integrated into the fabric of everyday business and public sector functions. If these contracts are locked into today’s restrictive conditions, the UK may find itself hamstrung just as global AI competition reaches fever pitch.
Industry expert Bill McCluggage, a former UK government CIO, argues that the CMA “already possesses the mandate, evidence, and legal powers; hesitation would undermine its credibility and the government’s digital competition agenda.” In other words, this is not a time for caution, but for clarity, speed, and resolve.
Microsoft and AWS Push Back: The Hyperscaler Counterargument
Both AWS and Microsoft have invested heavily in shaping the public narrative and lobbying on both sides of the Atlantic. Their main counterargument, echoed in recent CMA submissions and public statements, is that regulatory intervention now could “backfire” by undermining their ability to invest in cutting-edge infrastructure and AI services, for which they claim the market rewards scale and integration.Microsoft, in particular, claims the CMA is “ignoring AI’s role” and that delayed intervention is prudent given the sheer velocity of technological change. Yet critics point out that it is exactly this velocity—in compute requirements, in deployment of specialized AI accelerators, in the pervasive need for proprietary data and skillsets—that deepens lock-in and reinforces incumbency. The bigger AI becomes, the harder it gets for new competitors to catch up without a meaningful shift in the regulatory calculus.
Furthermore, where Microsoft has already imposed globally controversial licensing changes—such as “shared responsibility” terms or “bring your own license” restrictions—new innovation is often stifled or steered toward its own cloud, undercutting the very premise of competition.
AI and Cloud: A High-Stakes Symbiosis
Artificial intelligence is fundamentally dependent on scalable, secure, and interoperable infrastructure. For startups building the next generation of language models, fintechs deploying real-time fraud detection, or NHS trusts seeking to use predictive analytics, the ability to choose between clouds, or even span multiple clouds (a multi-cloud approach), is pivotal.The status quo, however, favors hyperscalers not just because of their scale but also the breadth of their integrated platforms—machine learning APIs, data warehousing, edge computing, and prepackaged compliance systems. These integrations, while powerful, are almost always restricted by proprietary architectures and non-standard data management systems.
Small and midsize enterprises, along with public research bodies, often lack the technical and financial leverage to negotiate bespoke migration clauses or to achieve contractual parity with hyperscalers. When exit is so heavily penalized, the practical result is a two-tier system: the largest incumbents reap preferential pricing and flexibility, while the rest of the market is corralled.
Precedents in Competition Law: Lessons from Open Banking
Skeptics of intervention often cite the “complexity” and “global scale” of the cloud market as reasons for regulatory caution. But the UK’s own history undercuts this argument. The Retail Banking Market Order, born from a comprehensive CMA investigation, forced previously reluctant high street banks to expose customer data and payments interfaces via standardized open APIs.This action, completed in a matter of months after the regulator’s final order, transformed UK banking. It enabled the rapid rise of challenger banks and fintechs, expanded consumer choice, and, according to data from the Open Banking Implementation Entity, contributed directly to new jobs and billions of pounds in new market growth.
The principal takeaway: where market structure enables incumbents to use vertical integration or technical lock-in to foreclose competition, robust and binding regulatory intervention can, if implemented swiftly and enforced ruthlessly, tip the balance toward innovation.
What the CMA Must Do — And What It Risks by Waiting
Based on its investigation and global precedent, the CMA has a ready-made playbook:- Make Exit-Related Provisions Binding: Cap or ban exit fees, and publish standardized migration paths from day one.
- Mandate Interoperability: Require technical standards for APIs, data formats, and licensing that open up portability and cross-provider deployment.
- Eliminate Anti-Competitive Licensing: Compel cloud-agnostic licensing for Microsoft products; audit and enforce against discriminatory practice.
- Ensure Real-Time Monitoring: Deploy ongoing compliance reviews, independent audits, and stiff financial penalties for non-compliance.
- No Prolonged Referral: Avoid lengthy regulatory pauses by acting immediately, relegating further fine-tuning to later reviews as necessary.
For AI startups, the stakes are existential. As workloads scale and the complexity of integrations deepen, so too does the cost of inertia. This is not just an issue of cost, but of national strategic interest: if the UK cannot guarantee a level playing field in cloud, its dream of becoming an AI superpower will remain just that—a dream.
A Unique Opportunity for Global Leadership
If the CMA acts decisively, it could set not only a national, but a global precedent. Regulators in the European Union, United States, and Asia are watching. The EU already has the Digital Markets Act, but its enforcement capacity is untested for cloud. The US Federal Trade Commission has opened inquiries, but its fragmented regulatory landscape leaves substantial gaps.The UK, uniquely, has both the legislative mandate and a track record of having triggered industry-wide change. By acting now on cloud, Britain could stake a genuine claim as both an AI leader and an architect of the future digital economy.
The Bottom Line: Now or Never
Britain stands at a crossroads. The evidence is overwhelming: if left unchecked, AWS and Microsoft will use their head start in hyperscale infrastructure to shape, and possibly choke, the next wave of AI-driven growth in the cloud. The tools to fix this imbalance—mandated interoperability, capped exit fees, open licensing, real-time monitoring—are not only available but already proven effective in parallel markets.Missed opportunities for timely intervention will be paid for in lost innovation, higher costs, and diminished national competitiveness. For the UK’s AI ambitions to be realized, and for cloud customers of all sizes to benefit from genuine market competition, the CMA must wield its new powers with determination, speed, and a refusal to be cowed by arguments for delay.
Anything less risks not just the UK’s digital ambitions, but its place in the coming AI-driven global order. The time for decisive action is now.
Source: theregister.com Time for the CMA to strike hard – or risk losing cloud