OFCOM and European Commission Diverge on Cloud Infrastructure Market | Fieldfisher
Skip to main content

OFCOM and European Commission Diverge on Cloud Infrastructure Market

Paul Graham


United Kingdom

The European Council recently confirmed the agreement on the draft compromise text for the European Data Act, also known as the EU Data Act. This agreement was reached following negotiations between the European Parliament and the Council of the EU on June 28th.

The primary objective of the EU Data Act is to enhance the European Union's data economy. It aims to achieve this by various means, including unlocking industrial data, improving its accessibility and usability, simplifying the transition between cloud and edge services, and fostering a competitive and dependable European cloud services market.

Simultaneously, the UK's OFCOM, the regulatory authority for communications, has taken steps to address issues in the cloud infrastructure services market. OFCOM provisionally proposed referring the market for cloud infrastructure services to the Competition and Markets Authority (CMA) for a comprehensive market investigation. This move was prompted by OFCOM's initial findings in its market study on public cloud services, which indicated several factors inhibiting competition in the UK cloud infrastructure market. Notably, the market is heavily concentrated, with Amazon Web Services (AWS) and Microsoft Azure dominating the landscape.

Our full whitepaper, available for download, explores OFCOM's key findings regarding the cloud infrastructure services market, potential impacts of OFCOM's proposed interventions for your business , and how the EU Data Act could influence the transition between cloud infrastructure providers.

Key finds from our Multi-Cloud Services: OFCOM and European Commission Diverge on Proposed Measures to Regulate the Cloud Infrastructure Market include:

Market Features Impeding Multi-Cloud Strategies

OFCOM identified three key features of the cloud infrastructure market that pose challenges for customers looking to switch between providers and employ multiple cloud infrastructure services:

Data Transfer ("egress") Fees: Customers are charged when transferring data out of a cloud provider's infrastructure.

Technical Restrictions on Interoperability: Major infrastructure providers implement practices that require significant effort from customers to adapt their applications and data for alternative cloud platforms.

Committed spend discounts: The structure of these discounts can incentivize customers to remain with a single cloud infrastructure provider.

OFCOM and European Commission Market Interventions

Data Transfer Fees

OFCOM proposed three potential interventions regarding data transfer fees:

Equalize Data Transfer Fees: Set data transfer charges at a rate no higher than internal data transfer costs within a specific cloud service.

Price Controls on Data Transfer Fees "at cost": Cloud providers can recover costs associated with transferring customer data, charging users in accordance with their usage.

Prevent Providers from Charging for Data Egress: Consider prohibiting providers from charging for data egress activities, although this could impact other charges.

Article 25 of the EU Data Act suggests gradually eliminating data transfer charges from the market within three years of the act's implementation.

Technical Restrictions on Interoperability

OFCOM proposed three potential interventions to address interoperability issues:

Transparency Requirements: Mandate cloud providers to provide documentation explaining compatibility with open-source software.

Easier Interoperability for First-party Services: Make elements of a provider's cloud infrastructure services compatible with those of other providers.

Standardization of Cloud Technologies: Promote the use of industry standards and open-source software or potentially mandate specific standards.

Article 26 of the EU Data Act classifies providers based on their obligations when customers switch to a new provider, emphasizing the importance of open interfaces, compatibility, and data exportability.

What are the next steps?

OFCOM will issue a final decision on a market investigation reference alongside its market study final report which will be published no later than 5 October 2023.

For an expanded assessment into OFCOMs report and where it diverges with the EUs Data Act please download the Multi-Cloud Services: OFCOM and European Commission Diverge on Proposed Measures to Regulate the Cloud Infrastructure Market whitepaper and get in touch with Paul Graham (paul.graham@fieldfisher.com) to discuss.

Areas of Expertise

Technology and Data

Related Work Areas