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UK’s Ofcom to probe cloud services, personal communication apps, and smart devices

UK’s telecom regulator Ofcom announced it is launching market studies into cloud services, personal communication apps, and smart devices

What’s the news: UK’s telecom regulator Ofcom on 22 September announced that it is planning to launch market studies into cloud services (Amazon, Microsoft and Google), personal communication apps (WhatsApp, FaceTime, and Zoom), and smart devices (connected televisions and voice assistants). The regulator expects to publish a final report on the cloud services market – including any concerns or proposed recommendations – within twelve months and launch studies into the other two markets over the next year.

“The way we live, work, play and do business has been transformed by digital services. But as the number of platforms, devices and networks that serve up content continues to grow, so do the technological and economic issues confronting regulators. That’s why we’re kick-starting a programme of work to scrutinise these digital markets, identify any competition concerns and make sure they’re working well for people and businesses who rely on them.” —  Selina Chadha, Ofcom’s Director of Connectivity

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Why does this matter: Apart from providing an insight into how these various markets function, market studies can eventually lead to regulations or antitrust investigations depending on the findings. Ofcom stated that if they “find a market is not working well, there can be negative impacts on businesses and ultimately consumers, through higher prices, lower service quality and reduced innovation,” which will prompt the regulator to take one or more of the following steps:

  1. “make recommendations to government to change regulations or policy”
  2. “take competition or consumer enforcement action”
  3. “make a market investigation reference to the Competition and Markets Authority (CMA)”
  4. “accept undertakings in lieu of making a market investigation reference.”

Major players in UK’s cloud sector: “Cloud computing is a huge and fast-growing market, which uses remote servers to offer services such as software, storage and computing power. […] The cloud has become an essential part of how products are delivered to telecoms users, as well as viewers and listeners of TV, radio and audio content,” Ofcom explained.  “The largest providers of cloud services – known as ‘hyperscalers’ – are Amazon Web Services (AWS), Microsoft and Google. Collectively, these three firms generate around 81% of revenues in the UK public cloud infrastructure services market,” the regulator added.

What is the cloud sector market study going to look at: “Our study will formally assess how well this market is working. We will examine the strength of competition in cloud services generally and the position the three hyperscalers hold in the market. We will also consider any market features that might limit innovation and growth in this sector by making it difficult for other companies to enter the market and expand their share,” Ofcom detailed. “We will look at how the market is working today and how we expect it to develop in the future – aiming to identify any potential competition concerns early to prevent them becoming embedded as the market matures,” the regulator added.

What is the personal communication apps market study going to look at: “We are interested in how services such as WhatsApp, FaceTime and Zoom are affecting the role of traditional calling and messaging, and how competition and innovation in these markets may evolve over the coming years. We also want to understand whether any limitations on their ability to interact with each other raises potential concerns,” Ofcom said.

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What is the smart devices market study going to look at: “Another future area of focus for Ofcom is the nature and intensity of competition among digital personal assistants and audiovisual ‘gateways’ – such as connected televisions and smart speakers – through which people access traditional TV and radio, as well as online content. We will explore competition dynamics in this sector and identify whether there are any potential areas that require more formal examination. Our work will include analysis of consumer behaviour, future developments, as well as the role and business models of major players and their bargaining power with content providers,” Ofcom detailed.

Why these three markets: Ofcom said that, under the Enterprise Act, it is tasked with making sure that communication markets are working well for consumers and businesses. Many of the digital services are competing with traditional telecom services and play a central role in how content is distributed and discovered, the regulator added.

This post is released under a CC-BY-SA 4.0 license. Please feel free to republish on your site, with attribution and a link. Adaptation and rewriting, though allowed, should be true to the original.

Update: the headline was updated at 5:43 PM on September 25th to include ‘Ofcom’

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