In a recent response to the UK’s Competition and Markets Authority (CMA), Microsoft has expressed strong opposition to the requests made by Amazon Web Services (AWS) and Google for regulatory intervention regarding its software licensing practices. The CMA’s provisional ruling, issued in January, highlighted concerns about competition within the UK cloud computing sector, suggesting that Microsoft’s pricing strategies may be detrimental to market health.
Microsoft’s Position on Licensing Practices
Microsoft categorizes AWS and Google as listed providers, which means that clients wishing to utilize Microsoft software, such as Windows Server, in non-Azure cloud environments face significantly higher costs—up to four times more than those using Azure. Both AWS and Google argue that this pricing structure places them and their customers at a competitive disadvantage.
The CMA has acknowledged that Microsoft possesses both the ability and incentive to limit access to its software products for AWS and Google, thereby harming competition in the cloud services market. In its rebuttal, Microsoft characterized the request from its rivals as “extraordinary and unprecedented,” asserting that it undermines its intellectual property rights. The tech giant contends that no other software provider would be subjected to such limitations.
Microsoft further argues that the only parties benefiting from the CMA’s potential intervention would be Amazon and Google. The company emphasizes that it competes vigorously for business through competitive pricing and marketing strategies, including discounts for customers deploying workloads on Azure that utilize Microsoft software.
Concerns Over Market Dynamics
Google has previously labeled the additional costs imposed by Microsoft as a “software tax,” a sentiment echoed in its recent anti-trust complaint filed with the European Commission. Research conducted by Frédéric Jenny, an emeritus professor of Economics, indicated that European customers have collectively faced significant overcharges due to Microsoft’s Bring Your Own License policy.
While Microsoft acknowledges the legacy of its software operations, it maintains that it encourages customers to transition workloads from private data centers to the cloud, with a preference for Azure. The company asserts that its pricing strategies are designed to benefit UK customers, contrasting its approach with that of AWS and Google, which do not license their proprietary software to competitors.
Despite the criticisms leveled against it, Microsoft points out that AWS remains the largest cloud vendor in the UK, commanding a substantial market share. In 2023, AWS accounted for nearly 50 percent of the £9 billion (.4 billion) spent by customers, while Microsoft held between 30 to 40 percent. Google Cloud, while growing, remains a distant third in this competitive landscape.
Regulatory Landscape and Future Implications
The CMA is currently evaluating whether to leverage its digital markets powers to address the barriers it has identified, including egress fees and Microsoft’s licensing practices. A final decision from the CMA is anticipated later this year, as the authority continues to scrutinize the dynamics of the cloud market in Britain.
As the situation unfolds, Microsoft has raised concerns about the influence of trade associations, noting that Google has invested heavily in supporting groups that align with its interests. The ongoing dialogue between these major players in the cloud computing sector will undoubtedly shape the future regulatory environment and competitive landscape.
