The Competition and Markets Authority (CMA) is investigating the state of the UK cloud market, and for good reason. While the submissions and commentary already submitted to the CMA point to various concerning practices, one issue stands out as the single biggest threat to a healthy, competitive landscape: excessive free cloud credits.

This tactic, employed by the dominant hyperscalers (AWS, Microsoft Azure, and Google Cloud Platform), is akin to a drug dealer offering free samples. In the short term, customers are hooked into using the platform, but in the long term (as the credits wind down) they are left trapped and dependent on the hyperscaler. What remains is a less competitive, innovative and agile cloud space.

While the CMA focuses on four key areas – egress fees, technical lock-in, software licensing, and committed spend discounts – these are mere symptoms of a deeper disease: a lack of genuine competition.

The free credit trap: How hyperscalers are getting new customers hooked

Among all these issues, the one that deserves the most urgent attention is the excessive use of free credits. My previous submission to the CMA documented instances of excessive free credits often reaching hundreds of thousands of pounds. With the rise of AI and ML, these figures are only ballooning in an attempt to further monopolise the AI and ML market.

This tactic is fundamentally unfair. Smaller providers simply cannot compete with such giveaways. It's a classic bait-and-switch – customers get enticed by the initial free tier, but switching later becomes a monumental task due to sunk costs and technical lock-in. This creates a monopoly for the big three hyperscalers, stifling innovation and preventing a truly competitive market from emerging.

The high price of a broken market

The consequences of this broken market are far-reaching. Consumers lose out on:

  • Innovation: Competition breeds fresh ideas and better solutions. With limited players, the incentive to innovate weakens.
  • Competitive tension: When there are only a few options, prices tend to rise, and service quality stagnates. Consistent price hikes have become a theme over the last few years with hyperscaler providers and they are considerably more expensive than many of the smaller providers.
  • Choice: Customers deserve a diverse range of cloud providers that cater to their specific needs. Free credits create a false sense of affordability with a single vendor, limiting choice.

A call to action: Dismantle the free credit monopoly

The CMA's investigation is a crucial step towards a healthier cloud market. However, focusing solely on the outlined theories of harm will yield limited results. To truly dismantle the monopoly and foster competition, the CMA must prioritise addressing the issue of excessive free credits.

Here are some potential solutions:

  • Limit the scope and duration of free credit offerings.
  • Increase transparency around free credit terms and conditions.
  • Encourage a culture of informed cloud purchasing, focusing on long-term value over short-term freebies.

By taking these steps, the CMA can create a level playing field where smaller providers can compete and innovation can flourish. This will ultimately benefit UK businesses and consumers by offering a wider range of high-quality, competitively priced cloud services.

Other causes for concern

Away from the excessive free credits, the CMA investigation is focussed around other areas, which are also of concern.

Let's dissect these areas to understand their impact:

Egress fees

The recent waivers on data egress fees by the hyperscalers sound good on paper, but they come with so many caveats that few consumers will truly benefit. This is a PR move, not a genuine policy change. Corey Quinn, an industry expert, rightly points out that regulators are focusing on the wrong target.

Technical lock-in

Proprietary features are a natural part of any platform. However, the ease with which these features can be implemented, often by junior staff without proper oversight, creates a lock-in effect. The focus needs to shift towards better cloud provisioning governance that considers procurement, competition, and wider business needs. Free credits exacerbate this issue by incentivizing rapid adoption without considering long-term implications.

Software licensing

Microsoft's licensing practices inflate costs for rival cloud providers, hindering competition. While addressing this is crucial, unless other measures are also taken, it will simply reshuffle the deck chairs on the same, limited, playing field. We need more players, not just a fairer fight between the existing giants.

Committed spend discounts

These discounts encourage customers to concentrate spending with one vendor, as exemplified by the UK government's controversial OGVA2 deal with AWS. This creates an anti-competitive environment where spending more with a single provider leads to bigger discounts. Here again, free credits play a role. By offering substantial upfront benefits, hyperscalers lure customers in before these discounts even become relevant.


If the UK wants a truly open and competitive cloud market, which puts the best interests of UK companies at its heart, urgent action is required. The emergence of AI and ML is only supercharging the stakes, with cloud players racing to build a platform fit for the AI revolution. Personally I am not a fan of over regulation of any industry, but I do believe it’s important to have a level playing field. Many of the tactics deployed by big 3 hyperscaler providers are anti-competitive. Until changes are made, smaller providers will be locked out and hyperscaler dominance will only grow.