Britain's £15bn cloud computing market is being investigated by the regulator over concerns that just three US companies dominate more than 80pc of the sector.
Ofcom is examining the dominance of US technology titans Amazon, Microsoft and Google as part of a wider study into digital communication markets.
The regulator, which is gearing up to regulate the wider internet as part of plans under the Online Safety Bill, is set to launch a market study in "coming weeks" that will examine the strength of competition in cloud services and barriers to new entrants into the sector.
The three big providers - Amazon Web Services (AWS), Microsoft and Google - collectively earn around 81pc of revenues in the UK public cloud infrastructure services market, according to Ofcom.
The regulator is launching a “market study” under the Enterprise Act 2002 together with the Competition and Markets Authority.
Ofcom said: “We have engaged closely with the CMA in planning the market study, and will continue to do so during the course of the project.
“Ofcom will lead the market study, drawing on our strong expertise in communications markets and reflecting that cloud is increasingly becoming an important element of the infrastructure of the internet."
Selina Chadha, Ofcom's director of connectivity, added: "The way we live, work, play and do business has been transformed by digital services.
"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."
Ofcom is also set to launch a broader investigation over the year ahead into other digital markets that will cover services such as WhatsApp, FaceTime and Zoom, as well as scrutiny into smart speakers and connected televisions.
Professor Diane Coyle, of the University of Cambridge, suggested in May that British regulators “need to pay greater attention to how companies have used the internet and cloud computing to radically cut the cost of providing products and services to each user – potentially to the point of shutting newcomers out of the market.”
The former Competition Commission member said that economies of scale enjoyed by the largest digital services companies could make it difficult for new entrants to “overthrow the incumbents”, potentially reducing market competition and therefore driving up prices.