It’s more than that.

Microsoft had clear rules for licensing on prem. You didn’t pay more to use HPE vs. Dell or Dell vs. Surface. If you chose to buy VMWare, same deal, as long as you followed certain licensing rules with respect to migration and other factors.

Now you pay a tax unless you use the favored provider. When I looked a couple of years ago, you could not license Windows client at all in cloud, unless you used on of the MS virtual desktop offerings.

But does Windows Server "dominate" server OS or especially cloud server OS market? Vast majority of servers in cloud run Linux....

But that is somewhat missing the point. This locks in people that are currently doing on-prem servers so that they are cost prohibitive to move to a cloud that isn't MS.

Again, you can almost argue that clouds do this with expensive exfiltration costs. At least that corresponds to work you are asking them to do, though. This is purely a licensing trap to keep people from choosing an option.

They can move to different OS if they don't like MS licensing policy. I'm sure IBM and Oracle etc are more than happy to take them as customers, MS does not have monopoly on server side.