Why Cloud Busting Will Create Chaos for Tech Regulators

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As regulators around the world try to address the asymmetrical competition in the cloud computing industry, they confront a challenging decision. Opening up the cloud market necessitates more extensive interventions compared to other tech markets, including implementing price controls and establishing detailed technical regulations.

However, taking no action is not a viable option. According to research firm Gartner, cloud computing already constitutes nearly 20% of global information technology spending and will be a significant driver of growth in the coming years. It is projected to expand by 20% annually, reaching a value of $1.1 trillion by 2027. Currently, Amazon Web Services and Microsoft dominate the market, with Google trailing behind.

There are powerful factors favoring a concentrated market. The major cloud providers, known as hyperscalers, benefit from significant economies of scale. In addition, large customers utilize multiple integrated cloud services, making it complex and challenging to switch to a different provider while becoming dependent on advanced suppliers.

Even when customers demand better deals, the leading tech companies have found ways to come out on top. For instance, they offer substantial discounts but require customers to sign contracts guaranteeing future business, effectively preventing them from switching providers.

Regulators increasingly believe that such tactics employed by IT companies are locking in customers. Switching providers incurs additional costs, and technical disparities make it expensive or difficult for customers to transition.

The UK regulators are taking the initiative by launching a formal investigation into Amazon and Microsoft, putting them ahead of the US, which initiated its cloud computing review earlier this year. However, they still lag behind the EU, which has already proposed new rules to promote cloud competition under its Data Act.

Volume discounts have been identified as one tactic scrutinized by UK authorities, although outlawing price breaks may inadvertently harm customers. The EU and UK primarily focus on two other areas.

The first area involves prohibiting cloud companies from using burdensome data-transfer charges to discourage customers from switching to rival providers. The EU rules call for completely barring such fees, but cloud computing’s complexities make this step less straightforward.

For example, AWS has faced criticism for only charging fees when customers transfer data out of its cloud, not when they bring data in. This asymmetry appears designed to lock in users. However, AWS argues that it cannot distinguish whether data is being exported to a rival or used for services like video streaming. If it is the latter, customers may “export” the same data multiple times, making it a service that should be charged for.

The second area for action involves interoperability, which refers to the ability of different companies’ systems to work together. Presently, technical disparities limit interoperability, making it challenging for customers to use multiple cloud providers.

UK regulators propose various potential solutions, including making certain technical standards mandatory or requiring rival companies to establish direct communication links between their data centers. This would enable smoother movement of customer data. However, they suggest focusing on specific areas where a lack of interoperability lacks clear justification.

There are precedents for detailed control of technical interoperability. After settling its antitrust case with Microsoft over two decades ago, the US subjected the software giant to years of technical monitoring to prevent it from leveraging its PC monopoly to dominate other markets.

If regulators choose to micromanage the boundaries between dominant cloud computing providers, they will face a complex task. Nevertheless, given that the future of IT is predominantly controlled by a few companies, regulators may have limited alternatives.

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Denial of responsibility! Vigour Times is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
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