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Fees Thwart Switching Cloud Computing Providers, Critics Say
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2023-05-12 08:19
Complaints about how cloud service providers try to prevent customers from switching to rivals was the focus of

Complaints about how cloud service providers try to prevent customers from switching to rivals was the focus of a virtual workshop convened by the US Federal Trade Commission on Thursday.

Experts invited by the agency said Microsoft Corp., Amazon.com Inc. and Oracle Corp. make it difficult for companies to leave their cloud systems by charging significant fees to migrate data or use their software tools elsewhere.

The workshop, part of an FTC inquiry focused on data security and competition in the cloud computing industry, took place as antitrust agencies globally are stepping up their scrutiny.

Microsoft is facing a formal inquiry from the European Commission into its business practices related to cloud computing. The UK’s digital regulator said last month that cloud services firms might be abusing their market power to thwart fair competition and suggested that the competition authority open a market investigation.

The US cloud market is dominated by Amazon, Alphabet Inc.’s Google and Microsoft. Licensing practices make it hard for companies to effectively switch among providers, said Frederic Jenny, an economics professor at ESSEC Business School in Paris.

Jenny has been researching potential anticompetitive conduct in cloud markets on behalf of Cloud Infrastructure Services Providers in Europe, a trade association of European cloud providers that includes Amazon, Reevo Spa and Gigas Hosting SA, among others.

“There is a great deal of confusion about fairness and competition in the cloud,” Jenny said. “Because there are many different business models, people are quite confused about what is the norm.”

Jenny said at the FTC workshop that Microsoft charges additional licensing fees to use its Windows and Office software with rival cloud providers, like Amazon Web Services and Google Cloud Platform. Oracle also charges additional fees for use of its popular database software on other clouds, he added.

Amazon Web Services, imposes charges to move data out of its data centers, making migrations difficult and expensive, said Steven Weber, a professor at the University of California at Berkeley School of Information.

Preston Grisham, a spokesman for Amazon Web Services, said in an interview after the event that the company charges for all data downloads, whether for migration to other cloud providers or other purposes. That practice is standard in the industry, he said, and that Amazon had reduced its fees in November 2021.

Microsoft made changes to its cloud licensing terms in Europe last year in response to concerns, according to spokesman David Cuddy, who was reached after the event.

Oracle didn’t respond to requests for comment.

The dominance of just a few cloud providers could affect innovation in artificial intelligence, said Weber, who heads Berkeley’s Center for Long-Term Cybersecurity. Some of the big cloud companies have been offering artificial intelligence startups investments in the form of cloud credits, he added.

“That kind of subsidy has the effect of tying a particular company’s AI models to a particular cloud provider,” he said.

The FTC is accepting public comments on the cloud computing inquiry through June 21.

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