Big cloud companies want you to buy their own product suites. That makes regulators squirm

US, UK probes examine IT bundling practices.
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· 4 min read

Concerns about vertically integrated cloud providers have long peeved European regulators, and now those misgivings are spreading across the pond.

The Federal Trade Commission launched an inquiry this spring exploring the dynamics of “cloud computing, with a particular focus on issues related to market power, business practices affecting competition, and potential security risks.” When the comment period ended on June 1, it amassed roughly 100 responses from providers and stakeholders, industry groups, and major players like Microsoft, Amazon Web Services, and Google.

“This is an early step toward rulemaking or enforcement,” Rebecca Allensworth, an antitrust professor at Vanderbilt Law School, told IT Brew.

Some of the commenters—including AWS, in a statement to IT Brew via PR rep Preston Grisham—suggested all-in-one and single-service cloud providers don’t harmfully undercut each other as they all offer small businesses choices and flexibility while allowing them to outsource their various IT needs.

Continental controversy. The discussion echoes a UK regulatory probe that zeroes in on the practices AWS, Microsoft, and Google employ to sell infrastructure as a service (IaaS) and platform as a service (PaaS). CIO reported that the nation’s communications regulator has deemphasized dynamics surrounding the third pillar of cloud services, software as a service (SaaS), and is instead monitoring whether the big three leverage their SaaS offerings to lock customers into the other two pillars.

The European Union’s Digital Markets Act, which took effect in May, is also primed to shape the way cloud providers operate, at least abroad. That law means companies could be subject to fines or forced divestment if they’re found to abuse their market power, said Daphne Muller, the alliances, ecosystem, and support manager for Nextcloud.

Muller’s company, which bills itself as an open-source cloud services alternative that can run on private servers, filed a complaint against Microsoft in 2021. The complaint, which is still under investigation in Germany, alleges that Microsoft bundled Teams, its Edge browser, and OneDrive storage system with its Windows operating system in a way that made it difficult for customers to easily substitute services from different providers, Muller said. This translates into a barrier for smaller providers hoping to compete with these companies, she said.

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In a statement shared with IT Brew via PR rep Stark Sutton, Microsoft said it has since “made changes to our cloud licensing terms to address licensing concerns and provide more opportunity for cloud providers.”

Bringing the heat. The FTC probe didn’t name specific companies under the microscope, but some smaller cloud IT firms identified Amazon, Google, and Microsoft as their main peers. David Friend, CEO and co-founder of cloud storage provider Wasabi, likened the behemoths to superstores that sell a little bit of everything instead of specializing in a single category of products.

Sometimes, that’s an advantage. Friend highlighted the practice of charging egress fees, or tolls paid to access or transfer a company’s stored data, as something large companies typically charge for.

“This is what really irritates the government agencies, especially in Europe,” he said of the fees.

Whether the cloud services market is anticompetitive or harms customers is open to interpretation, but Friend said he doesn’t perceive the big three as an unfair threat.

“We’re like the Nike store, and they’re kind of like Macy’s,” Friend said. “We can do the same thing they can, but they have hundreds of other products to worry about.”

Google didn’t respond to IT Brew’s request for comment.

Top insights for IT pros

From cybersecurity and big data to software development and gaming, IT Brew delivers the latest news and analysis of trends shaping the IT industry, like only The Brew can.