Regulatory

FTC and UK’s Ofcom Investigating Big Tech’s Hold on Cloud Computing Markets

BitOoda Regulatory Analysis 5/2/23

Key Takeaway #1

US and UK regulators are actively probing the business practices of the large incumbent cloud computing providers, and potential changes to market structure.

Key Takeaway #2

AWS and Microsoft maintain a disproportionate market share, and regulators view their contracts and price-setting approaches to be anti-competitive.

Key Takeaway #3

BitOoda can help clients navigate the complexities of the power and compute markets to optimize their strategies.

Key Takeaway #4

Regulators in the US and UK are actively looking into the business practices of large cloud computing providers, including issues related to the critical nature of cloud compute services, potential anti-competitive behaviors such as predatory pricing, and possible data security risks.

The US Federal Trade Commission (FTC) and Ofcom, which regulates the UK communications industry, have taken actions in the last month to probe the market structure and competitive dynamics of cloud computing services. Given the degree to which a growing number of segments of the economy are increasingly dependent on cloud computing resources, regulators appear to be more closely examining the structural integrity of the compute market.

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Regulators in the US and UK are actively looking into the business practices of large cloud computing providers, including issues related to the critical nature of cloud compute services, potential anti-competitive behaviors such as predatory pricing, and possible data security risks.

The US Federal Trade Commission (FTC) and Ofcom, which regulates the UK communications industry, have taken actions in the last month to probe the market structure and competitive dynamics of cloud computing services. Given the degree to which a growing number of segments of the economy are increasingly dependent on cloud computing resources, regulators appear to be more closely examining the structural integrity of the compute market.

The FTC on March 22 published a Request for Comment on the business practices of cloud computing providers. Among the issues in which the agency expressed interest were:

“The extent to which particular segments of the economy are reliant on a small handful of cloud service providers.

The ability of cloud customers to negotiate their contracts with cloud providers or are experiencing take-it-or-leave it standard contracts.

Incentives providers offer customers to obtain more of their cloud services from a single provider.”

These topics clearly indicate the FTC’s awareness that the current compute market is dominated by a small number of providers who are able to set prices and terms in ways that lack transparency and reduce customer choice.

On April 5, Ofcom announced that it conducted a study of the practices of Amazon (AWS) and Microsoft in the UK market, finding that “High fees for transferring data out, committed spend discounts and technical restrictions are making it difficult for business customers to switch cloud provider or use multiple providers.” Ofcom is proposing to transfer the action to the UK’s Competition and Markets Authority for further investigation.

Compute power is rapidly becoming one of the most critical commodities for a range of sectors across the digital economy. These two regulatory initiatives indicate a growing awareness among governments that there needs to be a fair and orderly market structure around the cloud computing sector, with clear benchmarks and price transparency.

At BitOoda, we are experts at navigating the power and compute markets and can help digital asset miners, data centers, and other market participants structure strategies to optimize their approaches to compute and power.

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Analyst Certification

Tom Nath, the author of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.

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