European providers want DMA to address ‘unfair practices’ in cloud market

A number of European providers advocate cloud services should be included in the scope of the DMA. [Michael Vi/Shutterstock]

Service providers are arguing that for the European cloud market to develop, the new EU antitrust law should prevent anti-competitive practices by large software providers.

The European trade association for cloud infrastructure services providers, CISPE, commissioned a study on potential unfair practices for cloud computing services. Interviewing 25 European companies, the report pointed to what it considers a number of anti-competitive practices around the way software is licensed.

“Over the course of several months, I have spoken to business software users of all sizes and across sectors. Some users were fearful of possible reprisals if they spoke out against alleged unfair practices,” said professor Frédéric Jenny, chairman of the OECD competition committee and author of the study.

According to the interviewees, large tech companies might leverage their market position in adjacent services to restrict competition in the cloud infrastructure service market.

The study points in particular to Microsoft and Oracle, accusing them of anti-competitive behaviour against the cloud infrastructure sector. Both companies declined to comment on the report.

“Even some large users of cloud services recognised that they could not do without the core productivity suites that these software companies control,” Jenny added.

Therefore, the study argues, software vendors should be designated as ‘gatekeepers’, the key definition of the EU’s Digital Markets Act (DMA) that intends to pose significant obligations on systemic players.

Alban Schmutz, president of CISPE, which commissioned the study, said it was clear that “certain legacy software providers are seeking to limit choice in cloud infrastructure through these unfair license terms. Now is the time to act to protect the future growth, innovation and sustainability of European cloud services”.

CISPE is politically very close to the French government and its view on digital sovereignty. For this reason, it was heavily involved in the development of the data infrastructure project GAIA-X since it became a Franco-German endeavour. The trade association also oversees the application of a code of conduct for cloud infrastructure providers.

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For Jonathan Sage, a former IBM employee and chair of the general assembly of a competing code of conduct – the EU Cloud – the discussion about software and licenses dates back to the 1980’s when originally vendors sold IT as “tin boxes” with software included at no or low cost.

In the subsequent era, boxes were commoditised and the software that ran on them, covered by copyright, became very profitable. The movement to Cloud from software licencing to the as-a-service model did not really have the impact that some expected, in enabling more flexibility, making switching suppliers easier and improving interoperability.

According to the study, these large providers have imposed increased costs, unfair bundling conditions and unduly restricted their choices.

“Licensing practices are being abused by parties with a de facto monopoly to strangle the independent cloud providers. Ultimately, if nothing is done, this will lead to the disappearance of the European cloud industry,” said Simon Besteman, managing director of the Dutch Cloud Community.

By contrast, Sage maintains that there is plenty of room for innovative companies and startups to build on existing cloud platforms such as Amazon Web Services (AWS), Google and Microsoft and that the real issue is to be able to switch providers later on.

“The ability to move workloads from one cloud platform to another or to replace cloud services is important, as it makes for a competitive market, you can control costs and it provides flexibility. If you are locked into one provider, what was good value for a start-up can become substantial cost in the longer run, like a sort of digital tax,” he added.

If an application is built on Google, AWS, or Microsoft, it becomes so closely tied with the infrastructure that it is currently extremely difficult to shift to another platform.

“It’s funny that CISPE doesn’t attack Amazon Web Services because it is one of their members. Yet AWS is like a cockroach hotel, once you’re in, you build your services on Amazon, you can’t get out,” one person familiar with the matter told EURACTIV on condition of anonymity.

Cloud computing has been included in the DMA initial proposal of the European Commission as a core platform service (CPS), which define the key digital markets that contribute to designating a company as a gatekeeper.

The current draft of the proposals in the European Parliament includes cloud services as a CPS, but that was not the case in the European Council as late as last month, according to an internal document seen by EURACTIV.

Council document exposes significant differences with Parliament over gatekeeper definition

The definition of active users for core platform services is one of the main ways to identify a gatekeeper, but the services to be covered by this differ significantly in the texts submitted in the European Parliament and the Council, …

[Edited by Zoran Radosavljevic]

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