Are French and European cloud players managing to develop freely on the French market? This is what the Competition Authority has been examining since January 2022. More than a year ago, it was seized of office.
The regulator has just issued its final opinion on the competitive operation of the cloud, and more particularly IaaS and PaaS. In these sectors, giants dominate, the hyperscalers AWS, GCP and Microsoft.
Cloud credits and exit fees: instruments of domination
“In 2021, they represent 80% of the growth in spending on public cloud service infrastructure and applications in France. Amazon and Microsoft captured 46% and 17% of IaaS and PaaS service revenues respectively”, figures the Authority. .
It is interested in various practices of these suppliers whose use is, in its view, likely to restrict competition. And to pin cloud credits and exit costs, but also risks, such as those related to the first migration to the cloud.
Cloud credits, the amounts of which can reach up to $200,000 over two years, are an instrument allowing hyperscalers to use their financial power. For the Authority, these credits, “raise doubts as to the ability of all cloud service providers to offer them profitably.”
Transfer fees disconnected from costs
Egress fees are also problematic. They consist of charging for outgoing data transfers. “The instruction showed that these egress fees are potentially disconnected from the costs directly borne by the suppliers.”
“These fees, as currently structured, could create a risk of customer foreclosure in a growing market, making it more difficult for cloud users to switch from their first-time provider or to multiple providers at once in a multi-cloud environment”, considers the competition policeman.
Thus, the “hyperscalers are by their financial strike force, and their ecosystems of digital services in a position to be able to hinder the development of competition”, notes the Autorité de la concurrence.
Increased focus with LLMs or Edge
The significant concentration dynamic noted by the regulator is already an obstacle to competition. The “probability that a new player will be able to quickly gain market share appears limited outside of players who are already powerful in other markets”, he judges.
Moreover, this trend is set to increase “as companies realize their migration to the cloud and choose an ecosystem.” However, the vice of hyperscalers does not loosen. Quite the contrary.
The Autorité suggests that several developments could affect competition in the sector, including major language models, edge computing, but also cybersecurity and environmental issues.
“The competition authorities will have to be vigilant that the players already established do not hinder the development of smaller or new players from these technologies”, underlines the French regulator.