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FTC examines competition in cloud computing

The Federal Trade Commission is examining the impact of a handful of big tech companies such as Amazon, Microsoft and Google providing a large portion of cloud services.

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The Federal Trade Commission is seeking to learn more about tech giants' hold on cloud computing services and whether there might be competition and security concerns for the agency to address.

The FTC issued a request for information in March on the business practices of cloud computing providers, kicking off the agency's examination of how cloud computing works and who controls the market. On Thursday, the agency hosted a webcast featuring a panel discussion assessing competition concerns and the role of leading cloud service providers including Microsoft, Amazon and Google.

FTC Chair Lina Khan noted during Thursday's discussion how the largest cloud computing providers are big tech companies, which she said have benefited from the network effects that a large, existing customer base provides them.

We want to make sure at the FTC that we're fully understanding what are the factors that are leading the market to be so concentrated in the hands of a few companies.
Lina KhanChair, Federal Trade Commission

"We want to make sure at the FTC that we're fully understanding what are the factors that are leading the market to be so concentrated in the hands of a few companies, and also what are some of the downstream risks that might stem from that, that need to be on our radar, both on the competition side as well as on the data protection and security side," Khan said during the FTC webcast.

FTC concerned about competition, security

One concern is with cloud vendors that tie and bundle other products to business cloud services. For example, Microsoft provides its Azure cloud and ties other products such as Office 365 to the service.

Frédéric Jenny, emeritus professor of economics at the ESSEC Business School in Paris, said during the panel discussion that it's incumbent upon agencies such as the FTC to determine when tying such products and services directly to cloud offerings is due to a technical necessity, versus an attempt on the company's end to unfairly lock businesses into agreements that prevent their ability to easily take advantage of other products and services in the market.

"The role of the competition authority is to distinguish what is technically justified from what is an additional obstacle which has no reason except to try to develop market power," Jenny said.

Indeed, Steven Weber, another panelist and a professor at the UC Berkeley School of Information, said one way the FTC could assess this concern is to investigate licensing terms provided by tech companies for using their cloud services.

"Licensing terms tell us a lot about the ways in which people are trying to parse the difference between technical constraints and business model constraints," he said.

Security and resiliency are also among the FTC's concerns. Given the number of businesses using cloud services from a handful of providers, Khan raised the issue that when a cloud service goes down, the impact is significant and widespread. Earlier this year, Microsoft suffered a networking issue affecting multiple products, including Azure.

"Over the last decade, we've seen time and time again how cloud outages can have a cascading effect across markets and across our economy," Khan said.

The FTC's deadline for public comments on cloud computing business practices is June 21.

Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget Editorial, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.

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