Competition in the provision of Cloud Computing Services
Paris, 19 June 2025
Antonio Manganelli
Features and Competition Issues
Competition issues
• Market studies across many jurisdictions have consistently identified similar competitive concerns
• Market concentration: three major hyperscaler Economic features of the market: scale and scope economies
Companies’ strategies:
Technical: data portability restrictions | switching costs | lack of interoperability: closed API or differentiate technical standards
Commercial: bundling/tying strategies | vertical/horizontal integration and leveraging of mkt power
Economic/monetary: high/unforeseeable exit costs / egress fees; discounts on spending commitments (financing-lock-in tool)
Competition issues /2
• Despite these general commonalities, the intensity of those competition concerns varies depending on the specific migration scenario.
From on-premise to cloud
Cloud switching (data portability | model/app portability)
Multi-cloud (interoperability and multihoming)
• Furthermore, competitive problems can be substantially different across the different layers of cloud
IaaS = Infrastructure as a Service
PaaS = Platform as a Service
SaaS = Software as a Service
Cloud Computing Services
• Cloud computing service attributes, service models (IaaS, PaaS, SaaS) and deployment models (public, private, hybrid)
• Different cloud customers (B2B, B2C) and use cases (internal vs. external use)
From: A. Manganelli, D. Schnurr (2024)
Cloud Computing Services /2
• Main business models:
Hyperscalers and smaller / specialised cloud providers
Independent software vendors
Suppliers of professional services and IT services companies
• Revenue distribution (ACM, 2022): IaaS (22%), PaaS (16%) and SaaS (61%)
Main Features
• There is the tendency of either considering cloud computing services as a monolith, while economic features can be substantially different across the different layers of cloud
SaaS is a fundamentally different market category than cloud infrastructure | most market studies have focused on IaaS and PaaS although main revenues are for SaaS
• Or to assimilate IaaS to ICT infrastructures and PaaS and SaaS to «digital markets and services», which is only partly true
Main Features: different economics
• Infrastructures
Scale economies (on supply side) – especially at IaaS layer (infrastructure investment) yet also operating cost decrease with larger scale concentration if not offset by benefits of specialization
Economies of scope | horizontal integration
• Digital services/markets:
Indirect / Direct Network effects = scale economies on the demand side (availability to pay increase)
?? Cross- side network effects | two-sided markets ??
depends on the type of intermediation
Main Features: different kind of intermediation
• Infrastructures/hardware-based (IaaS | PaaS)
Vertical pipe-line
• Software/middleware-based ( PaaS | SaaS):
PaaS and ISVs are not per sè two-sided market the less technical compatibility | interoperability, the more indirect network effect (what makes it similar to classical ICT and also CAPs on telcos | but net neutrality)
SaaS | cloud services vs services based on the cloud | what relevant market(s)? On-premise vs on cloud softwere
Two-sided dynamics are weak/ancillary
• Could marketplace (IaaS, PaaS, SaaS): pivotal cross-sided network effect | combining cloud infrastructure / services with marketplace intermediation | importance of vertical integration
Main Features: use of data
• Infrastructures/hardware-based (ISPs | IaaS | PaaS)
Data = asset (to be flowed | to be stored and processed)
lock-in for monetary /economic switching costs on demand side to move data
• Software/middleware-based ( PaaS | SaaS):
Data = asset/ information for enhancing productive efficiency/quality (both for ad-based platforms and all other kind of matchmaking) and enables data feedback loops
informational lock-in for perceived higher efficiency and quality of current provider on the supply side
Cloud and AI
• Cloud infrastructures /services play crucial role along the entire AI value chain: both upstream (FM training and development) and downstream (FM deployment and inference )
From: A. Manganelli (2025)
Upstream vs Downstream Competition issues
• Upstream
main focus: essential inputs from FM development
Tendency toward concentration yet conglomerate competition
• Downstream
Can more easily emerge tipping dynamics as in “traditional” digital markets | Also, defensive strategies
Mostly where platform-like dynamic: genAI applications, platform or device forced by a “gatekeeper”, e.g.:
Integration (commercial or technical) with Operating systems
Cloud-based AI marketplace
• CUDA exception? proprietary software platform which enables developers to optimize code for NVIDIA’s GPUs built a strong market position as it became the de facto industry standard, generating network effects and creating substantial switching costs for NVIDIA’s customers
Policy Responses
Competition law and policies
• Market studies/investigations
Difference, where an NCA has “regulatory” power: only a few NCAs possess the legal power to impose binding remedies to address market dysfunction beyond traditional competition law enforcement
still decentralized differentiated regulation could not be optimal as for all digital markets
• Competition law enforcement:
no dominance (with JP exception?) | unexplored joint dominance
leveraging from adjacent markets
• Pro-competitive regulation (in the EU) Data Act
Digital Markets Act
Data Act
• Objective:
Removing obstacles for switching between providers of data processing services of the same service type
Enabling/facilitating interoperability between providers of data processing services of the same service type | multi-cloud
addresses multiple switching barriers through specific obligations
• Symmetric regulation:
applied to all providers of DATA PROCESSING SERVICES (Cloud + Edge) regardless size, customer base, market share or market power
Trade-off: Removing obstacles is more costly for smaller companies?
Digital Markets Act
• Established the new harmonized regulatory framework for some of the most relevant digital markets
• Objective: fairness + contestability
• Asymmetric regulation:
Core Platform Services (CPS) currently most used by enterprises and end users, identified as the most exposed to risk for contestability and unfair practices
including CLOUD COMPUTING SERVICES (CCS): “a digital service that enables access to a scalable and elastic pool of shareable computing resources.” art 2(13), aiming at article 4(19) Directive (EU) 2016/1148
Gatekeeper designation: quantitative or qualitative
No designation so far | not enough end- users
Digital Markets Act: no designation so far
• Definition of end-users and business users is crucial in the DMA, as contestability and unfair practices problems mainly concern large digital platforms when represent an important gateway for business users to reach consumers
the fundamental challenge for DMA application to cloud services lies in their vertical pipeline structure rather than traditional twosided market dynamics
notable (and growing) exception for cloud marketplaces | under the DMA this specific marketplace activity should probably be qualified as "online intermediation services" another CPS, rather than cloud computing services
Digital Markets Act: cloud business-users
• Extensive definition of Business users: “provides any cloud computing services hosted in the cloud infrastructure of the relevant provider of cloud computing services”
“cloud infrastructure” = only IaaS?
no reference is made to any intermediation activity: extensive definition of business user may well fit the vertical value chain of cloud services = access-seeker to a vertically integrated company
ISV (if not in a cloud marketplace) are not part of a two-sided market relationship |possibly no relationship with End-users
Cloud reseller: provide the same CPS than its “gatekeeper” acting as an access-seekers ⇒ number of BU directly reflect the intensity of (downstream) competition | also for ISV if substitute services
Digital Markets Act: cloud end-users
• For end users not such an extensive definition = “engages with any cloud computing services from the relevant provider of cloud computing services”
"to engage" and “remuneration” direct economic-commercial relationship between the end-users and the prospective gatekeeper | excluding the access-seeker type of relationship
Yet these customers do not necessarily have an economic-commercial relationship with any business users
Digital Markets Act: policy recommendations
no clear importance as a gateway for BU to reach EU: difficult to designate a CCS provider as GK, even under qualitative assessment
Focus on cloud marketplace under intermediation CPS
Regulatory revision? | to empower the EC to amend the Annex, including the definition of BU and EU, through delegated acts.
Thanks!