Competition in the provision of Cloud Computing Services Competition Committee
Paris, 19 Jun 2025
Songrim Koo and Connor Hogg
OECD Competition Division
Understanding Cloud Computing Services
Market shares as reported in various market studies
Barriers to Entry and Competition Concerns
High Fixed Costs
Economies of Scale
Data Transfer Pricing
Integration with digital services
Cloud Computing and AI
Increasing Interdependence
Cloud underpins AI development and AI drives cloud demand growth
Competition for limited chipsets (particularly GPUs) which may favour larger providers
Strategic Partnerships
Hyperscalers investing in AI firms
Vertical relationships may raise competition concerns
The Competition Issues in Cloud Computing Services (1)
Switching Barriers
Technical barriers: Differences in APIs, proprietary formats, fragmented environment of cloud service offerings, etc
Contractual and pricing barriers: Opaque and unpredictable pricing structure, high egress fees, and complex contract terms that reinforce lock-in..
Lack of Interoperability
Limited interoperability, especially at the platform and software level.
Proprietary interfaces creating fragmented environments.
Hinders multi-cloud strategies and customer mobility.
The Competition Issues in Cloud Computing Services (2)
Pricing
Issues
Egress Fees: High charges for data movement off-cloud, disproportionately high compared to actual costs, potential penalty for switching.
Cloud credits: Large discounts tied to high spend and exclusivity offered by hyperscalers, potentially loyalty rebate effects.
The Competition Issues in Cloud Computing Services (3)
Market Power Leveraging or Foreclosure
Licensing Practices: Restrictions imposed by big-tech providers, potentially raising rivals' costs.
Bundling and Tying: Integration of software and cloud services by big-tech companies risks of foreclosing competition.
Competition concerns in relation to marketplaces
Instruments Available to Competition Authorities (2)
Market Studies
Essential for understanding market dynamics. Examples from France, Netherlands, Japan, Korea highlight concerns and possible remedies. (Spain, UK, US FTC are currently conducting)
Enforcement Actions
Addressing anti-competitive conduct through competition law (abuse of dominance)
Instruments Available to Competition Authorities (2)
Regulatory Measures:
Ex-ante regulation (e.g., DMA).
EU Data Act to remove technical and contractual barriers to switching.
Standardisation Initiatives
Potential remedy to improve interoperability and reduce lock-in.
Discussion regarding open standards (e.g., Open Virtualization Format).
