Competition and Regulation of Cloud Computing Services: Economic Analysis and Review of EU Policies

Cloud infrastructures and services have become key building blocks of digital society. As more organisations migrate their infrastructure and services to the cloud, the cloud industry has become a key enabler of digital businesses and a vital infrastructure of the economy as a whole. Given its strategic and economic importance, the European Union (EU) and Member States are increasingly intervening in the cloud sector.

Following the data strategy and the Commission’s guidelines, the current Commission has recently enacted a myriad of policy initiatives and regulations that have been concerned with competition in the cloud industry, interoperability issues, and cloud security. At the same time, national competition authorities have been undertaking investigations into cloud markets with a focus on their functioning.

In the latest CERRE Tech, Media & Telecom report, Research Fellow Daniel Schnurr and Antonio Manganelli, Professor of Antitrust and Regulation at LUMSA University of Rome, provide an overview and assessment of these recent policy initiatives and legislations in the European Union with a particular focus on potential competition issues.

When it comes to the legal assessment, the report reviews the recent policy initiatives, paying special attention to the Data Act (DA) and Digital Markets Act (DMA), and analyses the coherence and consistency of these initiatives from a legal perspective to provide the following recommendations:

• Recommendation 1: Clarify the legal interpretation within and across policies through guidelines.
• Recommendation 2: Consider all specific features of cloud services vis à vis other core platform services, in particular, by applying the proportionality principle to designation and application of remedies.
• Recommendation 3: Establish a clear institutional framework for the enforcement of the existing rules to avoid too much fragmentation.

The economic assessment investigates competition issues that may arise from the specific characteristics of cloud computing services, focusing on vendor lock-in and economies of scale and scope. Based on this analysis, the report highlights the economic trade-offs that arise in the context of different remedies that have been recently proposed or are currently discussed and proposes the following recommendation:

• Recommendation 4: Consider the specific economic and technical characteristics of the cloud computing industry as well as the strategic decision making of cloud customers when applying regulatory interventions.
• Recommendation 5: Take into account the economic trade-offs involved in remedies, particularly those that directly limit the benefits for customers.
• Recommendation 6: Facilitate the development of market-driven interoperability solutions and use regulated standards only as a last resort.