Economic analysis of proposed regulations of cloud services in Europe

June 6, 2023
Fibre optics, hardware, circuit board in the background

This article was originally published in the European Competition Journal.

Cloud computing services (“cloud services”) have attracted the scrutiny of antitrust authorities around the world. Relying in part on data from AWS, we assess the economic impact of measures within the European Commission’s proposed Data Act (with parallels in France, the UK and elsewhere): namely, requiring cloud services providers to phase out data transfer-out fees, offer functionally equivalent services and publish open interfaces to facilitate switching and multi-clouding. The paper comes to three main conclusions. First, there is no clear evidence of market failure in cloud services. Second, a ban on data transfer-out fees will likely lead to unintended consequences, mainly price increases due to excessive levels of data transfer-out when customers do not internalize the costly nature of data transfers. We show how this could materialize using AWS data. Third, requirements to standardize cloud services carry a serious risk of dampening cloud services providers’ incentives to innovate.