Published on November 20, 2023, 10:06 am

Cloud computing is a crucial component for the development of artificial intelligence (AI) technologies, according to Federal Trade Commission (FTC) Chair Lina Khan. In an open meeting held by the agency, Khan highlighted potential threats in software licensing practices, egress fees, and minimum-spend contracts associated with cloud providers. She emphasized that companies across various sectors, including the U.S. government, rely on cloud providers as key infrastructure for their services.

The FTC initiated an inquiry into cloud competition earlier this year, seeking information on hyperscaler business practices. The emergence of generative AI tools has further intensified the FTC’s concerns regarding cloud computing. Large language models that require substantial compute resources have driven organizations to adopt cloud-based marketplaces to access generative AI tools, thus establishing a close relationship between these technologies.

Nick Jones, a senior technology advisor at the FTC’s Office of Technology, explained during the meeting that AI firms heavily depend on cloud providers for deploying their AI products or technologies. This inquiry has sparked tensions among the three largest cloud providers: Google, Microsoft, and Amazon Web Services (AWS). For instance, Google criticized Microsoft for imposing restrictions and surcharges on customers attempting to migrate workloads to Azure competitors.

A report from Synergy Research Group revealed that AWS dominates approximately one-third of the public cloud market spending, with Microsoft and Google capturing 23% and 11%, respectively. As enterprise demand for cloud services continues to grow and organizations migrate more workloads to the cloud, dependence on this technology is becoming increasingly prevalent across different sectors. Risk managers are now recognizing cloud concentration as one of the top emerging business risks due to factors like vendor lock-in and regulatory compliance issues.

In response to these developments, Gartner reported that many organizations face severe disruptions in the event of a single provider failure. Cloud concentration not only raises competition and consumer protection questions but also increases fragility by creating a single point of failure or risk to data security.

Under Lina Khan’s leadership, the FTC has intensified its scrutiny of Big Tech. The agency launched an investigation into OpenAI, a Microsoft-funded AI startup known for its ChatGPT, to examine its data security practices. Furthermore, the FTC has taken enforcement actions against companies such as Uber subsidiary Drizly, education technology provider Chegg, and prison communications provider Global Tel*Link Corp for their lax data security practices in the cloud.

Considering these developments, it is crucial for stakeholders to monitor and address the potential risks associated with cloud concentration. This includes evaluating whether dominant firms are undermining fair competition and assessing the fragility introduced by reliance on a single provider. The FTC’s increased focus on cloud computing signifies its commitment to ensuring data security and promoting healthy market competition in this evolving landscape.

In conclusion, cloud computing serves as a fundamental component for the development of AI technologies. As organizations increasingly rely on cloud providers for their services and workloads, there is a need to address potential threats related to software licensing practices and minimum-spend contracts. By closely monitoring cloud concentration and fostering fair competition, stakeholders can mitigate risks and promote data security in this rapidly evolving digital ecosystem.

The article was originally published on CIO Dive.

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