Here's what AWS, Microsoft, and Google really think about egress fees and software licensing

The most thorough investigation yet into the competitiveness of the cloud infrastructure computing market has been unfolding for nearly a year in the U.K., as the Competition and Markets Authority attempts to sort out whether AWS and Microsoft exert undue control over how British businesses procure cloud services. 

This week the CMA published summaries of hearings it conducted this past July with AWS, Microsoft, and Google, during which the Big Three were asked to explain their practices around topics such as software licensing and egress fees. Their answers provide an interesting look into how the cloud providers see themselves, their competitors, and the current state of the market.

Microsoft's licensing practices have come under intense scrutiny over the last year, and it has already made some concessions around how Microsoft Teams and other cloud products are consumed. However, "Microsoft said that it treats server applications and operating systems differently as the latter are more tied to a specific piece of hardware," according to the CMA, in response to questions about its Azure Hybrid Benefit discounting scheme.

Microsoft said it changed its licensing for Windows Server in 2019 over concerns that big cloud providers wouldn't have any way to know if a customer that ran Windows Server on their clouds under its Bring Your Own License program was running that software elsewhere, unless the providers licensed that software directly from Microsoft itself. But Microsoft allows smaller cloud providers to host Microsoft software without such a license, which imposes additional costs on AWS or Google Cloud customers that want to run Windows Server on those clouds.

"AWS said that Microsoft should have the same rules for customers on every cloud instead of singling out what are deemed as listed providers (Google, AWS and Alibaba), according to the CMA.

Egress fees have been another big point of contention over the past year, with all three cloud providers making some concessions in response to the EU Data Act. But those concessions were limited to customers that wanted to make a clean break from their provider, and all three companies defended their right to charge data egress fees for ongoing customers.

Google, which attempted to position itself as a hero for getting rid of switching fees, "stated that it is likely that its average egress fees are higher than those of its competitors because it has invested significantly in its infrastructure and offers better networking products," according to the CMA.

Likewise, "AWS said that many customers pay a higher percentage of their cloud bill on DTO fees [data transfer out, AWS's term for egress fees] simply because of the nature of the company and how it uses the cloud as they may need to push data out to their customers."

For its part, "Microsoft added that customers negotiate on almost everything, but they do not raise egress fees as it is not a significant issue for them." Should the CMA impose remedies on egress fees for ongoing customers, all three companies said they would be forced to rethink their investment in networking technology.

The full summaries of each company's responses during the hearing (AWS, Microsoft, and Google Cloud) are worth a read, and regulators asked questions about a variety of other enterprise tech issues such as AI, multicloud, and volume discounts. The CMA is expected to wrap up its investigation by April 2025, and any potential remedies identified by that investigation could have profound effects on how cloud infrastructure services are bought and sold outside the U.K.

As AWS put it, "it would be operationally very difficult to restrict remedies to geographic subsets of customers given that cloud services are delivered to be available and consumed across the world."

(This post originally appeared in the Runtime newsletter on Sept 19th, sign up here to get more enterprise tech news three times a week.)