For two days in December, millions of Americans across the country experienced a sudden loss of technological capabilities. The consequences ranged from the rather innocuous loss of Netflix streaming at home to the disruptive halt of delivery operations during peak holiday season with an already strained supply chain. Companies saw their websites and apps lose functioning, inconveniencing customers and harming their reputations for reliability.
The reason for the disruption was an historic outage from Amazon Web Services. The widespread nature of the outage’s effects is testament to the market power that AWS has accumulated – and the danger it poses.
AWS is the largest cloud-computing service provider in the U.S., dwarfing its next closest competitor and raking in billions of dollars a quarter. Lucrative government contracts, including a recent $10 billion deal from the National Security Agency, partly explain AWS’s dominance.
But perhaps a better explanation is the troubling tactics AWS employs to trap customers into their service.
AWS is infamous for imposing policies that lock customers into contracts with the cloud provider. The only escape to a more customer-friendly provider is through expensive fees designed to be cost prohibitive.
AWS’s lock-in problem has become sufficiently pronounced to catch Congress’s attention. The House Judiciary Committee’s Subcommittee on Antitrust, Commercial and Administrative Law conducted an in-depth investigation of Big Tech’s worst perpetrators, and AWS emerged as a key example.
The report detailed complaints from AWS customers who report significant time and expense costs to move to another cloud provider. AWS imposes an egress fee for moving data that is designed more to discourage customers from leaving the company than to cover the costs of such a transfer.
The policy achieves AWS’s desired outcome. As one AWS customer told the subcommittee, “Any transition of the cloud services currently provided by AWS to another cloud service provider would be difficult to implement and would cause us to incur significant time and expense and could disrupt or degrade our ability to deliver our products and services.”
A natural consequence of AWS’s lock-in is cost overruns. AWS clients have complained about how being trapped with the cloud provider results in costs that “spiral out of control quite quickly.”
Soaring costs for cloud computing have sent companies in search for ways to cut down on the expense. Cloud services are often the second-largest overall expense for tech startups after employee compensation. With costs racking up for so many, entirely new services have emerged just to help customers find ways to reduce cloud spending.
The subcommittee report publicized what AWS customers already know too well: AWS leverages lock-in and related cost overruns to its financial benefit.
AWS’s strategy of trapping customers into a service with escalating costs has helped entrench the company as the largest cloud provider. It’s this dominant market position that enables AWS to wield considerable power, including the ability to de-platform users who don’t conform to its Big Tech views.
Earlier in the year AWS booted Parler, a social media company favored by conservatives, from its service – resulting in the entire website becoming inoperable. Today, one tech giant has the power to bring down an entire company in competition with other established tech giants.
Big Tech’s continuous abuse of power is why Congress has dedicated resources to investigating these monopolies while drafting legislation to reel in their abusive practices and foster more competition. Predictably, Amazon has responded by spending more than $15.3 million this year – more than any other company – to lobby against this type of legislation.
AWS’s costly cloud trap is emblematic of the many ways Big Tech continues to flex its power and harm consumers. But AWS’s days of squeezing customers may be numbered as Congress and its customers speak up about the egregious practices that have helped make it a behemoth.
Mike Davis is the founder and president of the Internet Accountability Project, a conservative grassroots advocacy organization that opposes Big Tech and seeks to hold these companies accountable for their bad acts. He was previously chief counsel for nominations on the Senate Judiciary Committee under the chairmanship of Sen. Charles E. Grassley, R-Iowa.