Why The Cloud Should Be a Public Utility

Perhaps no technology underpins more the everyday functioning of our increasingly digital world than cloud computing. We rely on the cloud every day to access government, healthcare and educational services. We access our government benefits, file taxes, schedule doctor’s appointments, bank online and access educational materials all through the cloud.

We also increasingly depend on the cloud to communicate with each other. Where we once relied on the telephone system and federated self-hosted email servers, now millions of Americans communicate daily over cloud-based apps, such as web-based email services like Gmail, WhatsApp, Messenger and Zoom. And now, with the advent of artificial intelligence, nearly all Americans use either AI-specific products, such as AI chatbots, or AI-enabled services such as social media, weather forecasting apps or shopping websites. All of these products and services require processing powers, not only to train the underlying AI models, but also to deploy them to end users.

What “the cloud” even is remains obscure to many people. There are many different service offerings and business models in the industry, but it is most simply understood as companies that offer computing resources — access to big storage servers and processing power — as a service. Cloud providers build, rent or manage the physical infrastructure to do all the computing, and then sell access to it to all the many individuals and businesses that need it.

But unlike other essential infrastructure services — including electricity, water, gas or the telephone system — cloud companies are treated like any other firm, rather than a firm that provides a clear public good or service, like water or electricity. The “big three” cloud providers in the world, Amazon Web Services (AWS), Microsoft Azure and Google Cloud, dominate the market, collectively controlling nearly two-thirds of global cloud infrastructure. This concentration of power allows cloud providers to set terms of access, pricing and service without meaningful accountability or transparency. These dynamics also undermine competition from small businesses, locks in consumers and threaten innovation and access to critical information.

First of all, the large cloud providers are known to price-discriminate. They often offer steep discounts and credits to startups, as well as “committed spend discounts” for customers that shell out large sums. Most worryingly, they have inked deals framed as “partnerships” with artificial intelligence (AI) labs to provide them with massive amounts of computing power via their cloud services for free or at steep discounts. The most well-known cases have been the Microsoft-OpenAI partnership and the Amazon-Anthropic partnership, the details of both of which remain largely non-public. These partnerships, which have already garnered regulatory scrutiny, lock in exclusive access to critical infrastructure while raising the barriers to entry for rivals.

Beyond the issue of pricing transparency, the cloud giants’ behavior has wider societal implications — for example, they enable and amplify censorship efforts. Cloud companies have been known to pull the plug on services for arbitrary and often politically motivated reasons.

After President Donald Trump’s supporters attacked the US Capitol on January 6, 2021, Amazon suspended Parler from its AWS services, citing its inability to “effectively identify and remove content that encourages or incites violence against others.” Google and Amazon also blocked Signal, an app widely used by journalists and political dissidents, from using a practice called domain-fronting to enable service in Egypt, Oman, Qatar and the United Arab Emirates, effectively cutting off users from secure communications in authoritarian countries. AWS has also complied with the Chinese government’s censorship requirements in order to sell cloud services to Chinese customers. Private companies should not unilaterally be able to make decisions like these that affect which information and services we can access.

Market concentration also compounds the threats inherent in relying on cloud services. When critical digital infrastructure is controlled by a few firms, single points of failure are more likely, meaning market resilience declines and vulnerability to cyberattacks, national disasters and misconfigurations increases. This could not only result in prolonged periods of disruption of critical services — it could also jeopardize intelligence and other sensitive information.

Given that cloud computing has become such a central part of our lives — and the serious harms already caused by concentration in this sector — it should be regulated as a public utility.

Public utilities — also sometimes called public services and deeply interrelated to, but distinct from, common carriers — provide goods and services so central to society that they cannot be left to the free market. They are essentially legal monopolies that operate under government oversight to ensure that they provide these crucial services reliably, justly, and at fair prices.

In the modern age, public utilities are characterized by high barriers to entry and economies of scale, both of which apply to cloud services as well — a single hyperscale data center can cost hundreds of millions of dollars to build.

The concept of public utility has been around for centuries and has traditionally been applied to electricity, water, gas, telecommunications, and railroads. However, public utility law has not been successfully applied to a new industry in decades.

One of the classical examples of public services, railroads, operated as price-discriminating monopolies that systematically exploited their market power before the adoption of regulation.

Railroad companies had the power to set prices, push out competitors, and control several geographic markets. Big companies such as Standard Oil secretly received preferential rates and rebates of up to 50%, while small businesses and farmers had to pay full price. Geographical discrimination was also rampant, as railroad companies charged higher per-mile rates for short local routes than for longer ones — leaving rural communities stranded.

Public utility-style regulation changed these practices. Over the decades, requirements were introduced to standardize accounting practices and make rate schedules more transparent, effectively eliminating price discrimination and secret deals. If the cloud is the new railroad of the digital age — used by businesses and consumers alike to move and process the most valuable commodity of our age, data — shouldn’t the cloud be regulated like railroads?

Another classic public utility is electricity, and the cloud industry is singlehandedly driving the direction of the electricity industry. The AI boom — which relies heavily on cloud computing for training and deploying AI models — is rapidly driving up energy demand. The technology companies behind the push have successfully convinced the US government to make modernizing grids and deregulating energy permitting processes a national priority in the AI Action Plan.

And like the robber barons of yesterday, Big Tech is strong-arming electricity providers, forcing them to accept unfavorable terms for building out new energy projects. While the potential to leverage this boom into a sustainable energy infrastructure should be promising, the average consumer will not reap the benefits. In fact, many of these deals have been exclusive power purchase agreements that allow tech companies to buy all of a new project’s energy, and energy bills could rise by up to 25 percent in areas heavily populated by data centers, such as northern Virginia.

This all begs the question: If electricity companies are governed as public utilities, why shouldn’t the titans who pull the strings of the electricity market be governed also?

The evidence is mounting that the government should step in to regulate cloud compute services as public utilities, just like electricity or water. The blueprint for this is simple, and could start at the state level: state public utility commissions (PUCs) would receive oversight over the cloud, enforcing pricing transparency, nondiscrimination and interoperability standards.

Many other parts of the “tech stack” could potentially be considered public utilities. Several states have tried to classify Google search and social media sites as common carriers — often considered a type of public utility. However, these efforts have faced legal challenges due to the lack of indifference of service, since web search and social media are highly customized to user preferences.

The cloud, on the other hand, is not personalized — it can, or should, offer neutral, uniform service to all customers. Compute power is highly quantifiable and meterable, and pushing the market more strongly in that direction of commodification will only benefit consumers. Furthermore, among the services in the tech stack, the cloud stands out as one of the most concentrated sectors, and the source of tech giants' systemic power. The outsized profits generated by cloud divisions create powerful incentives for these companies to engage in anticompetitive practices to protect their cash cows. Although regulating the cloud as a public utility would not solve every issue of Big Tech consolidation, it would be a vital step toward restoring accountability, competition and user choice in the digital ecosystem.

The cloud market is too important to our economy and society to operate without appropriate regulation and direct oversight by democratic institutions. While cloud providers are subject to some existing regulations, the current regulatory structure fails to recognize their role as essential infrastructure and does not impose the public interest obligations necessary to serve the public good. Access to compute power is becoming the essential service of the AI and digital future, and now may finally be the time to establish the next generation of public utilities to govern these services for the public good.