The agency presented notable findings from its Request for Information on Cloud Computing Providers, underscoring the significant customer harm posed by unfair licensing tactics.
The U.S. Federal Trade Commission (FTC) held an open meeting to present key findings and ongoing areas of inquiry stemming from the agency’s Request for Information (RFI) regarding the business practices of Cloud Computing Providers.
The open meeting featured a panel discussion that touched on a number of concerns raised by customers including how restrictive software licensing continues to inhibit competition, limit customer choice, and expose users to increased cybersecurity threats.
As part of the panel, Krisha Cerili, Deputy Assistant Director of the FTC’s Technology Enforcement Division, highlighted how these unfair licensing practices, such as vendor lock-in, ultimately stifle innovation and competition in the cloud at the expense of customers.
“Some [RFI] submissions raised concerns that certain software licensing practices of cloud providers could limit the ability of customers to use software in rivaled cloud environments, thereby inhibiting competition,” said Krisha Cerili.
Other panelists, including Nick Jones, Senior Technology Advisor to the FTC, brought to light how restrictive software licensing also exposes customers to cybersecurity threats and vulnerabilities by limiting interoperability between security solutions.
“Certain RFI submissions compared the security that cloud services can provide to the security that more traditional on-premise options provide, highlighting that the cloud generally provides a higher baseline level of security,” said Nick Jones. “However, others focus on the areas of cloud security that could use improvement.”
Industry groups, including the Software and Information Industry Association (SIIA), were also invited to share their feedback. Morten Skroejer, Senior Director at SIIA, said that software licensing is an area that merits further study from the FTC.
“Software licensing restrictions designed with legacy technology in mind could harm the ability of the IT sector to remain dynamic and highly competitive,” said Morten Skroejer.
In June, the Coalition for Fair Software Licensing submitted its own public comments as part of the FTC’s RFI, focusing on the anti-competitive practices that have been historically and repeatedly deployed by one software vendor in particular – Microsoft. Specifically, the Coalition’s public comment detailed customer experiences with:
- Restricting “Bring Your Own License” (BYOL): In August 2019, Microsoft announced that, beginning in October 2019, customers would need to repurchase their existing licenses to operate their software on Microsoft, Alibaba, Amazon (including VMware Cloud on AWS), and Google in addition to the Microsoft licensing they already had. Alternatively, they could migrate to Microsoft instead, forfeiting their perpetual license for a subscription service. For some software, there was no option to run it on a non-Microsoft cloud.
- Discriminatory Licensing: The Services Provider License Agreement is utilized by other cloud service providers, and the Cloud Solution Provider Program is utilized by resellers who host products on Microsoft’s cloud servers. As Microsoft ended BYOL for its customers, it began increasing the cost of SPLA – but not the CSPP. Microsoft began charging more to cloud providers who compete with Azure.
- Tying: Microsoft ties several software products to its Microsoft 365 cloud-based office product, resulting in vendor lock-in and a less secure cloud experience for users. This results in price increases, less customer choice, reduced innovation, and poorer quality products. Meanwhile, rivals in cybersecurity, IAM, videoconferencing, and other consumer products are finding it harder to compete effectively. Nascent competitors have fewer incentives to enter the market.
Software customers in the cloud should be able to choose which services and IT service providers they can use to ensure they achieve the best solutions for their needs.
Today’s FTC meeting reinforced the adverse impacts of restrictive licensing on customer choice, competition, and cybersecurity – and why the Coalition has requested the FTC investigate Microsoft’s licensing practices to ensure an open and competitive cloud marketplace.