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A new report calls the market for cloud computing in Canada “broken” and warns that domestic alternatives to U.S. tech giants could still leave Canadians trapped in “maplewashed dependencies” unless providers are required to be compatible.
The Canadian Anti-Monopoly Project’s latest report describes cloud computing as “core infrastructure” and says there is already a lack of competition in Canada, with U.S. tech giants Amazon, Google parent Alphabet and Microsoft controlling 85 per cent of the Canadian market by one estimate.
Cloud computing involves renting software, processing power and storage from a provider and accessing the output through the internet. It underpins everything from government services and bank transactions to streaming video and social media.
A significant majority of Canadian cloud computing being held by only three companies is cause for concern, said Joel Blit, a University of Waterloo economics professor and senior fellow at the Centre for International Governance Innovation.
“Any time that we have very high concentration in any industry, we should be worried about whether those companies can exercise market power,” said Blit, whose research focuses on innovation and innovation policy.
Switching providers can be costly
Curtis McCord, policy analyst with the Canadian Anti-Monopoly Project and co-author of the report, said simply adding Canadian “sovereign” providers would not fix the problem if customers cannot easily switch.
“The costs for their clients to move from one provider to another … is extremely high,” McCord said.
Without rules encouraging or forcing companies to be compatible, customers risk being locked in to whatever provider they already use, he said.
“The root of the problem wouldn’t necessarily be addressed.”
The report says domestic alternatives could still create “maplewashed dependency” if customers remain locked into incompatible systems.
Can Canadians switch today?
When asked for comment, Google representatives pointed to a blog post from the company, where they noted Google had eliminated transfer fees.
“We continue to proactively advocate against restrictive cloud licensing policies that lock in cloud customers,” Sachin Gupta, VP of Google Cloud wrote in February.
In a statement emailed to CBC News on Tuesday, Microsoft Canada wrote that its “approach to digital sovereignty is grounded in choice, control and compliance with local laws.”
“We support customer choice, interoperability and data portability,” wrote the company’s national technology officer, John Weigelt.
Indeed, both Google and Amazon offer free data transfers in some cases when customers leave their cloud services. Microsoft Azure offers credits specifically for customers in the European Union and the United Kingdom, although Canadian Azure customers may still face charges which can be refunded if customers “comply with the instructions” in specific circumstances.
However, those moves followed pressure from European and U.K. regulators, who raised concerns about barriers to switching cloud providers.
But McCord said being able to export data does not necessarily mean it will work easily with another provider’s system.
A new report from the Canadian Anti-Monopoly Project says there’s a lack of competition in the country’s cloud computing market. One estimate says three U.S. tech giants control 85 per cent of the market. Cloud computing is essentially renting storage, processing power or software from a provider; it underpins much of modern digital infrastructure.
The report calls for Canada to pursue international standards that would make cloud companies compatible with each other, saying that could increase competition and reduce dependence on a few U.S. firms.
CBC News has also reached out to Amazon for comment on potential international standards.
Federal AI strategy may offer clues
A draft version of Canada’s national AI strategy obtained by CBC News mentions working on shared standards with partners. The draft, which was not final and could still be revised, also says significant investment is needed to reduce Canada’s reliance on foreign technology companies for cloud computing.
The federal Competition Bureau told CBC News it’s not currently conducting any studies on cloud computing in Canada.
“I must clarify that being a large or dominant business is not, by itself, a cause for concern under the Competition Act,” wrote Bureau spokesperson Georgia Simone Fakiolas.
However, the federal agency did point out that when it ran a public consultation on artificial intelligence in 2024, many expressed concern about large incumbent companies creating barriers for smaller firms.
Artificial Intelligence Minister Evan Solomon says the federal government will provide $66 million in funding for Canada’s artificial intelligence sector. On Monday, Solomon said there would be three data centres built in B.C.
The Canadian Anti-Monopoly Project’s research paper discourages Canada and other “middle powers” from developing new standards, and to instead rely on existing technologies that are widely adopted.
McCord called cloud computing “a pretty essential infrastructure” as AI becomes more widely used.
Blit said concentrated control of cloud computing could also shape access to AI.
“If you have hyperscalers that are very concentrated, where switching costs are really high … they are going to control access to AI and that is potentially a huge problem for our country,” he said.
Blit said compatibility could boost competition, but warned it may also limit companies’ ability to offer unique products.
“If you impose a standard too early … you could lock in VHS instead of Beta.”
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