Cloud sovereignty and contestability: what role for the EU Digital Markets Act and the Data Act?

Abstract

Cloud computing, that emerged as an early response to outsourcing by small and mid-sized firms, has over time, emerged as the foundation of the data economy. Cloud computing is no longer merely outsourcing of non-core functions by firms. It is an irreversible trajectory to path dependence and reliance on the digital ecosystem of the global hyperscalers, Amazon, Microsoft and Google. The dependence on cloud will only strengthen further, as AI and quantum computing, that rely on large cloud capabilities, become central to the big data-driven digital economy. What technical (such as complexity of the technology, learning effects and interoperability) and economic considerations (such as ecosystem effects, egress fee and lock-in) can potentially explain the enduring global dominance of the three hyperscalers? Together these economic and technical considerations, also raise non-economic concerns, such as sovereignty and innovation, in cloud computing, that well underline the urgent call by Nation States across the globe for workable competition in the cloud computing industry. This research contribution develops the foregoing considerations, and reasons that in light of the infrastructural and foundational nature of the cloud, it should be seen as part of a digital ecosystem owned and controlled by the hyperscalers, that also qualify as gatekeepers in the EU's Digital Markets Act (DMA), and other equivalent exante regulatory frameworks across the globe. This ecosystem-driven view offers a normative foundation to consider cloud sovereignty as a non-economic consideration in competition, particularly in light of the irreversible structural impact of cloud on functional autonomy and innovation capabilities of firms. This contribution elucidates how a flexible interpretation and qualitative approach may be more suited to qualify cloud under the DMA, and the relevant obligations therein. It then evaluates the portability and interoperability requirements under the Data Act. The discussion critically evaluates the landscape of cloud computing, and discusses whether together, these legal instruments can effectively promote contestability, fairness and sovereignty in cloud computing, the infrastructure layer of Industry 4.0.