布鲁盖尔研究所-云计算与生成人工智能的竞争关系（英）

THE

COMPETITIVERELATIONSHIP

BETWEENCLOUD

COMPUTING

ANDGENERATIVE

AICHRISTOPHECARUGATICloudcomputingproviders

andgenerative

artficialintelligence

(GenAI)

providers

nurturea

close,

interdependent

relationship:

GenAI

providers

needcloudproviders

totrain,

runanddeploy

theirGenAI

solutions,

whilecloudproviders

seeGenAI

providers

asa

businessdriver

togrow

theirmarket

shares

incloudandrelated

markets,

suchasproductivitysoftware

orsearch

engines.

ecloud/GenAI

relationship

takesvarious

forms,

includingexclusiveandstrategic

partnerships,

especiallybetweenlargecloudproviders

andGenAIproviders

across

allparts

ofthecloudmarket,

includinginfrastructure,

platformsandsoftware.Competitionbenefitsandrisks

are

likelytoresult

from

therelationships.

Competitionbenefitsarise

from

increased

competitionandinnovation

inthecloudandGenAI

sectors.Risksrelate

topotential

concentrations

arising

from

thepartnerships

betweencloudandGenAI

providers,

andfrom

anticompetitive

practices,

includingdiscriminationinthesupplyofITequipment

by

dominant

ITproviders,

interoperability

obstaclestoswitching,useofbusiness-userdata,

self-preferencing

ofcloudservices

over

third

parties,

tyingandpure

bundling.Merger

control

andantitrustlaws

canaddress

someofthecompetitionrisks,

whilelaws,

includingtheEuropean

Union’s

DigitalMarkets

Act

andData

Act,

candealwithcompetitionissuesindigitalmarkets

andthecloudsector.

Nevertheless

there

are

gaps.

eEuropean

Commissionshouldamendexisting

EU

instruments,

includingby

changing

thedefinitionofa

concentration

undermergercontrol,

andshouldspecifyinteroperabilityrequirements

forcloudproviders

undertheData

Act.

e

Commissionshouldalsocloselymonitordevelopments

inandoutsideEurope

through

market

investigations,

includingwithinternational

counterparts,

andshouldintervene

totackleimminent

competitionrisks

usingfastprocedural

tools,

suchasinterimmeasures.ChristopheCarugati(christophe.carugati@)isanAffiliateFellowatBruegelRecommended

citation:Carugati,

C.

(2023)‘ecompetitiverelationshipbetweencloudcomputingandgenerativeAI’,Working

Paper

19/2023,Bruegel1

IntroductionCloudcomputingandgenerativeartificialintelligence(GenAI)arecentraltotheeconomy'sdigitaltransformation1.Viathecloud,infrastructure,platformsandservicesareaccessibleonline,includingGenAIapplications,suchastheOpenAI-ownednaturalconversationallanguageapplicationChatGPT.GenAIapplicationsusenaturallanguageprocessing,suchastextsummarisation,togenerateoutputfrominputdata.Thecloudsectorwasworthanestimated€84.76billioninEuropein2022,withtheexpectationthatthiswilldoubleto€175.87billionby20272.ThesametrendofveryrapidgrowthcanbeseenintheGenAIsector.Itwasworthanestimated$6.33billioninEuropein2022andexpectssixfoldgrowthto$35.94billionin20273.CloudprovidersandGenAIprovidersrelyononeanother.GenAIprovidersneedcloudinfrastructurestotrain,runanddeploytheirapplications,whilecloudprovidersseeGenAIasabusinessdrivertogrowtheirmarketsizeinthecloudandotherrelatedmarkets,includingproductivitysoftware,searchengines,webbrowsers,e-commerceandadvertising.AsdemandsoarsforcloudcomputingandGenAI,competitionintensifies.CloudproviderscompetebyadaptingtheirinfrastructuresandservicestoGenAIneeds.Atthesametime,GenAIproviderscompetebyfrequentlyreleasingmodelsandapplications.Competitionrisksarealreadypresent.Competitionauthoritiesworldwidehavehighlightedatrendinthecloudsectortowardsconcentrationinthehandsofafewfirms,includingAmazon,MicrosoftandGoogle4.Thesefirmsaredeemed‘hyperscalers’bycompetitionauthoritiesandtheindustryastheyenjoylargeeconomiesofscaleinhostingcapabilitiesandservices,andeconomiesofscopeintheprovisionofanarrayofservices.Theycanalsoaffordhighfixedcostsbecauseoftheirinvestmentcapabilities.Whileauthoritieshavehighlightedcompetitionbetweencloudproviderstoattractcustomers,someofthepracticesidentifiedposecompetitionissuesbymakingitharderforcustomerstoswitchfromonecloudprovidertoanotherortousemultiplecloudproviders.Obstaclesincludingexitfeesorso-called‘egressfees’andinteroperabilityissues.ThehyperscalersareinvestingheavilyinGenAI.TheyaredevelopingexclusiveorstrategicpartnershipswithGenAIproviderstodeploytheirmodelsontheircloudinfrastructuresandservices.1

IntheEU,theEuropeanCommissionhassetatargetfor75percentofbusinessestousecloud

services,bigdataorAIby2030.2

Statista,‘CloudComputingMarketSizeinEuropeFrom2017to2030,bySegment,June2023’,/forecasts/1235161/europe-cloud-computing-market-size-by-segment.3

Statista,‘GenerativeAIEurope’,/outlook/tmo/artificial-intelligence/generative-ai/europe.4

CompetitionauthoritiesinJapan,SouthKorea,theNetherlands

andFrance(Autoritédelaconcurrence,2023)havealreadypublishedcloudsectorreports.CompetitionauthoritiesintheUnitedStatesandtheUnitedKingdomareattimeofwritinginvestigatingthecloudsector.1TheyalsoofferGenAImodelsandapplications.SomeevenintegratetheirGenAIapplicationsintotheirfamiliesofservices.ThesebehavioursmightreinforcethepositionsofthehyperscalersandraisecompetitionconcernsrelatedtodiscriminationinthesupplyofITequipmentbydominantITproviders,interoperabilityobstaclestoswitching,usageofbusiness-userdata,self-preferencingofcloudservicesoverthirdparties,tyingandpurebundling.CompetitionauthoritiesintheUnitedKingdomandPortugalhavealreadyissuedreportsoncompetitionandGenAI,andtheG7competitionauthoritieshavepledgedtocloselymonitorGenAI5.Inthiscontext,thisWorkingPaperexaminestherelationshipbetweencloudprovidersandGenAIproviders.Itdescribeshowtherelationshipworks,thenoutlinesthecompetitionbenefitsandrisksoftherelationship.Ithighlightshowcompetitionlawsandregulationscanrespondtocompetitionissues.Finally,itconcludeswithsomepolicyrecommendations.2

The

cloud/GenAI

relationshipCloudprovidersthatutilisesharedinfrastructure

supplythreemaincategoriesofsolution:infrastructureasaservice(IaaS),platformasaservice(PaaS)andsoftwareasaservice(SaaS)6.WeexamineinturneachoftheseandtheirusebyGenAIproviders.2.1

Infrastructure

(IaaS)Theinfrastructureofferedbycloudprovidersincludescomputingpowerresources,servers,storageandnetworks.SeveralcloudprovidersofferIaaS,includingAmazonWebServices(AWS),GoogleCloud,MicrosoftAzure,OVHcloud,OutscaleandScaleway.GenAIprovidersneedthisinfrastructuretotrain,runanddeploytheirmachine-learningmodels.Theserequiremassiveamountsofdataandcomputingresourcestogeneratenaturallanguageoutputfrominputdata,includingtext,imagesorvideo.GenAIprovidersscaleupordowntheirstorageandcomputingresources.Inparticular,theyneedaccesstolargestorageandcomputingresourceswhentrainingtheirmodelsforseveralweeks.Then,oncemodelsaremadeavailableonthemarket,theirneedsdependonhowextensivelyusersusethemodeltogenerateoutputs.CloudprovidersareindispensabletoGenAIproviderstoensurethisflexibility,withoutGenAIprovidersneedingtoinvestinhighfixed-costandhardlyscalableinfrastructure.5

CompetitionauthoritiesarealreadystudyingpotentialcompetitionrisksinGenAI.SeeCMA(2023),AutoridadedaConcorrencia(2023),G7competitionauthorities(2023),Carugati(2023c).6

InformationaboutthefunctioningofpubliccloudprovidersisbasedontheFrenchcloudsectorreport(Autoritédelaconcurrence,2023).Thispaperfocusesonlyonpubliccloudprovidersasopposedto

privatecloudproviders,whichusetheirowninfrastructures.Informationaboutmachine-learningmodelsisbasedonCarugati(2023c).2HyperscalerssupportGenAIprovidersfinanciallythroughexclusiveorstrategicpartnerships.Forinstance,Microsofthasinvestedmorethan$11billionsince2019inanexclusivepartnershipwithOpenAItosupportthedeploymentofOpenAItechnologiesexclusivelyviaitscloudservice,MicrosoftAzure7.TheexclusivepartnershipenablesthecloudpartnertoinvestininfrastructurespecificallydesignedfortheGenAIpartner.However,theexclusivepartnershipraisescompetitionrisks.TheGenAIpartnerandtheircustomerscannoteasilyswitchtoalternativecloudinfrastructures.OtherhyperscalersalsohavestrategicpartnershipswithGenAIprovidersfornon-exclusivehostingontheircloudinfrastructures.ThesestrategicpartnershipsallowGenAIproviderstobeavailableonalternativecloudprovidersandcloudproviderstohostseveralGenAIproviders,thusraisingfewercompetitionconcerns.Non-exclusivepartnershipsincludeGoogleCloudwithCoherein20218,AWSwithStabilityAIin20229,AWSwithHuggingFacein202310,AWSwithAnthropicin2023,11

andGoogleCloudwithAnthropicin202312.Aspartofsuchpartnerships,cloudprovidersmobilisetheirmassivecomputingresourcestorunanddeployGenAImodelsatscale.Forinstance,MicrosofthasdevelopedanddeployedaspecialisedsupercomputingsystemspecificallyandexclusivelydesignedtotrainOpenAImodels.Google13

andAmazon14

havedevelopedproprietaryAIsemiconductorstooptimisetheperformanceandcostsofAIworkloads.However,mostofthechipsnecessarytopowerAIapplicationsaresuppliedbyNvidia(estimatedglobalmarketshareof88percentin202215).ThepressreportedinSeptember2023atemporary7

OpenAIBlog,‘MicrosoftinvestsinandpartnerswithOpenAItosupportusbuildingbeneficialAGI’,22July2019,/blog/microsoft-invests-in-and-partners-with-openai;DinaBass,‘MicrosoftInvests$10BillioninChatGPTMakerOpenAI’,Bloomberg,23January2023,/news/articles/2023-01-23/microsoft-makes-multibillion-dollar-investment-in-openai#xj4y7vzkg.8

Cohere,‘CohereandGoogleCloudAnnounceMulti-YearTechnologyPartnership’,17November2021,/news-release/2021/11/17/2336632/0/en/Cohere-and-Google-Cloud-Announce-Multi-Year-Technology-Partnership.html.9

Amazon,‘StabilityAISelectsAWSasItsPreferredCloudProvidertoBuildArtificialIntelligencefortheFuture’,30November2022,/2022/11/stability-ai-selects-aws-as-its-preferred-cloud-provider-to-build-artificial-intelligence-for-the-future.10

AWS,‘AWSandHuggingFacecollaboratetomakeGenAImoreaccessibleandcostefficient’,21February2023,/blogs/machine-learning/aws-and-hugging-face-collaborate-to-make-generative-ai-more-accessible-and-cost-efficient/.11

Amazon,‘AmazonandAnthropicAnnounceStrategicCollaborationtoAdvance

GenAI’,25September2023,/2023/9/amazon-and-anthropic-announce-strategic-collaboration-to-advance-generative-ai.12

LizetteChapman,KatieRoofandJuliaLove,‘GoogleBets$2BilliononAIStartupAnthropic,InksCloudDeal’,Bloomberg,27October2023,/news/articles/2023-10-27/google-to-invest-2-billion-in-ai-startup-anthropic-wsj-says#xj4y7vzkg.13

Cloud,‘AccelerateAIDevelopmentwithGoogleCloudTPUs’,/tpu.14

AWS,‘AWSTrainium’,/machine-learning/trainium/.15

Wallstreetzen,

‘NvidiaCorpStatistics&Facts’,/stocks/us/nasdaq/nvda/statistics.3shortageofNvidiachipsbecauseofcapacityissuesatTaiwanSemiconductorManufacturingCompany(TSMC),Nvidia’smainsupplier16.TheshortageaddstopreviouschipshortagesarisingfromsupplyanddemandshocksfromthelowsupplyduringtheCOVID-19pandemic.andhighdemandfromAIapplications,whichimpactscloudproviders17.Inthiscontext,asnotedbelow,competitionauthoritiesaremonitoringNvidia’ssalesofchipsandhowitallocatessupplyamongcloudproviders,potentiallyprivilegingsomecustomersoverothers.Thus,inadditiontoincreasedconcentrationinthehandsofhyperscalersarisingfromthepartnerships,competitionrisksarisefromdiscriminationinthesupplyofITequipmentbydominantITproviders,andinteroperabilitybarrierswhenswitchingfromonecloudprovidertoanother.2.2

The

platform

level

(PaaS)CloudproviderssupplyingPaaSenabletheircustomerstoaccesssoftwareandtoolstodeveloptheirapplications.Thesetoolsincludedatabases,dataanalysis,toolsfordevelopers,AItools,servicesforinternetofthings(IoT)devices,ITcontainersandsecurity.PaaSisofferedbyseveralcloudproviders,includingAWS,GoogleCloud,MicrosoftAzure,OVHcloudandScaleway.GenAIprovidersofferAItoolstocloudproviderssothatcloudcustomerscanuseanddevelopAIapplications.Forinstance,OpenAIprovidesitsmachine-learningmodelsonMicrosoftAzurewithAzureOpenAIservice18.AWSprovidesaccesstovariousmodelsfromAI21Labs,Anthropic,Cohere,Meta,StabilityAIandAmazonthroughitsAWSBedrockservice19.GoogleCloudalsooffersaccesstovariousproprietary,open-sourceandthird-partymodels20.CloudprovidersandGenAIprovidersthuscompetefortheprovisionofAItools,withpotentialcompetitionrisks,includinglegitimateuseofthedataofbusinessusersforreasonssuchastheprovisionofdataanalysisservices,andalsopotentiallyillegitimatereasons,suchasdevelopmentofcompetingservicesandself-preferencing.2.3

Software

(SaaS)CloudproviderssupplyingSaaSenablecloudcustomerstoprovideapplicationstotheirusersviaanyconnecteddevice.ApplicationsincludeproductivitysoftwaresuchasMicrosoft365orGoogleWorkspace,orstreamingservicessuchasNetflix.GenAIprovidersenablecloudproviderstointegratetheirsolutionsintoproprietarySaaSapplications.Forinstance,MicrosoftintegratesOpenAIsolutionsintoitsproductivitysoftware,Microsoft35516

ChengTing-Fang,‘TSMCSees

AIChipOutputConstraintsLasting1.5Years’,NikkeiAsia,6September2023,/Business/Tech/Semiconductors/TSMC-sees-AI-chip-output-constraints-lasting-1.5-years.17

AlexWoodie,‘TheChipShortageSeemstobeImpactingAIWorkloadsintheCloud’,Datanami,

12March2021,/2021/03/12/the-chip-shortage-seems-to-be-impacting-ai-workloads-in-the-cloud/.18

MicrosoftAzure,‘AzureOpenAIService’,/en-us/products/ai-services/openai-service#Features.19

AWS,‘AmazonBedrock’,/bedrock/.20

GoogleCloud,‘GenAIonGoogleCloud’,/ai/generative-ai.4Copilot,itswebbrowser,MicrosoftEdge,itssearchengine,MicrosoftBing,anditsoperatingsystem(OS),MicrosoftWindowsCopilot.Googledoesthesamewithitsproductivitysoftware,GoogleWorkspaceanditssearchengine,GoogleSearch.SomeSaaSactasaplatformenablingthird-partydeveloperstodevelopapplicationsthatcomplementandinteractwiththeirservices.Forinstance,Microsoftenablesthird-partydevelopersincludingOpenTableandExpediatodevelopthird-partypluginsthatinteractwithOpenAIChatGPT,MicrosoftBing,MicrosoftDynamics365Copilot,Microsoft365CopilotandMicrosoftWindowsCopilot21.CloudprovidersandGenAIprovidersarethusverticallyintegrated,bringingpotentialcompetitionrisks,includingtyingandpurebundling.3

Competition

risksWhilethecloud/GenAIrelationshipbringswithitmanycompetitionbenefits,asdiscussedintheprevioussections,therelationshipalsocreatesrisksrelatedtopotentialconcentration(section3.1.)andanticompetitivepractices(section3.2.).3.1

Potential

concentration

issuesInchoosingcloudproviders,thereisariskthatGenAIprovidersusemostlyhyperscalers,increasingthetrendtowardconcentrationinthehandsofthehyperscalers.First,GenAIprovidersusetheinfrastructures,platformsandsoftwareofhyperscalers.Accordingly,GenAIprovidersandtheirconsumersbecomedefacto

cloudcustomersofthehyperscalers.Second,thepartnershipbetweencloudprovidersandGenAIprovidersmightreinforcethepositionofcloudprovidersinthecloudmarketandrelatedmarkets.Theextentofthereinforcementdependsonthenatureandconditionsofthepartnership,thusrequiringacase-by-caseanalysis.Bycontrast,somesmallercloudprovidersalsohavepartnershipswithGenAIproviders,suchasScalewaywithMetaandHuggingFaceatthenationallevel22.However,smallercloudprovidersmightnotbeabletocompetewithhyperscalersatgloballevelbecausetheymightlacktheinvestmentcapabilitiesandinfrastructurerequiredtotrain,runanddeployGenAImodelsandapplicationsgloballyatscale.Inotherwords,GenAIproviderscanbeavectorofgrowth,mainlyforhyperscalers.Nevertheless,thedegreeofconcentrationinthehandsofhyperscalersresultingfromGenAIwillhingeontheshareofrevenuesalesandcloudcustomersusingcloudresourcesforGenAI,whichisjustapartofoverallcloudactivities.21

FrankX.Shaw,‘MicrosoftBuildBringsAIToolstotheForefrontForDevelopers’,OfficialMicrosoftBlog,23May2023,/blog/2023/05/23/microsoft-build-brings-ai-tools-to-the-forefront-for-developers/.22

MetaBlog,‘MetaPartnerswithHuggingFace&ScalewaytoSupportOpenSource’,8November2023,/news/2023/11/meta-partners-with-hugging-face-scaleway-to-support-open-source/.5Thepotentialcompetitionrisksfromincreasedconcentrationinthecloudsectoraretwofold.First,whileconcentratedmarketscanbecompetitive,itbecomesharderforsmallerprovidersandnewcomerstocompeteinandtoenterconcentratedmarkets,especiallymarkets,likecloudmarkets,characterisedbystrongeconomiesofscaleandscope(Cremer,deMontjoye,andSchweitzer,2019).Concentratedmarketsarethuslesscontestable,withcustomershavingfewoptions.Second,concentratedmarketsaremorepronetoanticompetitivepracticesarisingfromabuseofdominanceandcollusionbecauseoftheiroligopolisticnatures,withcustomersfacinganimbalanceofpowerwiththeavailableoptions.Thesecompetitionrisksfromincreasedconcentrationaretheoriginofregulationsindigitalmarkets,includingtheEuropeanUnion’sDigitalMarketsAct(DMA,Regulation(EU)2022/1925;seesection4.2).3.2

Potential

anticompetitive

practicesTherelationshipbetweencloudprovidersandGenAIprovidersmightalsoleadtopotentialanticompetitivepracticesattheIaaS,PaaSandSaaSlevels.TherisksrelatetodiscriminationinthesupplyofITequipmentbydominantITproviders,interoperabilityobstaclestoswitching,usageofbusinessuserdata,self-preferencingofcloudservicesoverthirdparties,tyingandpurebundling.Table1indicatesthepotentialcompetitivebenefits,anticompetitiverisksandanticompetitiveeffectsofthesebusinesspractices.Discrimination

in

the

supply

of

IT

equipment

by

dominant

IT

providers.

DominantITprovidersallocatethesupplyofITequipment,likeGPUs,amongstcloudcustomers.Inthecontextofashortageofchips,theFrenchcompetitionauthoritystatedinitscloudsectorstudythathyperscalersbenefitfromprivilegedaccesstocertainITequipmentbecauseoftheirlargepurchasingvolumes(Autoritédelaconcurrence,2023).Inotherwords,dominantITprovidersmightdiscriminateamongstitscustomershowitallocatesitsupply.ThispotentialanticompetitivepracticealreadyraisedantitrustscrutinyinFrance,Europe,theUnitedStates,andChina23.Interoperability

obstacles

to

switching.

CloudprovidersmighthavetheabilityandincentivetolimittheinteroperabilityofGenAIsolutionswithothercloudproviders,withapotentialexclusionaryeffect.CloudproviderscanimposeorwithholdtechnicalrequirementsthatlimitGenAIsolutionsandtheircustomersfromswitchingfromonecloudprovidertoanother,orpreventthemfrommulti-homingwith23

Autoritédelaconcurrencepressreleaseof27September2023,‘TheGeneralRapporteuroftheAutoritédelaconcurrenceIndicatesthatanUnannouncedInspectionwasCarriedOutintheGraphicsCardsSector’,https://www.autoritedelaconcurrence.fr/en/press-release/general-rapporteur-autorite-de-la-concurrence-indicates-unannounced-inspection-was.Seealso,Form10-QNvidiaCorporation,21November2023,/financial-info/sec-filings/sec-filings-details/default.aspx?FilingId=17074143:“Ourpositioninmarketsrelating

toAI

has

ledtoincreasedinterestinourbusinessfromregulatorsworldwide,including

theEuropeanUnion,theUnitedStates,and

China.

Forexample,the

FrenchCompetitionAuthoritycollectedinformationfromus

regarding

ourbusinessandcompetitioninthegraphicscardand

cloudserviceprovidermarketas

partof

an

ongoing

inquiryintocompetitioninthose

markets.Wehave

alsoreceivedrequestsforinformationfromregulatorsintheEuropeanUnionandChina

regarding

oursalesof

GPUsand

oureffortstoallocate

supply,and

we

expecttoreceiveadditionalrequestsforinformationinthefuture”(p.42).6morethanonecloudprovider,so-called‘multi-cloud’.CloudprovidersmighthavetheincentivetodosotokeepGenAIprovidersandtheircustomersontheircloudservices.Usage

of

business

user’s

data.

CloudprovidersmighthavetheabilityandincentivetousedatafromGenAIprovidersandtheircustomers,whichmighthaveanexploitativeeffect.CloudprovidershavetheabilitytousethedataprovidedorgeneratedbyGenAIprovidersandtheircustomersastheystorethisdataontheircloudinfrastructure.Theymighthavetheincentivetodosoinordertoprovide,improveordeveloprelatedcloudservices,suchasdataanalysis,AItoolsorevenproprietaryGenAIsolutions.Asnotedabove,thisdatausagemightbeforlegitimatereasons,suchastheprovisionofdataanalysisservices.Oritmightbedoneforpotentiallyillegitimatereasons,suchasdevelopingcompetingservices,whichmightconstituteapotentialcontractbreachandanticompetitivepractice.However,thisexploitativestrategyisself-harmingasitunderminestrustbetweencloudprovidersandtheirGenAIprovidersandtheircustomers,whichmightleadthelattertowithdrawbusinessfromcloudproviders.Cloudprovidersmightthuslosesignificantbusinessopportunitiesandsufferreputationalharm.Accordingly,whiletheoreticallypossible,itisquestionablewhethercloudproviderswillengageinthisstrategyinpractice,astrust,businessopportunitiesandreputationsmightbemorevaluablethanthedevelopmentofcompetingservicesorproducts.Self-preferencing

of

cloud

services

over

those

of

third

parties.

Cloudprovidersmighthavetheabilityandincentivetopromotetheirowncloudservicesoverthirdparties,withpotentialexclusionaryeffectsonthirdparties.CloudprovidersareabletopromoteoverthirdpartiestheirproprietaryGenAItoolsandmodelsontheirplatforms.TheymighthavetheincentivetodosotoincreasethesalesoftheirproprietaryGenAIofferings.Tying.

Cloudprovidersmighthavetheabilityandincentivetoimplementtyingstrategies,whichmighthaveexclusionaryeffects.Cloudprovidersmighttietheprovisionofnon-dominantcloudservicestotheprovisionofrelateddominantservices,withGenAIasaconnectorbetweenthem.Forinstance,anon-dominantcloudproviderwithadominantpositioninproductivitysoftwareoroperatingsystems(OS)couldrequireorstronglyencouragesoftwaredeveloperstouseitsproprietaryorexclusivethird-partyGenAIsolutions,availableonlyonitsnon-dominantcloud,todevelopthird-partyGenAIapplicationsthatcomplementandinteractwithitsproprietarydominantproductivitysoftwareorOS.Cloudprovidershavetheincentivetodothistoincreasesalesoftheirnon-dominantcloudservices.Pure

bundling.

Cloudprovidersmighthavetheabilityandincentivetoimplementbundlingstrategies,withpotentialexclusionaryeffects.Cloudproviderscanprovidetheirproprietaryorthird-partyexclusiveGenAImodelsandapplicationstogetherwiththeirnon-dominantcloudservices.Theymightseektodothistoincreasesalesoftheirnon-dominantcloudservices.However,astheGenAIsectorisstilldevelopingwithintensecompetitionbetweenvariousGenAIproviders24,thispracticeisunlikelytohaveanegativeimpactoncloudprovidersastherearenotyetdominantGenAIproviders.Thisimplies24

AsofSeptember2023,theUKCompetitionandMarketsAuthority(CMA)counted160foundationmodelssince2018(CMA,2023).7thatGenAIcustomerscanusealternativeGenAIprovidersavailableondifferentcloudproviders.However,assumingaGenAIproviderbecomesdominant,thebundlingstrategymighthaveprocompetitivebenefitsandanticompetitiverisks.Table

1:

Summary

of

potential

anticompetitive

practices

in

cloud/GenAIPracticeProcompetitivebenefitsThepracticeenablesAnticompetitive

risksPotentialanticompetitive

effectPotentialDiscriminationintheThepracticemightsupplyofITequipment

cloudproviderswithpreventsmallercloud

anticompetitivebydominantITprovidersalready-scalablecloud

providersfrom

exclusionaryeffectofinfrastructuresandinvestmentcapabilitiestoadaptthemquicklyforGenAIproviders.accessingchipsinatimelywayfortheircloudinfrastructures.puttingsmallercloudprovidersatacompetitivedisadvantageagainsthyperscalers–smallerproviderscannotoffercloudservicestoGenAIprovidersbecausetheydonothavetherequiredITequipment.Thoughchipshortagesmightbetemporary,theycanhavelastingimpactsoncompetitionbecauseGenAIproviders,attractedtothehyperscalers’processingcapacities,mightcontinuetousethehyperscalers’infrastructuresaftertheendofshortages.PotentialInteroperabilityTheobstaclesprovide

Theobstaclesmightobstaclestoswitching

incentivestoinvestin

preventGenAIanticompetitiveinfrastructure,platformsandsoftware

customersfromspecificallyand/orprovidersandtheirexclusionaryeffectofexcludingalternativecloudproviders.switchingtoexclusivelydesignedal