Google submits complaints about Microsoft licensing to UK competition regulator

Now Microsoft has regulator breathing down its neck in three regions

Google is asking Britain's competition watchdog to make a ruling over its allegations Microsoft abused cloud software licensing in an anticompetitive way, months after taking claims of its rival's monopolistic behavior to the Federal Trade Commission.

The Competition and Markets Authority is examining the role of Microsoft and AWS in the local cloud computing landscape, following Ofcom's review earlier this year when it found the two tech titans accounted for between 70-80 percent of the $7.6 billion sector in Britain.

Of particular interest to the regulator is egress fees, committed spend discounts (CSD), interoperability, and software licensing in the cloud. Google has become a vocal critic of Microsoft’s policies and has made its submission to the CMA, sources told us.

In the letter to the CMA - seen by us - Google said:

"We believe that the market is, with one notable exception, operating competitively and delivering good outcomes for UK customers in terms of quality, price and innovation Technical barriers - which are to a certain extent a natural consequence of pro-competitive product differentiation between vendors - can generally be overcome, and egress fees and CSDs are natural features of price competition. We are confident that the evidence the CMA gathers will show that these three theories of harm are unfounded."

It added: "[W]ith Microsoft's licensing restrictions in particular, UK customers are left with no economically reasonable alternative but to use Azure as their cloud services providers, even if they prefer the prices, quality, security, innovations, and features of rivals."

We asked Google to comment. The CMA refused to comment. The submission by Google will be made public by the CMA when it collates evidence from rivals, we're told.

At the heart of Google's grievance, as outlined by The Reg in June, is that Microsoft classifies Google, AWS and Alibaba as listed providers, meaning customers can simply not run certain Microsoft software on their clouds. For software that Microsoft does permit to run of its major rivals' cloud, the cost of doing so makes it prohibitive for customers, sources previously told us.

Amit Zavery, Google Cloud vice president, general manager, and head of platform, branded the latter element as a Microsoft cloud software licensing "tax," telling us in an interview over the summer that there is no technical reason for Microsoft to do this other than the obvious.

On premises, they could run it on any hardware, there was no restriction really. But now if you want to run it on any other cloud provider, you have to pay a tax and penalty to Microsoft if it's not running on Azure, or in the preferred providers of their choice.

So that, I think, is a big issue because, of course, all enterprises have a large footprint of Microsoft products like Office and Windows, SQL Server and others as well, and if you don't allow that for products which have been paid for already by customers to be run anywhere, without paying a penalty to Microsoft, you're just getting getting beholden to Microsoft.

That's the big, big problem for many enterprises today where they can't bring their licenses wherever they choose to. There is nothing technically preventing that from happening either. It's running on standard compute, which of course Microsoft allows for some cloud providers to use and run their products on, but not AWS, or GCP.

Smaller cloud players including OVHcloud, Danish Cloud Community and Aruba.Spa filed a complaint with the European Commission's antitrust team over Microsoft's commercial behavior but Microsoft made some concessions last year and that case was settled well before it went to court. The nature of the settlement was confidential, so we are unable to verify the points it addressed.

Sources told us that addressing concerns of small cloud players is all well and good, but these are not the major competitors that Microsoft is battling on a daily basis, such Google, AWS and Alibaba.

Microsoft has also tried to settle with the Cloud Infrastructure Service Provider for Europe (CISPE) trade group, backed by AWS, which filed with the EC in November last year. So far the offer on the table from Redmond hasn’t satisfied the organization.

A CISPE spokesperson told us today: "Microsoft continues to leverage its massive dominance of productivity software to enforce discriminatory pricing that lures and locks customers into its own Azure cloud infrastructure. These unfair and anticompetitive prices hurt everyone but Microsoft. It is therefore no surprise that Google has cogently expressed its concerns to the CMA. CISPE supports Google’s assessment and further calls on the European Commission to act swiftly on our complaint on the very same issues."

Google has also accused Microsoft of monopolistic attitudes in the US when it took the fight to the Federal Trade Commission.

In a statement sent to The Register, a Microsoft spokesperson said:

"We have listened to and work constructively and directly with independent cloud providers to change our licensing terms, addressing their concerns and providing more opportunity for them. Worldwide, more than 100 cloud providers, including companies in the UK, have already taken advantage of these changes. And as the latest independent data shows, competition between cloud hyperscalers remains healthy. In the second quarter of 2023 Microsoft and Google made equally small gains on AWS, which continues to remain the global market leader by a significant margin." ®