Tech policy & regulation
Developing regulatory approaches to limit harmful market concentration in cloud infrastructure and model hosting services.
This article surveys enduring strategies for governing cloud infrastructure and model hosting markets, aiming to prevent excessive concentration while preserving innovation, competition, and consumer welfare through thoughtful, adaptable regulation.
August 11, 2025 - 3 min Read
Global cloud infrastructure and model hosting markets have grown to underpin essential services across sectors, elevating concerns about concentration, interoperability, and resilience. When a few dominant platforms control core hosting capabilities, entry barriers can harden, pricing may stagnate, and innovation can stall as smaller competitors struggle to access critical infrastructure. Regulators face a delicate balance: safeguarding competition without chilling investment or slowing the pace of technological progress. An evergreen approach emphasizes transparency about market shares, service-level dependencies, and data portability. It also highlights the need for robust incident reporting, clear architectural standards, and predictable review processes that adapt to rapid technological shifts, ensuring policy stays aligned with actual market dynamics.
A foundational step is to define the scope of regulatory concern beyond traditional antitrust concepts. Regulators should consider not only market share but also network effects, access to essential facilities, and control over critical APIs and data ecosystems. This involves mapping how cloud providers influence startup viability, customer switching costs, and the ability to build interoperable tools. By identifying choke points—where access to compute, storage, or model hosting interfaces could affect downstream competition—policymakers can design targeted remedies. Such remedies might include fair access requirements, unlimited data portability, standardized interoperability interfaces, and timelines for scooping up or sharing infrastructure capabilities under structured, enforceable conditions.
Regulatory design should foreground resilience, transparency, and innovation compatibility.
The first pillar is ensuring nondiscriminatory access to essential cloud services and model hosting interfaces. When a dominant provider controls key APIs, downstream developers face inflated integration costs and uncertain timing. Regulators can require transparent pricing for essential capabilities, publish standardized API contracts, and mandate welcomed compatibility with open formats. This reduces lock-in and fosters a healthier ecosystem where startups can compete on ingenuity rather than engine size. Proper enforcement involves routine audits, public dashboards showing service dependencies, and consequences for unjustified changes that degrade interoperability or inflate latent switching costs, thereby reinforcing consumer welfare.
The second pillar focuses on contestable markets through procurement and customer choice mechanisms. Public sector and large enterprise buyers should be encouraged to pursue multi-cloud or vendor-agnostic strategies, supported by standardized procurement templates that favor interoperability. Policymakers can promote consolidated frameworks for fair negotiations, require disclosure of exclusive agreements, and incentivize the use of open-source components where possible. By shaping demand-side incentives, regulators can temper structural advantages created by scale, helping smaller providers gain a foothold. This approach also enhances resilience by reducing single points of failure and enabling rapid migration in response to security incidents or service disruptions.
Oversight should be proportionate, principled, and technically informed.
A third pillar attends to data portability and interoperability as drivers of healthy competition. If customers can readily move workloads, datasets, and model artifacts between providers without prohibitive friction, market entrants can compete on features, performance, and privacy protections. Standards-based data exchange, governed by neutral bodies, can lower switching costs and reduce vendor lock-in. Regulators can support community-led specifications, ensure backward compatibility, and require clear migration paths during platform transitions. This not only broadens consumer choice but also incentivizes providers to invest in user-centric features that improve portability rather than locking customers into proprietary ecosystems.
A fourth pillar concerns accountability for platform governance and model risk. As cloud infrastructure and hosting services embed extensive automation and AI models, regulators should demand explicit risk disclosures, model governance policies, and external assurance mechanisms. Clear responsibility for data handling, bias risk, explainability, and auditability helps align provider incentives with public-interest goals. Regulators can mandate periodic third-party reviews, publish aggregate risk metrics, and require incident response plans that demonstrate preparedness for cascading failures. Such measures reinforce trust without stifling experimentation, allowing innovation to proceed under careful oversight that protects users and the broader market.
Regulators should cultivate data-informed, collaborative policymaking processes.
The fifth pillar emphasizes competition-friendly integration standards. When platforms expose well-documented, machine-readable interfaces, developers can design portable solutions that work across multiple clouds. Regulatory guidance can promote common data schemas, open authentication methods, and consistent performance benchmarks. These initiatives reduce the complexity of multi-cloud deployments and lower the barrier to entry for new firms seeking to operate at scale. Transparent benchmarking and independent verification help ensure claims about performance and reliability are credible, enabling customers to compare options meaningfully. Regulators should coordinate with industry consortia to keep standards current with evolving architectures and security practices.
A sixth pillar addresses geographic and sectoral diversity in infrastructure access. Concentration in particular regions or industries can magnify systemic risk, making consumers vulnerable to outages, price shocks, or regulatory shocks. Policymakers can encourage regional cloud hubs, cross-border data flows with strong privacy protections, and competition-friendly incentives that distribute capacity more broadly. This approach supports local innovation clusters while preserving global interoperability. It also helps regulators monitor market health by collecting diverse data on utilization patterns, service quality, and customer satisfaction across different sectors, enabling more precise, targeted interventions when needed.
Policy resilience demands ongoing review and adaptive experimentation.
A seventh pillar centers on competition enforcements that avoid overreach and unintended consequences. Rather than broad prohibitions, regulators can pursue targeted remedies that address specific harms, such as exclusive agreements, unfair mergers, or discriminatory treatment of rival platforms. This approach benefits from a phased enforcement strategy, clear sunset provisions, and regular policy reviews to gauge effectiveness and adjust course. Engaging with industry stakeholders, consumer groups, and technologists helps align regulatory aims with technical feasibility. Balanced enforcement preserves competitive incentives for ongoing innovation while ensuring that dominant platforms do not crowd out smaller players or degrade consumer welfare.
The eighth pillar contends with dynamic consumer protection in the era of AI-enabled services. As model hosting becomes more proliferated, consumers and businesses need clarity on privacy, data usage, and consent. Regulators can require transparent data lineage, auditable model behavior, and robust consent mechanisms for data collection. They can also promote user empowerment through right-to-explanation or opt-out options for automated decisions where appropriate. By embedding privacy-by-design principles and ongoing risk assessments into platform governance, policy can keep pace with rapidly evolving capabilities while preserving individual rights and market trust.
The ninth pillar advocates for interoperability funding and public-interest technology incubators. Governments may support grant programs that encourage building open-source tools, shared platforms, and reference architectures that enable competition. By decoupling critical capabilities from a single vendor, these initiatives create healthier ecosystems where startups can scale without dependence on a dominant player. Such investments also contribute to national strategic autonomy in digital infrastructure, helping communities weather supply chain disruptions, cyber incidents, or regulatory shifts. A steady commitment to open technology fosters collaboration and lowers barriers to entry, reinforcing long-term market vitality.
The tenth pillar highlights international cooperation to align standards and enforcement. Cloud markets are inherently global, making cross-border regulatory alignment essential to avoid confusion and regulatory arbitrage. Multilateral dialogues can harmonize guidance on data sovereignty, fair access requirements, and model governance. Sharing best practices and empirical evidence helps regulators learn from diverse experiences and avoid one-size-fits-all prescriptions. A cooperative framework supports consistent expectations across jurisdictions while allowing local adaptations that reflect different market structures, legal traditions, and public policy objectives, ultimately contributing to a healthier global cloud economy.
