Canada's cloud market is 'broken,' report warns

A young cover calls the securities industry for cloud computing in Canada " broken in" and warns that domestic help 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.

"Anytime 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.

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.

Google Cloud says online that its products allow Canadian users to "control where their content is stored and processed." Google and Amazon both offer free data transfers in some cases when customers leave their cloud services, while Microsoft Azure offers credits, including for customers in the European Union.

Those moves followed pressure from European and U.K. Regulators, who raised concerns about barriers to switching cloud providers.

The fight over Canada’s AI future

But McCord said being able to export data does not necessarily mean it will work easily with another provider's system.

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.

Ottawa announces funding for AI, new data centres 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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