Cloud Computing in the EU Policy Sphere: Interoperability, Vertical Integration and the Internal Market

• Author: Jasper P. Sluijs - Pierre Larouche - Wolf Sauter
• Position: Tilburg Law and Economics Center (TILEC), Tilburg Law School
• Pages: 12-32

2012

Jasper P. Sluijs, Pierre Larouche, Wolf Sauter

12

1

Cloud Computing in the EU Policy Sphere

Interoperability, Vertical Integration and the Internal Market

by Jasper P. Sluijs, Pierre Larouche, Wolf Sauter, Tilburg Law and Economics Center (TILEC), Tilburg Law School

© 2012 Jasper P. Sluijs, Pierre Larouche, Wolf Sauter

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Recommended citation: Sluijs/Larouche/Sauter, Cloud Comput ing in the EU Policy Sphere: Interoper ability, Vertical Integ ration

and the Internal Market, 3 (20 12) JIPITEC 12, par a 12

Keywords: Cloud Computing; Economic Policy Concerns; European Law; Competition Law

A. Introduction

1

Cloud computing is currently viewed by many in the

industry as the ‘next big idea’thatwill see major in-

formation technology companies vying to compete.

1

It has also been described as providing computing re-

sources as if it were a utility – accessible by anyone

anywhere with an Internet connection, and always

on tap.2 Finally, it is regarded as an ‘extreme form of

vertical integration, just carried out by other com-

panies than the telecommunications service provi-

ders, and at higher levels of the protocol stack’.3 Ar-

guably, therefore, cloud computing stands to shake

up the technology, telecommunications and media

sectors for the next few years.

2

This change and innovation give rise to the question

whether and how cloud computing policy should

be approached on a European level. Cloud compu-

ting is a global phenomenon with impact on the in-

ternal market in terms of innovation and regula-

tory harmonization. European law has settled for a

regulatory approach to the digital sphere in which

competition law, regulation of networks and elect-

ronic commerce regulation are treated as separate

legal regimes.4 The main regulatory issue to address,

therefore, is how to approach a cloud computing

provider in regulatory terms – through competition

law, network regulation, electronic commerce or ac-

ross those ields.

3 The European Commission has circulated an ambi-

tious digital agenda as part of the 2020 Lisbon strat-

egy, highlighting the importance of innovative and

convergent online services – such as cloud compu-

ting providers – for the European internal market.5

Can available European laws accommodate the broad

adoption of cloud computing facilities, while addres-

sing possible concerns that arise along the way? How

does European policy deal with the challenges raised

Abstract: Cloud computing is a new develop-

ment that is based on the premise that data and ap-

plications are stored centrally and can be accessed

through the Internet. This article sets up a broad

analysis of how the emergence of clouds relates to

European competition law, network regulation and

electronic commerce regulation, which we relate to

challenges for the further development of cloud ser-

vices in Europe: interoperability and data portability

between clouds; issues relating to vertical integration

between clouds and Internet Service Providers; and

potential problems for clouds to operate on the Eu-

ropean Internal Market. We find that these issues

are not adequately addressed across the legal frame-

works that we analyse, and argue for further research

into how to better facilitate innovative convergent

services such as cloud computing through European

policy – especially in light of the ambitious digital

agenda that the European Commission has set out.

Cloud Computing in the EU Policy Sphere

2012

13

1

by the further emergence of cloud computing? Is

the EU regulatory regime ready to meet this trend?

The literature on cloud computing in relation to Eu-

ropean law shows a strong emphasis on data pro-

tection, privacy and security issues.6 We wish to

introduce a different approach, focusing on the re-

lationship of cloud computing to domains of EU law-

that have hitherto had less attention. This research

sets up a broad framework to assess a numberof Eu-

  

computing. After a thorough analysis of the pheno-

menon of cloud computing on a technical and policy

level, we will single out challenges that cloud com-

puting services face as they develop to maturity as

a market: data portability and interoperability con-

straints; the complexity involved in vertical integra-

tion between clouds and Internet Service Providers

(ISPs); and potential problems for clouds to operate

on the European Internal Market. We will then ana-

lyse how competition law, network regulation and

electronic commerce regulation can address these

potential challenges.

4 We will conclude that the challenges for cloud com-

puting that we highlight cannot be addressed ade-

quately by the existing European regulatory regime.

-

bility and data portability constraints for clouds only

in an indirect way, through the abuse of dominance

-

tition law framework for vertical integration is not

very well tailored towards advanced online servi-

ces such as clouds, mainly due to problems involved

  -

ver, competition law does little to streamline clouds’

operation on the European internal market. Euro-

pean electronic communications (network) regula-

tion only indirectly affects cloud computing services,

as this regulatory framework mainly applies to the

ISPs that carry cloud data. Here we see that network

regulation is of little use to mitigate interoperabi-

lity and data portability for clouds, and might not

prevent the leveraging of market power by domi-

nant ISPs into cloud computing markets. Finally, EU

electronic commerce regulationis most applicable to





jurisdictional issues of the Electronic Commerce Di-

rective will most likely not streamline operating on

the internal market for cloud service providers, and

the Directive’s provisions on secondary liability are

increasingly coming under pressure by courts and

governments.

5 

seems to exceed the scope of the provided legal me-

chanisms. The disconnect in legal scope between

clouds and the laws that concern clouds demons-

 

regulation and electronic commerce regulation re-

main more distinct than would be desirable in the

light of convergent practice. Cloud computing forms

a new, hybrid technology that is affected by all of



are over-regulated on matters of minor impor-

  

further emergence of cloud computing remain le-

gally unaddressed.

6

As Iansiti has argued, we need to investigate how the

principles behind cloud computing relate to exis-

ting policy rationales.7 This article aims to function

-

puting on a European policy level with a focus on

competition law, network regulation and electronic

commerce regulation. As such, we argue that these

legal domains are not prepared to accommodate the

further advent of cloud computing. Our article offers

a critical roadmap to the status of clouds under these



provides suggestions for a more elaborate research

agenda on cloud computing in the EU policy sphere.

B. On cloud computing:

Definitions, market, policy

7 Cloud computing is a new development combining

different services in a manner that arguably revolu-

tionizes computer and Internet usage. The central

feature of cloud computing is that existing and no-

vel computing applications are increasingly being

performed in a ‘cloud’ online – i.e. not on users’

own hardware.8 The announcement by Google and

IBM of their collaboration on cloud computing re-

search in 2007 sparked broader public awareness

of cloud computing.

9

The ‘revolutionary’ aspect of

cloud computing, however, may sometimes be over-

stated, as many applications of cloud computing –

think of webmail – have been around since the Inter-

net became popular for consumers.10 Indeed, some

have remarked that the move to cloud computing

demonstrates a cyclical progression in computing:

from centralized mainframes, to personal compu-

ters, to personal computers tied together in clouds.

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I. Relevant characteristics

of cloud computing

8

The underlying idea of cloud computing seems to

be that functions that are now discharged either on



(LAN) server would be moved to the ‘cloud’. The pos-

sibility of placing in the ‘cloud’ well-established lo-

cal applications such as word processors or spreads-

heets – and the documents produced therewith – has

caught the public imagination and has brought cloud

computing to the fore.