COMMENT
In the middle of the assembly criticisms AND regulatory control of its anticompetitive practices, Microsoft, in late February, announced a series of Principles of access to AI which it believes will guide its relationships and business practices in the new artificial intelligence (AI) economy.
The principles were introduced by company president Brad Smith at the Mobile World Congress in Barcelona to frame Microsoft’s recent investments and programs in artificial intelligence across Europe, including a partnership with the French company Mistral AIwhich has already drawn the attention of European regulators.
If the goal is to foster greater competition and innovation in the AI ecosystem, there’s a lot to like in what Microsoft He says aims to achieve. The problem is that innovation and competition do not develop with words alone. Microsoft, in recent years, has effectively built a “walled garden” around OpenAI through a series of investments totaling over $13 billion. These came, in part, as Azure cloud credits that forced OpenAI to develop its models on Microsoft’s closed cloud computing platform.
Microsoft’s long experience
If Microsoft was truly changing its philosophy and approach to the economics of AI, that would be a great thing. But his actions must uphold his noble principles.
Microsoft has a long history of proclaiming principles and changes supposedly to support competition, but only in the face of looming pressure from competition authorities. Smith noted exactly that in his announcement, saying that Microsoft saw 15 years of controversy and litigation related to its market position before publishing the “Windows Principles” in 2006 to allay concerns about innovation and competition in that generation of technology. In 2023, facing an antitrust investigation by the European Commission related to the bundling of Teams with Microsoft 365 and Office 365, Microsoft has announced a series of steps it would be necessary to address the commission’s concerns by calling the steps “proactive” only because they occurred before the investigation could be completed.
The new AI-driven economy is taking shape much faster. OpenAI’s revenue reached $2 billion in December, making it one of the fastest-growing tech companies in history. Businesses across the economy are redesigning their information systems and business processes to leverage the capabilities of artificial intelligence and deserve the benefits of open competition. They should be able to access the best products for their needs at each level of the AI stack and be assured of interoperability between them. They should be able to move data, implement different models, and choose the best and most secure cloud services.
Since introducing its principles of access to artificial intelligence and following similar moves first by Google and then Amazon Web Services, Microsoft announced will no longer charge customers an exit fee to remove their data from Azure. Before this, customers faced excessive and discriminatory costs if they wanted to move or transfer their data to other providers. Microsoft’s move is an important step toward a more free and open market, but there are additional actions Microsoft can and should take now to continue to prove its point.
First, Microsoft should revoke its exclusivity agreement with OpenAI, which is in direct conflict with its stated commitment to free and open competition and access to artificial intelligence. Maintaining this exclusivity agreement would only strengthen Microsoft’s walled garden, increasingly limiting customer and partner choice, disadvantaging other cloud providers, and foreclosing software vendor competition in ancillary markets.
Second, Microsoft should eliminate excessive costs for customers who choose to host products on competing cloud platforms. There is no justification for the up to Price increase of 300%. that Microsoft designed for customers choosing non-Azure cloud infrastructure. Such practices are cost-prohibitive and anti-competitive. As these business practices are extended to Microsoft products that incorporate AI tools and capabilities, they drag old and insidious anticompetitive dynamics into the new AI economy.
Finally, Microsoft should make multicloud interoperability real by reviewing its restrictive and discriminatory licensing practices that bundle its AI tools and software packages. As OpenAI’s exclusive cloud provider, Microsoft has removed customers’ ability to access OpenAI models using multiple vendors. A free and open market simply cannot exist without multi-cloud interoperability.
Smith said: “We have a responsibility to help spur innovation and competition in the new AI economy that is rapidly emerging.” The time to act on these principles is now. The responsibility to hold Microsoft accountable for complying with its self-proclaimed principles should not fall on customers and competition authorities. If Microsoft had learned from the past, as he says, then these three actions could go a long way toward proving his point. More importantly, they would benefit competition and innovation for the entire AI ecosystem, including Microsoft in the long term.