Today’s AI systems are built on and accessed using cloud computing, a $600 billion market dominated by Amazon, Microsoft, and Google. Yet despite its central role in the modern economy and national security, the cloud sector remains underanalyzed and unregulated. A new report by Asad Ramzanali of the Vanderbilt Policy Accelerator (VPA) offers a detailed legislative roadmap for creating a competitive and secure cloud market.

The paper identifies five market failures—concentration, vertical integration, conglomerate effects, opaque pricing, and high switching costs—that undermine competition and innovation. In addition, the paper highlights two major national security risks: cross-sectoral dependence on three Big Tech cloud providers and the critical role of cloud infrastructure in today’s U.S.-China geopolitical AI competition.

“Cloud computing is a concentrated industry that lacks the features of a healthy market,” said Asad Ramzanali, VPA’s director of AI and technology policy. “Because companies and government agencies depend on the cloud and it is critical to global technology competition, failures in this market are national security risks. Policymakers can and should deploy tried-and-tested economic and national security policies to mitigate these risks.

Building on historical precedents in regulating utilities, Ramzanali proposes legislation to implement a package of reforms, including:

Structural separation to eliminate conflicts of interest;
Neutrality requirements to prevent discriminatory pricing and service quality;
Data portability and interoperability to reduce lock-in;
Critical infrastructure designation to improve resilience;
Restrictions on foreign ownership of cloud companies to safeguard security; and
Know-your-customer requirements to mitigate misuse.

Together, these measures would encourage competition and strengthen resilience to a market that serves the priorities of the American public.

Read about the analysis on VPA’s Substack, or visit the VPA website to read more papers on AI governance.

The Vanderbilt Policy Accelerator for Political Economy and Regulation (VPA) focuses on cutting-edge topics in political economy and regulation to swiftly bring research, education, and policy proposals from infancy to maturity. To learn more about their work, visit vu.edu/vpa.