Microsoft Wants You to Watch What It Says, Not What It Does

COMMENTARY

Amid mounting criticisms and regulatory scrutiny of its anticompetitive practices, Microsoft, at the end of February, announced a set of AI Access Principles that it says 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 AI investments and programs across Europe, including a partnership with the French company Mistral AI, which has already drawn the attention of European regulators. 

If the goal is to promote greater competition and innovation in the AI ecosystem, there is a lot to like in what Microsoft says it aims to achieve. The problem is that innovation and competition are not advanced by words alone. Microsoft, over the past several years, has built a de facto "walled garden" around OpenAI through a series of investments totaling more than $13 billion. These came, in part, as Azure cloud credits that bound OpenAI into developing its models on Microsoft's closed cloud computing platform. 

Microsoft's Long Track Record

If Microsoft is indeed changing its philosophy and approach to the AI economy, that would be a very good thing. But its actions need to back up its lofty principles. 

Microsoft has a long track record of proclaiming principles and changes purportedly in support of competition — but only when facing looming pressure from competition authorities. Smith noted exactly this in his announcement, saying Microsoft saw 15 years of controversies and litigation related to its market position before publishing "Windows Principles" in 2006 to assuage concerns about innovation and competition in that generation of technology. In 2023, facing an antitrust investigation by the European Commission related to its bundling of Teams with Microsoft 365 and Office 365, Microsoft announced a series of steps it would take to address the commission's concerns — calling the steps "proactive" only because they came before the investigation could be completed. 

The new AI economy is taking shape much more rapidly. OpenAI's revenue hit $2 billion in December, making it one of the fastest-growing technology companies in history. Enterprises across the economy are re-engineering their information systems and business processes to make use of AI capabilities, and they deserve the benefits of open competition. They should be able to access the best products for their needs at every level of the AI stack and be assured of interoperability between them. They should be able to move data, deploy different models, and choose the best and most secure cloud services.

Since introducing its AI Access Principles and following similar moves first from Google and then from Amazon Web Services, Microsoft announced it would no longer charge customers an exit fee to remove their data from Azure. Prior to this, customers had faced excess and discriminatory costs if they wanted to move or transfer their data to other providers. Microsoft's move is an important step toward a freer and more 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 AI access. To maintain this exclusivity agreement would only build Microsoft's walled garden higher by increasingly restricting customer and partner choice, disadvantaging other cloud providers, and foreclosing competition by software providers in ancillary markets.

Second, Microsoft should eliminate egregious upcharges for customers who choose to house products on competing cloud platforms. There is no justification for the up to 300% price increase that Microsoft has engineered for customers who choose a non-Azure cloud infrastructure. Such practices are cost prohibitive and anti-competitive. As they get extended to Microsoft products that incorporate AI tools and features, these business practices drag old and insidious anti-competitive dynamics into the new AI economy. 

And last, Microsoft should make multicloud interoperability real by revising its restrictive and discriminatory licensing practices that bundle its AI tools and software packages. As OpenAI's exclusive cloud provider, Microsoft has taken away customers' ability to access OpenAI models using multiple vendors. A free and open market simply can't exist without multi-cloud interoperability. 

Smith said, "We have a responsibility to help spur innovation and competition across the new AI economy that is rapidly emerging." The time for acting on these principles is now. The responsibility to hold Microsoft accountable for abiding by its self-proclaimed principles shouldn't fall to customers and competition authorities. If Microsoft has learned from the past, like it says it has, then these three actions would go a long way toward proving its point. More importantly, they would benefit competition and innovation for the entire AI ecosystem, including Microsoft in the longer term.