Public Clouds : An Unregulated Utility

What is a utility? It’s a little like art or pornography – we know it when we see it.

Public cloud services such as backup services, photograph storage like Flickr, and email like Gmail are quickly becoming completely ingrained in the fabric of modern life. The Internet offers a host of free or low-cost services that we come to rely on for managing, storing, and sharing our data. In fact we have become as dependent on these services almost as much as phone, electricity, and energy services. To me that makes them data utilities but unregulated ones.  And that’s dangerous.

In the past one of the defining elements of a utility was a sanctioned monopoly. There was only one gas company, only one phone company, and only one water company. If you didn’t like their service or their prices then tough! Back in the day, when our US Presidents were manly men who acted manly and had manly mustaches (such as Teddy Roosevelt), it was decided that this was a bad thing. These monopolies had the people by the… throat and that would not do. However, these were not just manly politicians. They were reasonably intelligent ones (and a few may have been receiving perfectly legal contributions from the utilities) who understood the importance of monopolies to early business development. So they struck a bargain. You get to keep your monopoly Mr. Phone Company President and we will regulate you and tell you what you can charge, what your service (i.e. product) will be like, and everyone will be happy. The people won’t get a royal screwing (we being Americans and not liking royal anything one bit) and the monopoly/utility will get unreasonable amounts of money. Bully for us!

Then, in an era of still manly Presidents (Yes sir Mr. Reagan sir!) but less manly politicians in general, things changed. Competition was the byword and deregulation become the way to do business like an American. Let the market, not big government, decide. However, deregulation does not mean no regulation. You see Mr. Cable Company CEO, you still need to pull wire through OUR towns. So we can tell you what to do. You still have a market share that is monopolistic? That means we can still regulate you so that we have no royal anything going on here in America. And this is why the cable company can’t raise rates when it wants to. What could be more un-American than making 500 channels of television unaffordable! Wars have been fought for less.

So what does this have to do with Public Cloud services. Even if you are enjoying the spirited economic history lesson (bully for you!) it is a reasonable question. You see, as we become more and more dependent on cloud services for functions that are important to our lives, they have us by the throats again. Do you want to see your photos disappear suddenly? Could you really live without Facebook? Not if you’re a 17 year old girl. Take away Facebook and their phones and you have a mental health crisis on your hands. Worse, if you are a small business that is using an online backup service or email from Google, Yahoo, etc. you rely on it to make your living. Don’t want that living to dry up so that you have to live in a cardboard box? Pay up! Mr. Roosevelt would not be amused.

This is only getting worse as smaller companies embrace cloud services for IT. Salesforce, Amazon, Google, and a host of other companies provide services that are critical to business. Worse, moving from one service to another is not trivial. Go ahead, try and change your email account, the one that all of your customers already have in their address books. It would become a symphony of missed opportunities.

Let’s take Mozy as an example. When they recently announced changes to their service plans, they did so as if it was just any old product – they just did it. Sure they risk losing customers especially amongst the geeky crowd. Clearly that isn’t bothering them too much. Why? Because changing is a pain and quite difficult for people who don’t know much about technology. For geeks like me, switching to another service isn’t all that hard. [Note: It was real easy for me personally because I didn’t use Mozy. Tried it years ago and didn’t much like it.] For the average American who got Mozy bundled with their new laptop, has no home infrastructure, and is scared stupid of losing their latest podcast about hipster living in New York City, switching is beyond them.

So Mozy, like lots of other cloud services, has nearly unlimited pricing power. They have their customers by the throat. For them, pouring costs into gaining new customers makes perfect sense. Worrying about losing them doesn’t. These people can’t really leave even if they want to. This is the modern definition of a utility. This is not to pick on Mozy (okay maybe a little) because there are lots of similar cloud services that have the same model. Herd in the cattle, pen them up, and do what you want to them.

Here’s what I think will happen. Nothing.

We do not live in an era of government officials with marvelous mustaches. They lack the moxie to stand up to a banking industry capable of bringing the entire world economy to its knees. Why would we expect them to even care about unregulated data utilities? That is, until they are forced to choose between losing their pictures of themselves with celebrities or paying through the nose to people who don’t contribute to their campaigns.

As consumers, what can we do. Be careful. Know the technology that you rely on enough to switch to a competitor. Build you own infrastructure and make the cloud secondary. All good ideas that enhance good ole American competition. It still won’t help when Facebook decides to start charging. Then you will have to man up and do without. Bully for you!

If I was a cloud service, I would starting looking at lobbyists and handing out contributions. You never know when a a member of the House Committee on  Committee on Science, Space, and Technology will suddenly be faced with paying to share pictures of their grandkids. Then you will see just how manly our government can be.

Fun U.S. History fact: The last U.S. President to sport a fantastic mustache in office was President Taft. Mr. Obama, it’s time!