Days after Amazon's cloud services company AWS suffered an outage that sent popular websites and apps into oblivion for millions of users, questions still remain about why we're so dependent on a handful of companies in the first place—and why it may be difficult to prevent another outage.
Reminds me of last year Disabling CrowdStrike And Rogers shutdown In 2022, Monday's disruptions highlighted how many parts of the economy depend on one company.
Snapchat, Pinterest, Reddit and Spotify went offline. Starbucks app — along with DoorDash and Grubhub — was struggling to accept food and drink orders, and the Lyft app was having trouble connecting drivers with passengers. Some Venmo users couldn't transfer money, and some Zoom users couldn't make video calls.
Streaming services such as Netflix, Disney+ and Amazon's Prime Video were affected, as were messaging services WhatsApp and Signal. UK government websites stopped loading properly, as did some platforms. used by the National Health Service.
As Atlantic writer Will Gottsegen put this ontechnological failures occur – “but under our current system, a bad day for Amazon can be a bad day for everyone.”
And as it stands, AWS captured nearly a third of the global cloud services market in the second quarter of this year, with Microsoft Azure and Google Cloud not far behind.. Together, these three companies control more than 60 percent of the cloud market.
So what about companies balloon to capture large swathes of a particular market?
There are several ways, say experts who spoke to CBC News. While some companies may be early innovators who naturally stay ahead of their competitors, many of the world's largest firms have been accused or investigated of using anti-competitive practices to stay on top.
Success creates a “snowball effect”
In July this year, the UK antitrust regulator published a report arguing that AWS's large share of the country's cloud services market is harming competition and recommended an investigation. Amazon's parent company objected, saying the report ignored “clear evidence of strong competition.”
Several years ago, Amazon was also accused of maintaining monopoly power in the United States through deceptive practices related to its Prime service. The company did not admit guilt. saying that Amazon and its executives “always followed the law” but agreed to settle the matter with a landmark $2.5 billion deal with the US this year.
When market power is held by a single company (monopoly) or dispersed among a small number of companies (oligopoly), it can “create fragility in our economy and a lack of sustainability,” said Robin Shaban, co-founder and chair of the Canadian Antitrust Project.
Some digital companies, such as ride-sharing apps or social media platforms, are growing quickly because they have “unique characteristics that make them more valuable the more people use them,” Shaban said.
“The more useful the platform is, the more users you have, the more accounts you have. And that creates a snowball effect,” Shaban said. “One company begins to dominate the market because it is the most efficient way for that company to make a profit.”
Super-sized businesses can also develop as a result of the merger of two large companies or as a result of “killer acquisitions.” The latter describes cases where a large company buys smaller companies that might otherwise become major competitors, Shaban said.
Some Canadian markets are monopolized by a few large companies, including products, airlines And banking. But too much competition—especially without consumer demand—can create a cutthroat environment that is not sustainable and unprofitable for the business in the long term.
“Oligopoly, monopoly and cut-throat competition are two ends of a very long spectrum. And there’s a lot of room for maneuver on that spectrum,” Shaban said, noting that public policy needs to reflect these market dynamics.
“There is no optimal number” of competitors
But big is not necessarily bad, and companies are even allowed to dominate markets, said Vass Bednar, managing director of the Canadian SHIELD Institute, a public policy think tank focused on sovereignty issues, and co-author of the study Big fix: How companies are cornering markets and hurting Canadians.
“Strong markets are about more than just counting the number of competitors… There is no optimal number,” Bednar said.
“But if we ignore the realities of how firms compete or how they are structured, how they have evolved over time, then conversations about things like barriers to entry or bringing a new entrant into the market are going to be really difficult.”
Amazon's cloud services unit (AWS) says it is recovering from a roughly three-hour outage on Monday that disrupted businesses around the world. Affected services include several popular websites, apps and major banks.
Some companies, especially those that have established themselves as “everything” companies with tentacles spanning different sectors and supply chains, can grow because they use one part of their business to financially offset other parts of it, Bednar said.
It could also help them “significantly undercut competitors to eliminate them, either take them out of the market or devalue them, and then acquire them because, as a company, they are not one thing,” she said.
They may also use a strategy called vertical integration, in which they control multiple parts of their supply chain rather than outsourcing the work to another firm.
Is there protection?
Several Canadian companies were directly or indirectly affected by Monday's AWS outage, including wealth management platform Wealthsimple, which said there were technical problemsand the Toronto Blue Jays, as some fans have been talking about. there were problems purchasing tickets after Ticketmaster was interrupted due to an outage.
Jennifer Quaid, a civil law professor at the Faculty of Law at the University of Ottawa, said disruptions are likely inevitable and that the question to ask is, “What measures are in place to ensure that dire or catastrophic consequences do not occur when they do?”
According to Quaid, some sectors of the economy are considered too important to fail because those sectors have built-in reserves: backup infrastructure that is not needed for day-to-day functioning but can kick in when the core infrastructure fails.
“This happens, for example, in the nuclear industry. You simply cannot afford a security failure,” she said.
In a report last year, the Canadian Radio-television and Telecommunications Commission said Rogers' blackout in 2022 could have been prevented if the company's systems there was no shortage of certain reserves. Changes have since been made to address the root cause of the failure, the regulator said.
Amazon's web services outage shut down huge swaths of the internet, from Snapchat to Fortnite, Netflix to Venmo. Is it time for Canada to rethink its digital infrastructure?
With something like AWS, “you would have to identify parts of the Internet or types of Internet usage that would be considered so critical that they would require backups or some kind of sharing mechanism with other providers,” Quaid said.
When it comes to protecting Canadian consumers from vulnerabilities foreign owned infrastructure“We have no defense against this,” Bednar said.
However, she said, “we are now much more aware of this interdependence, how this interdependence has been weaponized, and much more motivated to invest more in digital infrastructure here at home.”
