It's time to spin AWS out of Amazon: They regulate utilities, don't they?

The world is learning that the big web companies have too much power and too little accountability. They are now utilities, essential to people's daily lives, and should be regulated as such. An easy place to start: Amazon Web Services. Here's why.

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You probably use AWS dozens of times a day, without realizing it, through the millions of websites they host. But there's way more to AWS than website hosting. Virtually all large companies now use AWS to host, store, network, secure, and manage critical corporate data using hundreds of AWS services. AWS is a virtual data center in the cloud. And it's working to extend its lead to quantum computing.

AWS grew out of Amazon's own need for immensely scalable infrastructure. In 1998 I was part of a team from a major systems vendor who flew to Seattle to listen to Amazon execs present its problem and ask for a solution.

At that point they were just selling books, DVDs, and CDs, and even the largest IBM mainframe wasn't keeping up. My company had nothing for them - no one else did either - so they ended up hiring a bunch of PhDs and rolling their own.

Once Amazon started hosting storefronts for sellers, it didn't take long to realize that their infrastructure itself was a salable commodity. AWS was founded in 2006, at the same time that Google developed similar scale-out capabilities with the Google File System.

But Google waffled for years on offering cloud services - advertising was so easy - while Amazon plunged in. Today AWS owns about a third of the cloud computing market - over $40 Billion a year - with Google less than a fifth of that.

So why should it be spun-off?

Today, it is safe to say that you can't build a datacenter of any scale without using cloud services, and that means AWS. Amazon's Prime video runs on AWS, and so does Netflix, Disney+, and Hulu.

That means AWS has deep insight into its competitors' businesses. Or any other business AWS hosts.

Now, I'd be surprised if AWS hasn't offered all kinds of promises and assurances that such critical competitive data isn't available to the rest of Amazon. But if centuries of corporate misbehavior have taught us anything, it is that companies are quite willing to lie for their own benefit, especially when the bottom line is threatened. Maybe not today, but when times get tough.

There's another competitive issue: Amazon runs on AWS, so it gains a competitive advantage not only from its own scale, but from the scale of AWS too. If you want to compete with Amazon, your webservice also has to compete with AWS. That isn't fair.

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Finally, AWS has much higher profitability than Amazon's retail business. Why shouldn't Amazon's retail business have to compete without what is, in effect, the subsidy it gets from AWS income?

Historical precedent

IBM started a business in the 1930s that enabled smaller companies to access IBM equipment without the commitment of an in-house installation. With the advent of digital computers, the Service Bureau Corporation rapidly expanded, and gave IBM a considerable advantage in finding new customers and upgrading them. In 1957 IBM entered into a consent decree with the US Justice Department and spun the Service Bureau off as a separate company, ultimately selling it to Control Data in 1973 as part of a larger anti-trust settlement.

The take

I'm a lifelong, MBA-holding capitalist tool. We have ample experience with enterprises with so much power that they can tilt the playing field and disadvantage competitors. Doing so is just good business, which is why we need to referee capitalist games.

Amazon's AWS is now a utility, and should provide services to all comers without price or service discrimination, or the threat of competitive info leaks. While corporate lackeys have pushed the idea that concentrated market power is only a problem if it raises consumer prices, the damage is much broader than that: economic stagnation and, ultimately, a weaker economy.

As we look to reign in our corporate web masters, AWS is a good place to start, but not the last.

Comments welcome. I don't feel sorry for the big web companies. After all, they're only victims of their success. What do you think?