In this third piece of the Data Act series, we discuss the way in which the Data Act regulates switching between cloud service providers and how this can affect startups. 

The Data Act aims to facilitate switching between cloud services by removing commercial, technical, contractual, and organisational obstacles. This is regulated in Chapter VI (Articles 23 to 26 of the Data Act). This is achieved through a series of obligations on “data processing services”, i.e. cloud and edge service providers, aimed at removing such barriers and allowing users to switch cloud services with ease. This is established based on the idea that access to competitive and interoperable cloud services is a precondition for a flourishing data economy. To that end, these rules aim at safeguarding the users’ right, including startups, to switch providers.

Startups often rely on cloud services, allowing them to switch more easily between cloud service providers is in their benefit. Easy cloud-switching can create a more dynamic marketplace for startups and potentially lower cloud services’ prices. However, we call on the regulators to take into account the barriers that the Data Act’s rules on cloud-switching may create for startups operating as cloud service providers or aiming to enter the cloud services’ market if the obligations placed upon them entail high costs or they are technically complicated to implement. 

So, what changes do we suggest to these requirements?

First, the concept of functional equivalence can be problematic for startups operating as cloud service providers, since it places obligations on originating cloud service providers that may require complex technical operations to be completed. Technical feasibility aside, the originating cloud service provider would be accountable for the performance of its competitor (the destination cloud service provider), which we don’t consider fair or conducive to innovation. 

In addition, in certain instances, startup cloud service providers might face challenges to comply with the mandatory transition period (set at 30 days) for completing the switching to other cloud service providers. While simple migrations can be completed within that timeline, more complicated ones could be significantly more time-consuming. This would be especially true for startups, which generally have limited resources. Therefore, even if complying with this requirement was technically possible, it would give well-established players with more technical means a competitive advantage in comparison to smaller players such as startups.