FTC Comments Filed: “Business Practices of Cloud Computing” and Small Business

By SBE Council at 20 June, 2023, 1:04 pm

Federal Trade Commission

600 Pennsylvania Avenue NW

Washington, DC 20580

Re: FTC Docket FTC-2023-0028, Solicitation for Public Comments on the Business Practices of Cloud Computing Providers

To Whom it May Concern:

On behalf of the Small Business & Entrepreneurship Council (SBE Council), I am pleased to respond to the Federal Trade Commission’s Request for Comment on the Business Practices of Cloud Computing Providers.

SBE Council is an advocacy, research and education organization dedicated to protecting small business and promoting entrepreneurship. Since our founding 29 years ago, our work has focused on strengthening policies and programs that encourage startup activity, small business growth, economic opportunity and resiliency through entrepreneurship.

Much of our work concentrates on modernizing rules and laws, lowering barriers to entry, eliminating unnecessary red tape, promoting regulatory and tax fairness, advancing affordable choices in health coverage, and expanding policies that strengthen capital formation and access, investment, access to markets, and innovation.

The above issues have remained top priorities for small businesses and startups over the past decade and longer. The pandemic and its aftermath brought their own set of challenges for small businesses – such as inflation, supply chain glitches, severe labor shortages, and now increasingly, lack of access to capital and credit. Therefore, entrepreneurs want lawmakers and government officials focused on policy solutions and endeavors that help to resolve their pain points. The subject matter of the FTC’s review of the business practices of cloud computing providers, and the various “problems” it is seeking information on with respect to those services, has not emerged as a problem or concern – at all – within the small business community. In fact, small business owners are quite pleased with the quality, choices, value, and data security services they are receiving from their providers.

Small Businesses Have Greatly Benefited from Tech Innovation and Cloud Services

Technology, obviously, has been a driver of small business growth and competitiveness. It has been critical to small business efficiency, productivity and startup activity. Cloud services are a core component of a business’s operational ecosystem, and these services became even more important during the pandemic and in its aftermath, as I highlight in several small business surveys below.

Small businesses dominate every sector of the U.S. economy. This is certainly the case across the technology industry.

For example, within the “Data Processing, Hosting, and Related Services” sector of U.S. Census Bureau industry data (of which cloud computing services fall under), not surprisingly we find that the sector is overwhelmingly populated by small businesses:

Data Source: U.S Census Bureau (2019 latest data available)

Smaller firms in this important sector drive innovation within the industry and across industries, and help to make our economy more vibrant and competitive. So, when it comes to new regulation or potential regulation that may be imposed upon an industry (or industry sector), it is important to understand the potential downstream impact on smaller firms in that industry, as regulation disproportionately impacts small businesses through higher costs and increased burdens. Moreover, most larger firms utilize small businesses as suppliers, therefore regulatory effects may produce negative outcomes or unintended consequences for these suppliers. In addition, new regulatory requirements or intrusions may raise costs, limit innovation or upend services or product offerings for the small business consumers of those services. That is why it is fundamental to the regulatory process, that agencies and regulators provide small businesses with a voice when considering new regulations to determine if action is actually required, consider the impact these proposals may inflict on small businesses as innovators and consumers, and if action is taken to limit the damage on small businesses or consider alternatives.

As I noted above, the use of cloud services and technology platforms greatly accelerated during the COVID-19 pandemic. While digitization and the use of cloud services was increasing and becoming more prevalent among various types of small businesses prior to the pandemic, many small businesses upped their cloud usage following the shutdowns in order to communicate with employees and customers, make payroll, process orders and invoices, for e-commerce support, sales and expense tracking, and much more. According to a June 2020 survey conducted by SBE Council, about the use of cloud services during the early months of the pandemic and shutdown period:

● 84% of small business owners reported that cloud services were essential to operating their business, and 84% reported that cloud services improved employee productivity and collaboration.

● 67% of small business owners agreed that they were able to reopen more quickly and efficiently as a result of using cloud services.

● 89% of small business owners reported that using cloud technology saves them time and money.

● Not surprisingly, 36% of small business owners said that they subscribed to or retained new or additional cloud software or services as the COVID-19 shutdowns continued.

● 76% said that cloud services were critical to the survival and operation of their business during the COVID-19 shutdowns, with 79% saying that cloud services helped their businesses more effectively communicate with and/or better manage their customers amid COVID-19.

From COVID-19 to the Current Period 

Fast forward three years from June 2020, and we find that small business owners have a high comfort level with using technology, cloud services, and platforms in most aspects of their businesses. In fact, according to a June 2023 survey SBE Council published on immersive technologies, cloud services and artificial intelligence, we found that small business owners are enthusiastically embracing technology and are happy about how it is enhancing their businesses. Moreover, and specifically related to cloud services, small business owners have very high confidence and satisfaction levels with their cloud services providers.

In the June 2023 survey, SBE Council found:

93% of small businesses utilize cloud computing services, with cloud backup and email/web hosting being the most popular applications.

Small business owners also feel they have ample choices in the marketplace when it comes cloud providers, and they are pleased with the value they receive from their service providers, according to the survey.

Regarding the availability of cloud service providers, 81% of small businesses state that they have a sufficient number of providers to choose from.

Other key findings of the survey show that small business owners are solidly confident in their cloud service providers when it comes to the quality of services, and in the security and protection of their data. For example, according to the June 2023 survey:

● Satisfaction levels with the quality of cloud computing services are high, as 97% express satisfaction with services: 51% report being very satisfied with the quality of services received from their providers, 46% are somewhat satisfied.

● Regarding data security, 92% of small businesses express confidence in the security and protection provided by their cloud service providers. Among them, 44% are very confident; another 48% are somewhat confident, while only 7% lack confidence.

The satisfaction level and confidence among small business owners are quite impressive when it comes to cloud services, which speaks to the quality and professionalism of the cloud services ecosystem and its ability to serve millions of small businesses and consumers with great efficacy. As advocates for small business owners and entrepreneurs, we are concerned that potential FTC regulation in this area, where large-scale problems do not exist, is inappropriate given no signs of market failure or abuse. Moreover, government already has the tools to deploy remedies or actions against individual industry players when they may exhibit irresponsibility with their data-security responsibilities or their pledge to deliver agreed upon services to consumers. As I note below, startups and small business owners want the Administration focused on resolving their key pain points, not wasting resources on fishing expeditions where problems do not exist.

Source:  Small Business Checkup Survey, June 2023, SBE Council

Given the vast role that small business play in the cloud services industry – again they dominate this industry in terms of their numbers and as a percentage of the industry – as well as the unique role small businesses play in our economy and local economies, their views and use of cloud services is an important factor for the FTC to consider as the agency possibly moves forward with potential regulation. Their views, the impact of potential regulation on their businesses, and their overall satisfaction with their choices and services they receive must be taken into consideration.

Again, before possibly moving forward with new regulatory initiatives that could negatively affect small businesses and the overwhelming number of responsible players in the cloud services industry – as well as the millions of consumers who utilize cloud services for business and personal uses – the FTC must determine whether existing authority already allows for actions or enforcement that can be used for isolated problems that emerge. Moreover, the voice of small businesses is critical on this issue and we urge the FTC to be inclusive and diligent in considering the views and impact on America’s small business sector.

Sincerely,

Karen Kerrigan

President & CEO