Microsoft gatekeeping OpenAI models saddles AI rivals with costs, report says.
OpenAI CEO Sam Altman (L) shakes hands with Microsoft Chief Technology Officer and Executive VP of Artificial Intelligence Kevin Scott during the Microsoft Build conference at the Seattle Convention Center Summit Building in Seattle, Washington on May 21, 2024. Credit: JASON REDMOND / Contributor | AFP
Google reportedly wants the US Federal Trade Commission (FTC) to end Microsoft's exclusive cloud deal with OpenAI requiring anyone who wants access to OpenAI's models to go through Microsoft's servers.
Someone "directly involved" in Google's effort told The Information that Google's request came after the FTC began broadly probing how Microsoft's cloud computing business practices may be harming competition.
As part of the FTC's investigation, the agency apparently asked Microsoft's biggest rivals if the exclusive OpenAI deal was "preventing them from competing in the burgeoning artificial intelligence market," multiple sources told The Information. Google reportedly was among those arguing that the deal harms competition by saddling rivals with extra costs and blocking them from hosting OpenAI's latest models themselves.
In 2024 alone, Microsoft generated about $1 billion from reselling OpenAI's large language models (LLMs), The Information reported, while rivals were stuck paying to train staff to move data to Microsoft servers, if their customers wanted access to OpenAI technology. For one customer, Intuit, it cost millions monthly to access OpenAI models on Microsoft's servers, The Information reported.
Microsoft benefits from the arrangement—which is not necessarily illegal—of increased revenue from reselling LLMs and renting out more cloud servers. It also takes a 20 percent cut of OpenAI's revenue. Last year, OpenAI made approximately $3 billion selling its LLMs to customers like T-Mobile and Walmart, The Information reported.
Microsoft's agreement with OpenAI could be viewed as anti-competitive if businesses convince the FTC that the costs of switching to Microsoft's servers to access OpenAI technology is so burdensome that it's unfairly disadvantaging rivals. It could also be considered harming the market and hampering innovation by seemingly disincentivizing Microsoft from competing with OpenAI in the market.
To avoid any disruption to the deal, however, Microsoft could simply point to AI models sold by Google and Amazon as proof of "robust competition," The Information noted. The FTC may not buy that defense, though, since rivals' AI models significantly fall behind OpenAI's models in sales. Any perception that the AI market is being foreclosed by an entrenched major player could trigger intense scrutiny as the US seeks to become a world leader in AI technology development.
The FTC, Microsoft, and OpenAI are so far not commenting on The Information's report, but Google's spokesperson told The Information that the company is "committed to building the most open AI ecosystem in the world" and wants to host "as many AI models as possible."
Trump administration, or even OpenAI, could kill the deal
As the FTC continues circling the Microsoft/OpenAI deal, it seems possible that OpenAI may soon want out, The Information reported.
OpenAI initially agreed to the exclusive deal as a condition of receiving $13 billion in Microsoft funding, but the company has been "frustrated" by the limited "amount of servers the startup gets from Microsoft," The Information reported. To stay ahead of AI rivals, OpenAI may need access to more servers from other tech giants like Google or Amazon, the thinking goes. And if Microsoft perceives a benefit of ending the exclusive deal to prioritize AI innovation, it could dissolve before any officials get a chance to meddle with the terms.
Whether the FTC will continue monitoring Big Tech competition as heatedly under the upcoming Trump administration also remains unclear. Yesterday, Donald Trump announced that Andrew Ferguson, a current Republican FTC commissioner, would be replacing Lina Khan as FTC chair.
According to The New York Times, Ferguson has "promised to ease up on the policing of powerful American companies—except for the biggest technology firms," which he thinks should continue facing "strong scrutiny." However, The Information pointed out that Ferguson expects that the nascent AI market "could potentially dislodge existing monopolies or duopolies."
That thinking seems more in line with Microsoft's defense of its OpenAI deal as facing robust competition in the growing AI market than with Google's reported stance that Microsoft is unfairly paying to shut out rivals from effectively competing.