The government should stop relying so heavily on the likes of Amazon Web Services (AWS) and look to instead build publicly-owned cloud infrastructure for the national good, according to civil society group Digital Rights Watch.

In its submission to a senate inquiry into the influence of international digital platforms, Digital Rights Watch called the Commonwealth and states spending hundreds of millions of dollars on cloud services through AWS “little more than a transfer of public wealth into private hands”.

“Not only are critical functions of the government running on computing infrastructure owned and controlled by Amazon, there is doubtlessly personal information about Australian citizens, as well as population level insights and other highly sensitive information passing through Amazon’s servers,” the submission said.

From September 2013 to April 2023 this year, AWS had won more than $712 million worth of Australian federal government contracts, according to data from AusTender.

That includes a $390 million “whole of government agreement”, the cost of which has blown out from its original 2019 estimate of $39 million.

Last year, the centre for International Corporate Tax Accountability and Research (CICTAR) published a report that criticised AWS’s tax minimisation strategies in Australia.

During the 2021 financial year, AWS Australia wrote reported a $37 million loss off the back of $1.1 billion in administrative expenses – of which a quarter was from cloud services fees ($223 million) back to Amazon and payments for intangible assets ($55 million).

CICTAR described these line items as “large, typically offshore, related party transactions [that] are common indicators of aggressive tax avoidance by multinationals”.

Digital Rights Watch wants to see more direct ownership and control of the assets that are crucial for 21st century society, so they are no longer fully owned by corporations that aren’t “democratically accountable to the people they supposedly serve”.

To that end, the organisation has suggested the creation of an Australian Digital Corporation that would be to digital services what the CSIRO is to science and the ABC is to news and culture.

“In order to nurture Australian political, economic and cultural democracy, the Australian people need to take a stake in the development of digital technology and begin to shape our own future through a public institution,” Digital Rights Watch said.

“Privately owned digital platforms are pushing into more of our lives. Unless we act now to develop publicly owned alternatives, we risk a future where unaccountable, private and often foreign companies alone set the rules that govern our lives.”

Competition in the cloud

The senate committee asked respondents to consider the Australian regulatory environment for cloud computing and how to improve competition, noting that the cloud market is “dominated by a small number of large players” – in particular AWS, Microsoft Azure, and Google Cloud.

Amazon, for its part, disagrees that there is a need for greater competition, saying in its submission that the Australian market is “highly competitive” and that the behemoth – which owns more than a third of the global cloud market share – “faces intense competition from numerous providers of IT solutions with different delivery models”.

The Digital Transformation Agency (DTA) suggested a few ways the government could promote more competition, including through “caps on the level of spend with a single provider or with large vendors”.

The DTA also said the government could invest more in the local industry to support smaller market players.

Further supporting the need for more local cloud competition is the DTA’s statements around how international cloud providers have struggled with some requirements under the Hosting Certification Framework (HCF) which mandates that data not leave Australia.

“The DTA has found that global service providers, with workforces and facilities located outside of Australia, have had challenges in complying with some of the control objectives under the HCF,” it said in its submission to the senate committee.

“An issue is ensuring personnel that would have unescorted physical or logical access to sensitive or classified government data, obtain Australian Government Security Vetting Agency (AGSVA) security clearances.

“There are also requirements around executive control and influence of strategic decisions that have been challenging for global providers.”