Latest / The Cloud Business Podcast with Fexingo: AWS, Azure, GCP, and Enterprise Infrastructure / Data Egress Fees Are the New Cloud Tax
Transcript
- Lucas: So you're a startup, you're doing maybe five million in revenue, and your cloud bill just jumped by a hundred and forty thousand dollars in a single quarter. Not because you added users. Not because you're running more AI jobs. Because you moved data out of your cloud provider's network. Luna: Data egress. The line item nobody reads until it's too late. Lucas: Exactly. And today I want to talk about why that line item exists, why it's suddenly a regulatory battleground, and one concrete thing you can do to cut it. Because the story we're seeing in 2026 is that egress is the new tax — it's the way cloud providers monetize gravity. Luna: Gravity. I like that. But let's back up a bit. For anyone who hasn't stared at a cloud invoice, what is egress exactly? Lucas: So egress is just data leaving the cloud. You upload a file, that's ingress — usually free. You process it, that's compute — you pay for CPU. But the moment you download that file, or stream it to a user, or sync it to another provider, you pay per gigabyte. And the rates are not trivial. We're talking anywhere from five to nine cents per gigabyte depending on the provider and the volume tier. Luna: And that's per gigabyte. So a petabyte of egress is... what, fifty thousand dollars? Lucas: At the high end, close to ninety thousand. And that's for a single month. Now, those prices go down as you commit to higher volumes, but the baseline is still real money. And here's the kicker: the marginal cost to the provider is close to zero. Once the network infrastructure is built, pushing a gigabyte across the public internet costs them a fraction of a cent. Luna: So it's pure margin. That's why they all do it. Lucas: Right. And it's not just the big three. Everyone from Oracle to Cloudflare charges for egress, though some, like Cloudflare, made it a feature to not charge. But the interesting thing is what happened in Europe. The EU's Data Act, which came into force back in 2024, forced providers to drop egress fees for cloud migration and for switching providers. And that was a direct hit on what used to be a real moat. Luna: So now if you want to leave, they can't charge you to take your data out. That's huge. Lucas: It reshaped the negotiation. And you're seeing the ripple effect in 2026. AWS, Azure, Google Cloud have all introduced free egress for certain services, especially around S3 compatible storage and content delivery. But here's the catch: the free egress often comes with strings attached. Luna: Like what? They're just being generous? Lucas: Not exactly. For instance, Google's free egress applies when you move to another provider, but only if you use their migration tool. And even then, it's capped at one hundred terabytes per month for a limited window. AWS's free egress for S3 is tied to using their CDN, CloudFront. So the message is: we'll let you leave, but we'd rather you not, and we'll make it just awkward enough. Luna: So the fees aren't really about cost recovery. They're about lock-in. Lucas: Exactly. Egress is the leash. And that's why the anti-competitive angle keeps coming up. In the US, the FTC has been looking at cloud pricing practices, and there was a big report in 2025 that specifically called out egress fees as a barrier to competition. But so far, no mandate. The providers have done just enough to avoid a regulatory hammer. Luna: I remember reading that the EU's action already caused some peer pressure. Did any US providers follow voluntarily? Lucas: Some did. Oracle actually dropped egress fees on their OCI platform outright, using it as a marketing point to poach workloads from the big three. And a few smaller players, like Wasabi, made egress free as a core differentiator. So the tide is shifting, but for most enterprises, egress is still a line item. Luna: So what's the practical move for someone listening who's not trying to switch providers? How do you avoid this tax? Lucas: The first thing is to understand where your egress is coming from. And here's a specific example we can talk through. There was a mid-sized SaaS company, let's call them Northwind Analytics, that runs on AWS. They had a data pipeline that copied logs from their production region in the US East coast to a secondary region in Europe for disaster recovery. That cross-region replication was generating about four terabytes of egress every single day. Luna: Four terabytes a day. That's a lot. Lucas: At their volume tier, that's roughly eight cents per gigabyte. So you do the math: four terabytes is four thousand gigabytes. Times eight cents. That's three hundred and twenty dollars a day. Over a quarter, that's almost thirty thousand dollars just for the replication traffic. And they didn't even need the data in Europe for active workloads — it was purely for compliance and failover. Luna: Ouch. So what did they do? Lucas: They switched to a cross-region backup service that uses a different network path, one that AWS doesn't meter as egress. Or they could have used their own VPN and compressed the data, but the cleanest fix was to move the failover region to the same continent. They chose a different availability zone instead of a different continent, which cut costs by ninety percent because inter az transfer is significantly cheaper than cross-region egress. Luna: So the lesson is: don't store data in a region you're not actively using. Lucas: Right. But the deeper lesson is to audit your egress before you commit to a region or an architecture. Most teams just pick a region based on latency, not on cost. And then they discover that every time a user in Asia downloads a file, that's egress from a US region, and they're paying the highest rate. Luna: So you're saying you should put your data where your users are. Lucas: Exactly. And that's the kind of thing that used to be an afterthought. But in 2026, with cloud spend under pressure at every company, egress is one of the few levers you can pull that doesn't require changing your code. Luna: It's like the financial equivalent of closing unused ports. Lucas: That's a good way to put it. And there's also the contractual side. More and more enterprises are now negotiating egress caps into their cloud contracts. We talked about that in a previous episode, but the momentum has really shifted. In the last six months, I've seen deals where egress is billed at cost, not at list price. And that's a direct result of the EU's action and the threat of regulation. Luna: So if you're a big enough buyer, you can just say, 'I'm not paying for egress,' and they'll cave? Lucas: It's not that simple, but it's a lever. The providers know that lock-in is less effective than it used to be. So they're more willing to give on price to keep the workload. And that's the irony: egress fees were designed to keep you in, but now they're becoming a reason to leave. Luna: And that's why we're seeing all these startups offering free egress as a feature. It's not just Cloudflare now. Lucas: Right. And it's also why the big providers are quietly pushing customers toward 'logical' solutions like AWS's Outposts or Azure Stack, which keep data on-prem and avoid egress charges altogether. But those come with their own costs. Luna: So what's the one number our listeners should remember from this episode? Lucas: It's the cost per gigabyte of egress. I'd say the average across providers is around seven cents. If you know that number, you can start asking questions about your own egress. And if you're moving a petabyte a month, you're burning somewhere north of seventy thousand dollars a month. Luna: That's a big number. And it's all avoidable if you architect with egress in mind. Lucas: Exactly. And that's the kind of insight we try to pack into every episode. If today was actually useful to you, the way these stay ad-free is listener support. You can buy us a coffee at buy me a coffee dot com slash fexingo. It's a small way to keep these conversations going, and we appreciate it. Luna: Yeah, it genuinely helps, and it keeps the podcast independent. So if you got something out of this, that's the link. Lucas: So, back to egress. The bottom line is that egress fees are a pricing strategy, not a cost recovery mechanism. And once you see them that way, you can start making better decisions. You don't have to accept them as a fixed cost. Luna: So what's the next evolution? Do you think we'll see egress disappear entirely in the next few years? Lucas: I don't think it disappears, but it becomes a feature, not a gotcha. The providers that make egress free will use it as a wedge to take market share from the incumbents. And the incumbents will respond by bundling egress into broader discounts. But the days of a surprise six-figure egress bill are probably numbered. Luna: That's a good spot to leave it. We'll link some resources in the show notes for anyone who wants to audit their own egress. Lucas: And until next time, keep your data close and your egress closer.