It sounds like Confluent doesn't get what the real problem is. There's 2 ways developers who also sell hosting end up losing all their market share to players like Amazon:

1. The big players like Amazon make custom, proprietary modifications to the software they're hosting, and since they're not technically distributing it, they don't have to release the changes, giving them an unfair advantage. This is the exact loophole that the AGPL closes.

2. Sometimes, the big players are just better/more efficient at hosting the exact same software the exact same way. There's nothing unfair or unethical about this; it's how the free market is meant to work that customers flock to them.

Confluent is trying to "fix" the second "problem", which rather than making anything more fair, just makes it unfair in their favor.