- EC2/AWS may be the de facto standard but it's not an actual standard the way SQL/HTTP/DNS are so I don't think the comparison is totally accurate. I think there's plenty of room to supplant AWS by offering a better system.
- There's plenty of room to compete with Amazon. Despite what you might think their prices are actually pretty high with plenty of room for even small hosts to undercut them. There's a reason that it's been so successful for Amazon; they are making a mint on it.
The big problem for smaller hosts wanting to compete with Amazon is that there's currently no ready made cloud solution that's 100% end user ready. Every single solution on the market requires some amount of custom coding in order to bring it up to end user quality. Which is frustrating.
But x86 HVM, Ethernet, IPv4, IPv6, NFS, SCSI, etc. are also standards... that EC2 doesn't support (fully). There is room in the market for standards-based IaaS IMO.