ALEX BRUMMER: Vodafone-Three deal never going to work for consumers

One has to feel some sympathy for Vodafone CEO Margherita Della Valle. The mobile telecommunications pioneer had a strong chance of becoming a true technology champion for Britain after a series of rapid deals struck by his predecessor Chris Gent, who was in charge from 1997 to 2003.

The short-termism of his successors and the impatience of investors saw Vodafone dump its most valuable assets in Japan and the United States before the data revolution – which transformed telephony – matured.

Della Valle inherited a failing asset. She is fleeing the underperforming markets of her native Italy and Spain to focus more on Germany and the United Kingdom.

Liberty Media has outmaneuvered Vodafone by buying the moribund cable assets in Germany’s slow-growing market. As for the UK, Vodafone’s chosen path for expansion – a merger with rival Three – has landed it in a regulatory battle with the Competition and Markets Authority (CMA).

A Vodafone-Three deal could be great for two struggling mobile operators seeking more pricing power, but will never work for consumers.

At the very least, one might expect the combative Sarah Cardell, chief competition regulator, to propose experimental solutions. On the other side of the Atlantic, regulators are also waking up from a long sleep. America’s rapid growth post-pandemic, in the face of monetary restrictions from the Federal Reserve, can be largely attributed to big tech.

More established players were joined by Tesla, Nvidia and Space X.

Joe Biden’s administration finds itself in the curious position of awarding £15.5 billion in subsidies to chipmaker Intel to boost semiconductor production, while questioning Apple’s business model.

Apple is loved by consumers around the world for its beautifully designed devices, intuitive ease of use, and glamorous stores.

But behind every Apple device, as the US Department of Justice has guessed, are opaque services agreements that generated £66.5 billion in revenue in 2023 with a gross profit margin twice that of Apple devices. devices too expensive.

Older consumers may remember the days when Apple insisted that only the Sahara search engine was directly available on iPhones, iPads and laptops.

Apple needed Google. But Google needed Apple even more because it controlled 65% of the mobile phone market. Google therefore agreed to pay fees for access to Apple devices.

Almost all app providers like Spotify find themselves in the same trap. The Daily Mail’s MailOnline, the world’s largest newspaper website, pays a fee to Apple for downloads.

These tolls are considered anti-competitive because they increase the cost of accessing the global web, which when it was designed was intended to be free for all.

Apple may be the worst offender in technology, but it’s not the only one. Who can forget the way Microsoft’s Brad Smith sought to bully his way past the CMA when it wanted to take full control of gaming site Activision Blizzard. Microsoft earned its place by granting open access.

Amazon is being sued by the U.S. Federal Trade Commission (FTC) for allegedly overcharging consumers and exploiting sellers it allows on its site.

Here in the UK, Amazon is seen as the cuckoo in the nest by almost all retailers, as it evades most business rates and other taxes.

Meta, which owns Facebook, is under FTC scrutiny due to its social media dominance bolstered by ownership of Instagram and WhatApp.

Silicon Valley giants are the gift that keeps on giving in terms of popularity and productivity. But they can also be compared to the oligopolies of the past, like Standard Oil at the beginning of the 20th century. The first oil major eventually ran into trust-breakers and was broken up.

It’s great to see competition officials in the UK, in the case of Vodafone-Three, and at Apple in the US, flexing their muscles. Unfortunately, overwhelming financial power has a sad history of thwarting what is in the best interests of free markets and consumers.