Google's power may harm consumer choice, says Vodafone chief

Vodafone's chief executive, Vittorio Colao, yesterday called for policymakers to scrutinise Google's hold over search advertising on mobile phones, to boost competition in the industry "before it's too late".

Eric Schmidt, Google's chief executive, declined to respond last night, and said he would seek to discuss the matter personally with Mr Colao. Although he did say: "As long as we're pro- consumer we'll be fine."

The Vodafone head made the comments as he outlined his vision for the future of the industry during a speech to delegates at the Mobile World Congress in Barcelona. He said competition was an issue across the mobile industry. "We need to be very careful that monopolistic power does not reduce competition or make it more challenging," he said before focusing his attention on mobile search and advertising.

He showed a slide which detailed the competition in different parts of the mobile industry's "value chain" from content providers, app developers, to software system and phone handset developers as well as operators. The list of search and advertising players, in sharp contrast to the others, named just two players: Google and Yahoo.

Advertising revenue from mobile phones is set to rocket, the research group Gartner predicts. Though the market is still relatively small, it "is one of the few areas of the advertising market that is growing through the recession". Mobile advertising revenues hit $530.2m in 2008, and the group expects it to soar to $7.5bn in two years.

Mr Colao said Google's hold on up to 80 per cent of the market in mobile search and advertising in Europe was an issue. "From a policy perspective, this is something to think about to ensure choice and avoid concentration before it is too late," he said, adding that the European Commission and the US Federal Communications Commission should work to open up the markets.

"There has to be credible alternatives," Mr Colao said.

This comes a week after Cesar Alierta, the chairman and chief executive of O2's parent, Telefonica, said it was considering plans to charge search engines for using the company's network. He said that the companies, such as Google, contributed to clogging up their networks with data without bearing any of the cost. "That is going to change, of that I'm convinced," he said.

Mr Schmidt did respond to Mr Alierta's comments in his address to the conference, arguing that Google helped to fuel the growth in data, which is lucrative for the networks. Google recognised the operators had large fixed costs, he said, and was not "trying to run roughshod" over them.

"Almost all of the interesting growth from the operators is coming from mobile data, Google and the operators are growing because of this explosion in usage of networks. It is a good news story," he said, adding that many operators had asked Google to build applications to help them sell higher speed services.