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If they let me use my own server, they won't even know my usage patterns, which is even better for privacy.

Even if other vendors had Apple's hardware, it's doubtful that Apple would give competing services equal footing. See: The App Store.

The hardware isn't a real justification, just a convenient fig leaf.

I have created a more private cloud compute that is superior to Apple's implementation. Why can't Apple users choose my better service?

Sounds like Apple offered to implement that, but it didn’t fit the EU’s requirements.

I suspect if you paid apple enough money, and were willing to prove that your personal Private Cloud Compute did meet their requirements, it wouldn’t be impossible.

That would be a good argument to take to the EU.