TalkTalk only recently reduced the price of its entry level broadband service, with the result that it has made its fibre based (FTTC) available for £12.50 per month. In an interview with the Financial Times, Dido Harding CEO TalkTalk has made it clear what she believes the wholesale price should be for the base line product they buy from Openreach.
Dido Harding has nailed the price they want Ofcom to mandate on Openreach as £4/month for a GEA-FTTC service, if this is assumed to be the 40/2 product this is a large drop from the £6.90/month (+VAT) that the service currently costs. The 40/10 costs £7.40/month and the fastest product is the 80/20 service at £9.95 per month from Openreach.
TalkTalk has been calling for sometime for the entry level price to the FTTC (and FTTP where it is the only Openreach fibre service) be reduced significantly as they feel there is a margin squeeze at the retail end of the market with BT Retail. The big unknown is whether the current TalkTalk pricing for their fibre products is gambling on Ofcom forcing a lower price, or the margins are just paper thin.
The pricing for the GEA fibre products is due a review as the monthly rental has been unchanged for four years now and when the price was determined there was a plan for the more expensive to roll-out FTTP products to be available to more premises. The scaling back of the GEA-FTTP roll-out may give scope for a price reduction.
The dichotomy is whether to push the price down and increase take-up and thus push the average UK broadband speed higher and higher, or keep pricing relatively high (for the UK) and stick to the accountants previously planned payback schedules. As things stand the psychological target of £9.95 for a basic FTTC service is almost within reach.
The problem now for TalkTalk is to convince Ofcom to act, lowering the price of 40/2 service to £5.50 per month as a compromise is probably what will happen. When bargaining you always start off at the lowest price and work towards a consensus.
One thing we would like TalkTalk (and Sky too) to do is offer the GEA-FTTC speeds to those in areas where Openreach has its FTTP network as the only option, as currently for the average consumer BT Retail is almost the only visible option currently.