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Ofcom rejects TalkTalk margin squeeze complaint against BT Retail
Thursday 19 June 2014 14:07:30 by Andrew Ferguson

Ofcom has issued two competition updates on fibre based broadband, this article concentrates on a margin squeeze complaint from the TalkTalk Group that started in May 2013.

The TalkTalk complaint was that there the level of margin between the retail price of BT Infinity services and wholesale pricing that TalkTalk has to pay was insufficient for TalkTalk to compete in the retail market.

The update issued today by Ofcom is pretty short and boils down to Ofcom saying there is no grounds for action. While this means the complaint has been closed down, there are new rules being put in place to satisfy the EU telecoms framework that will mean closer scrutiny is applied to the margin between wholesale pricing and retail.

"We are pleased that Ofcom has rejected TalkTalk’s competition complaint and shown that BT’s fibre pricing is completely fair.

The consultation is welcome. We hope it results in regulatory clarity and certainty, and discourages spurious claims such as that made by TalkTalk.

There is strong competition in the UK broadband market and we are confident our pricing will pass any regulatory test that may be put in place. It is important that Ofcom encourages investment as well as competition, and recognises the full costs involved in deploying fibre.

BT statement in response to Ofcom announcement

As far as consumers are concerned, TalkTalk retails its lowest priced unlimited FTTC service for £13.50 per month (plus line rental) and BT Retail Infinity 1 is £23 per month (plus line rental) when none of the initial sign-up offers are taken into account. A chunk of the difference is down to the added extra's with the BT Retail services e.g. free WiFi access when out and about, BT Sport, Cloud storage etc.

We have seen lots of people air the view that it is unfair for BT Retail to be offering free sports programming when the group as a whole is receiving gap funding to increase the roll-out of fibre based broadband, but in a market where all the other three largest providers have some form of video content package it would be even more surprising if BT Retail was to ignore the content arena as a way of getting more customers.


Posted by TheEulerID over 2 years ago
I've no idea why people connect gap funding with BT Sports. Gap funding is over the lack of a commercial case for OR FTCC rollout whilst BT Sports is essentially about BT Retail defending its market share. In principle, both stand or fall on their own merits.
Of course, it's possible to debate to what extent there is a commercial gap or if BT Sport is self-funding, but that's an argument about accounting, not principle.
Posted by Dixinormous over 2 years ago
I'm not unhappy about this decision; I hope the end result is TalkTalk investing more in infrastructure rather than hoping to use BT's as cheaply as possible.

Of course I wouldn't be at all depressed if LLU disappeared as it's a huge hinderance to SFBB.
Posted by ValueforMoney over 2 years ago
In rejecting the margin squeeze complaint but wishing to establish a VULA margin to prevent a margin squeeze, it is working to maintain a status quo or trying to.
In the 200+ pages it artfully avoids mentioning any impact of the £1.2bn of public funding but reduces network costs to market 3 bandwidth costs. At least we know there is good margin on the existing GEA wholesale service.
More competition probably needs full ALA to support VLAN services.
In avoiding the wholesale price it can avoid looking at any detail at the impact of the £1.2bn+ public subsides. Cunning but cowardly.
Posted by themanstan over 2 years ago
Agreed, but it´s equally cowardly that these large ISPs are not rolling out their own and SLUíng. Then they would have the same advantages they have with LLU and maybe that is the rationale behind OFCOM decision.
Posted by michaels_perry over 2 years ago
But the current BT adverts are offering Infinity at £12 per month! (with an initial six months at £6 pm!) So how does that sit with your"BT retail Infinity 1 at £23 pm"?
We're on ADSL at 1-3 Mbps and pay £16 pm for that and fibre is not due in the area until at the very earliest this autumn. So we would be interested in FTTC at £12 as advertised - but is that really the true picture?
Posted by ValueforMoney over 2 years ago
Michael_perry It is possible through this proposal that BT will bet the farm on sport and increase Retail prices. Ofcom will say this is good as the other can charge less and take market share. More typically they follow one anothers pricing as its more oligopoly than competitive.
A more customer oriented approach would be for Ofcom to rigourously check the wholesale price given the much reduced investment in NGA and the Govenment £1.2bn but this is not on the offer.
Posted by ValueforMoney over 2 years ago
@themanstan It's not practical to have multiple street cabinets, perhaps it can come with fibre replacement.
It would be better I think to get clearer separation and check the wholesale price given the £1.2bn of Government monies and more incentives for a greater transition to an all fibre network over 15 years.
BT Retail is still likely to wish to bet the farm on sport and increase rentals.
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