Ofcom opens complaint about BT Group and alleged margin squeeze
It appears that the annual complaints from TalkTalk over the pricing of the BT Retail Infinity products in comparison to the wholesale costs has escalted this year, as Ofcom has now opened a complaint about an 'alleged margin squeeze in superfast broadband pricing'.
The issue is that the TalkTalk Group believes that the retail price for BT Infinity products is so close to the wholesale costs that it is very difficult for TalkTalk (and others) to undercut the BT Retail products and still make some profit.
Back in the days when Ofcom was Oftel the regulator operated a margin squeeze test, which then operated on the BT Wholesale pricing and was thus unpopular with many smaller providers, and ultimately it led to the introduction of the current charging system which meant charging for speed was abandoned by BT Wholesale. Interestingly with the launch of FTTC and FTTP services by Openreach speed based charging has made a come back.
If Ofcom finds in favour of TalkTalk we might see BT Retail forced to increase the price of the Infinity products, or alternatively Openreach reducing their prices, while BT Retail is required to keep its product prices fixed.
We should not expect a conclusion rapidly, as when Freeserve over a decade ago was complaining about BT Retail when a basic ADSL service was retailing at £39.99 (plus voice line rental) having an unfair advantage the issue ran on and on with changes in the wholesale market largely solving the issue.
Seven years ago Carphone Warehouse really got the LLU market going with its full LLU service, that sold broadband, with calls and voice line rental for £20.99, given the disparity of numbers of FTTC customers between TalkTalk and the BT Retail Infinity it may take a similar gutsy move to upset the apple cart again.