UPDATE TalkTalk UK Want BT to Charge ISPs £4 for FTTC Broadband

The CEO of budget Internet provider TalkTalk, Dido Harding, has once again reiterated her belief that BT is “acting anti-competitively” in the market for superfast broadband (FTTC) products and she wants them to cut the related wholesale price that it charges ISPs to around £4 +vat a month.

At present if you add TalkTalk’s up to 38Mbps capable “Superpowered Fibre Broadband” (FTTC) product to your existing service then the ISP will charge an extra £10 inc. VAT per month, which comes to a total of £12.50 when you add in the cost of their cheapest unlimited Simply Broadband package (+£15.40 line rental). Pay an extra £15 instead of £10 and you can have their up to 76Mbps option.

The result is that TalkTalk are one of the cheapest broadband ISPs for FTTC (Sky charge from £20 and BT’s closest match starts at £23). But they’re only able to do that by operating off some very thin margins, which is partly why the ISP lodged a formal competition complaint with Ofcom earlier this year and accused BT of “abusing a dominant position” in its supply of superfast broadband (here).

Ofcoms May 2013 Statement on TalkTalks Complaint

“Ofcom has received a complaint from TTG alleging that BT has been abusing a dominant position in breach of the Chapter II prohibition in the Act and Article 102 TFEU in relation to the supply of superfast broadband (‘SFBB’). Specifically, TTG alleges that BT has failed to maintain a sufficient margin between its upstream costs and downstream prices, thereby operating an abusive margin squeeze.”

Ofcom are expected to announce the outcome of their initial probe, which will decide whether or not to pursue a deeper investigation, before the end of this year. In the meantime TalkTalk’s boss has just told the FT that she thinks the price that ISPs are charged should be cut in half from the current level.

Dido Harding, CEO of TalkTalk, said:

“We pay £7.50-£8 per home per month for a superfast broadband connection. We think this should be £4. BT is acting anti-competitively – we think they are charging too much at the wholesale level, where it is making all its money.”

According to BTOpenreach, the standard annual rental for BT’s 40Mbps (2Mbps upload) FTTC product is £82.80 +vat (£6.9 per month), which doesn’t include any extras (e.g. profit margin, usage allowances etc.) that are usually added on top. This rises to £119.40 for the 80Mbps (20Mbps) option but prices can differ slightly for various reasons.

However, even if Ofcom did find in favour of TalkTalk’s complaint, then it seems almost inconceivable that the price would end up dropping to £4 as a direct result of intervention by the telecoms regulator. It is possible that such a price might be achieved over the much longer term through improved competition and related regulator changes but short time it’s simply too dramatic, too soon.

Meanwhile BT maintains that its fibre products are offered on a “level playing field” to all ISP and they ”completely refute the basis” of TalkTalk’s competition complaint, which they state bear “little resemblance to the actual costs incurred“ (here). Even if Ofcom did decide to pursue a full investigation then it would probably end up dragging on for years.

UPDATE 3:27pm

Corrected a small mistake in the title and intro, which referenced BTWholesale. But TalkTalk appears to buy direct through BTOpenreach.