TalkTalk Blame Ofcom and UK Wholesale Providers for Price Hikes UPDATE

Broadband ISP TalkTalk has moved to try and deflect some of the negative attention they’re likely to get from the confirmation of today’s annual inflation linked price hikes. The provider has done this by shifting the blame for those rises on to the shoulders of Ofcom and their wholesale providers (mainly Openreach).

As we reported earlier this morning (here), the latest inflation figures (CPI of 10.5%) mean that TalkTalk, along with many of the market’s other major providers, can now confirm how much their prices will rise this year for many of their existing customers. In TalkTalk’s case, the answer is 14.2% (10.5% CPI plus 3.7%).

However, rather than take the usual approach of blaming the current surging level of inflation, electricity costs and increases in data usage (among other things), the ISP has instead attempted to shift the blame on to Ofcom and wholesale providers at the physical infrastructure level.

The latter point mainly reflects Openreach’s regulated wholesale products, which are allowed to rise by inflation, although the ISP also works with CityFibre, CommunityFibre and Freedom Fibre.

A TalkTalk spokesperson said:

“This regulated CPI-linked price rise is preventable. There is still time for Ofcom to act and reduce the wholesale price increases that lead to these price rises. These are exceptional circumstances, and families and businesses across the UK need the regulator to act.”

Expecting Ofcom to order Openreach not to increase their prices by inflation (something they’ve already done), which would effectively be a significant real-terms price cut for some products and would probably only occur after another major strategic review, is perhaps not particularly realistic or likely to succeed. Some economic realities are simply hard to escape.

Nevertheless, TalkTalk say they have asked Ofcom to act, but the regulator has so far refused. On the one hand this is about deflecting blame, but on the other hand it is true to say that the costs imposed via wholesale do have to be passed on. The trouble is that the biggest problem here is with the wider economy, which can’t so easily be avoided, at least not without consequences in other areas.

UPDATE 11:02am

Ofcom has pointed out that, as part of their recent Wholesale Fixed Telecoms Market Review (WFTMR), they decided to allow the price of Openreach’s entry-level (40Mbps) copper broadband product to rise in line with CPI and not to regulate higher-speed products.

The goal was to give Openreach and other network builders the headroom to invest, while protecting consumers during the transition period. As investment continues and consumers migrate to full fibre, they expect the 40Mbps product to increasingly become less important. In addition, the prices of some of the newer/higher-speed (FTTP) products are actually falling (i.e. the ‘average’ price increase from Openreach is below CPI).

The regulator is also keen to underline the importance of regulatory stability and certainty, particularly during times when there are unexpected macroeconomic changes and fluctuations, as is currently the case.