BT is preparing for a battle with the regulator to defend its wholesale pricing of superfast fibre to other operators such as Sky and TalkTalk.
Last May TalkTalk complained to Ofcom, alleging that BT had been abusing a dominant position by making the wholesale price, that all providers pay, too close to its own fibre broadband retail price.
Last week the issue of BT’s fibre wholesale pricing was brought up in a broker note from Redburn, which claimed there is evidence BT used its market position to squeeze its competitors’ margins and increase its own market share. BT’s shares slipped 3.5 per cent after the note.
“We think Ofcom’s margin squeeze test could reduce BT wholesale fibre prices by at least ¡ê2 per month initially, with ongoing monitoring potentially leading to further cuts,” said Redburn.
Ofcom is expected to expand its probe of BT’s fibre pricing into a formal consultation in May this year.
BT denied TalkTalk’s allegations of margin squeezing and said that the Redburn note: “is flawed as it understates the revenues and overstates the costs that would be taken into account in any margin squeeze assessment.”