Telecoms regulator Ofcom is launching a probe into BT's fibre broadband pricing, which could result in the operator being forced to cut the wholesale cost of its superfast FTTC connections.
The situation began in May last year, when Ofcom received a complaint from TalkTalk alleging that BT had been abusing a dominant position and was in breach of the Chapter II prohibition in the Act and Article 102 TFEU in relation to the supply of superfast broadband.
In particular, TalkTalk alleged that BT has failed to maintain a sufficient margin between its upstream costs and downstream prices, thereby operating an "abusive margin squeeze".
In response, BT said it was "disappointed" by the action, claiming there was a "lack of any evidence" to support TalkTalk’s case and voicing its opinion that Ofcom would eventually drop the investigation.
"It would be better if the industry’s and Ofcom’s focus was on investing in the future of the country rather than on spurious actions designed to hold up fibre in the UK," BT said in a statement.
However, this did not prove to be the case, with the regulator now expected to officially expand its probe into a formal consultation in May this year, according to the Financial Times.
If Ofcom does find enough evidence to support TalkTalk’s position, it could potentially impose new charge controls upon BT’s FTTC lines, resulting in money knocked off the wholesale cost of its superfast fibre broadband.
A spokesperson for Redburn Partners, Europe’s largest independent equities broker, told the FT: "We think Ofcom’s margin squeeze test could reduce BT wholesale fibre prices by at least £2 per month initially, with on-going monitoring potentially leading to further cuts."
Though this has yet to be confirmed, rumours of the potential action and price reduction resulted in BT's stock market price falling significantly from 381 on Monday to 360 on Tuesday, leading to speculation that the regulator's investigation will indeed have major ramifications.