Communications regulator Ofcom has opened an investigation into BT's wholesale and retail broadband prices following a complaint from TalkTalk.
TalkTalk claims that BT is 'abusing a dominant position' and has 'failed to maintain a sufficient margin between its upstream costs and downstream prices'.
BT Wholesale has to lease broadband services to BT Retail at the same price as any other telecoms operator in the market, but TalkTalk are claiming that BT Retail's superfast broadband prices are too low, thereby operating an 'abusive margin squeeze' in the market.
Ofcom will be investigating whether BT has abused a dominant position under UK and/or EU competition law.
"We have long maintained that there needs to be tighter regulation in superfast broadband to ensure a level playing field and therefore deliver real benefits for consumers and businesses. We are pleased that Ofcom is taking this matter seriously and have decided there are reasonable grounds to investigate BT's wholesale fibre pricing," said a TalkTalk spokesperson.
If TalkTalk were successful in their complaint and Ofcom found that BT was abusing its dominant position in the market, BT Retail may be forced to raise the costs of its superfast broadband.
The UK government has said that it hopes to have the best broadband network in Europe by 2015, and has committed a minimum of £730 million up until 2015 to support the rollout.
All rural broadband deals so far financed through BDUK have gone to BT, after the only remaining competitor, Fujitsu, pulled out of the framework earlier this year, saying it couldn't compete on many contracts up for grabs.
A BT spokesman told Computerworld UK that they are confident the case will be overturned.
"We're disappointed that Ofcom has opened this case despite the lack of any evidence and we're confident that there's no case to answer," he said.
"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."