To understand what is going on here, you have to understand the UK telecoms market. It all started with a publicly owned conglomerate which did post and telephony rather badly. This got split up, and the telephony sector privatised together with some very special rules to force it to play fair and not exploit its monopoly position. This leaves us with the situation where British Telecom (BT) owns most of the telephone wiring from exchange to end user, yet is forced to share this with assorted other operators and is legally compelled to play them fair. With few exceptions, there is no difference between the copper you're talking over for BT ADSL, Talktalk ADSL or whatever.
The only real competitor in the market is the conglomeration nominally owned by Virginmedia, which is primarily a cable TV outfit which does internet on the side. Pretty much all their cabling dates from the initial build, and covers only those areas initially identified as really good prospects for selling cable TV to (primarily poorer areas, higher density housing, lovers of pay-for football etc). Mobile internet, wide area wifi and so on are minor players and can be discounted.
What this leaves you with is a price war, and a race to the bottom. Virginmedia can supply super-good internet, but only to cabled areas. Niche ISPs can supply good ADSL that is as good as the BT copper can support, and the likes of Talktalk are left slugging it out, trying to cut corners wherever they can to push the price ever lower. This is why we're seeing this crude blackmail attempt; these bargain basement ISPs are struggling to make any margin at all since pretty much every cost and corner that can be cut has been cut, from El Cheapo ADSL modems to call centres outsourced to Elbonian idiots (and the call centre numbers are usually premium rate numbers, to scrape a bit back there too).
None of this is going to change until BT upgrades the copper to the end user (which it is doing, with the Fibre To The Cabinet upgrading programme), and even that is going to take a while since there isn't any real incentive for BT to break any records doing the upgrade. It is a constrained monopoly operator, and is obliged to share any upgrades it makes with its direct competitors, so why bother fussing with upgrades? All BT needs to do is idle along doing the bare minimum, and wait for the competition to cut each others' throats for it.