If they raise their commission rate,they will kill their business.What they seem unable to understand is that it's the exchange that makes the sportsbook possible.Whenever people think of Betfair,they think of the exchange - not the Sportsbook.The exchange is what Betfair is famous for.I think that the sportsbook odds are based on the exchange odds where they are most liquid,and other people's odds.Their Sportsbook and its odds get little publicity,and do not feature to my knowledge on odds comparison websites.
Yes,of course,the sportsbook can sometimes undercut the exchange after commission,since Betfair set the commission.If Betfair make the exchange unattractive to new punters,they will be killing the goose that lays the golden eggs.