BT will be fined £42m for a serious breach of Ofcom’s rules, after the company reduced compensation payments to other telecoms providers for late installations. The firm has also set aside a further £300m to pay telecoms company’s for delays in installing high speed lines.
The investigation found that, between January 2013 and December 2014, BT misused the terms of its contracts to reduce compensation payments owed to other telecoms providers for failing to deliver ‘Ethernet’ services on time.
Openreach chief executive Clive Selley said the company “apologised wholeheartedly” for the mistakes.
Ethernet services are the most common type of ‘leased lines’ – dedicated, high-speed cables used by large businesses, and mobile and broadband providers, to transmit data. These lines also provide vital, high-capacity links for hospitals, schools and libraries.
Ofcom has taken enforcement action because BT breached rules that address the company’s ‘significant market power’. This market power comes from the fact that most telecoms companies rely on access to BT’s network to provide services such as broadband to their customers. Ofcom’s rules are therefore fundamental in ensuring BT does not act in a way that could harm competition and, ultimately, consumers and businesses.
Gaucho Rasmussen, Ofcom’s Investigations Director, said: “These high-speed lines are a vital part of this country’s digital backbone. Millions of people rely on BT’s network for the phone and broadband services they use every day.
“We found BT broke our rules by failing to pay other telecoms companies proper compensation when these services were not provided on time. The size of our fine reflects how important these rules are to protect competition and, ultimately, consumers and businesses. Our message is clear – we will not tolerate this sort of behaviour.”
BT will also be fined £300,000 for failing to provide information to Ofcom. Through this Ethernet investigation, Ofcom became aware that BT failed to provide accurate and complete information for the original dispute, the Business Connectivity Market Review 2016 and this investigation.
Andrew Ferguson, editor of thinkbroadband.com, says, “The £42m fine is substantial, and could have been 30 per cent higher if BT had not agreed to take full liability. The full amount this mistake will cost the BT Group is unknown, as a compensation scheme will be created for the companies buying Ethernet services that were affected by the installation delays.
“Ethernet and leased line services are the core of the business broadband world and is an area where BT Group is facing increasing competition and regulatory pressure to reduce the price it charges. However, if standards slip as they did between Jan 2013 and Dec 2014, fines like this are the result and it seems Ofcom is ready to act as regulator with a big stick.
“During that time, Openreach was making use of lots of third party contractors, so hopefully the ongoing recruitment drives will mean any faults or new installs are dealt with well ahead of any compensation deadlines.”
Mike van Bunnens, Managing Director, Comms365, commented, “As BT Group is fined record £42mln by Ofcom over Openreach broadband installation delays, there are big questions over how we can quickly and significantly improve the UK’s fixed line network. However, regardless of how quickly BT manages to address the problem of inadequate infrastructure, any delay has a huge impact on organisations unable to access the broadband services needed to run their business.
“Of course, the Ofcom fines will kick-start BT into addressing the problem, but there isn’t going to be an overnight fix. For organisations that simply cannot afford to wait for BT to catch up, 4G services could hold the answer. It is no longer a consumer only technology that is known to be a little temperamental. By taking several 4G connections and bonding them together, businesses can access high-speed, reliable broadband-like connectivity through the mobile network. By making the most of mobile, the thousands of organisations that suffer each year as a result of poor fixed-line connectivity can ensure that this does not impact their business performance.”