BT fined £42m for ‘serious breach’ of Ofcom compensation rules

BT fined £42m for ‘serious breach’ of Ofcom compensation rules

BT has been hit with a record setting £42 million fine for mis-using the terms of its contracts in order to reduce compensation owed to broadband providers due to installation delays.

 

An investigation by Ofcom into BT’s then wholesale arm, Openreach found that between January 2013 and December 2014 BT failed to pay £300 million to rival broadband providers. It also found that BT did not ‘provide accurate and complete information’ to Ofcom’s Business Connectivity Market Review 2016, the initial complaint by Vodafone, and to the Ofcom investigation itself. For these data sharing failings BT will be fined an additional £300,000.

 

Mobile understand that the compensation failings apply to every single BT partner who is dependent on BT for ethernet service delivery, meaning the £300 million is to be split between hundreds of providers depending on BT’s liability to each individual company.

 

The investigation focused on BT’s responsibility to install Ethernet services on behalf of its wholesale customers within 30 working days, or to pay compensation if this is not met. However, in certain instances an extension can be agreed between the customer and BT. The investigation found that BT was retrospectively applying extensions that had not been agreed. Ofcom said this not only harmed rival providers, but also businesses and consumers across the country.

 

Ofcom’s investigations director Gaucho Rasmussen said, ‘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 received a 30% fine reduction for accepting Ofcom’s findings. Openreach CEO Clive Selley commented on the fine stating, ‘We apologise wholeheartedly for the mistakes Openreach made in the past when processing orders for a number of high-speed business connections.

 

‘This shouldn’t have happened and we fully accept Ofcom’s findings. Since I became CEO of Openreach in February 2016, we have monitored this area very closely, we have made improvements to how we process and deliver such connections, and we will make sure the same mistakes aren’t repeated in future.’

 

BT Group CEO Gavin Patterson adds, ‘The investigation into historical Deemed Consent practices at Openreach revealed we fell short of the high standards we expect in serving our Communications Provider customers.’

 

News of the fine surfaced not from Ofcom but from BT, who were obliged to announce the fine to their shareholders this morning. Their share price opened -1.58% down before rallying up again by 0.5%.

 

Ofcom’s call for a legal separation fell short of industry pressure for complete structural separation, but was still met with optimism from the telecommunications industry. The move includes Openreach having its own board of directors, a strategy independent to BT’s and the restructuring of 32,000 staff to the newly formed Openreach organisation. It is unclear whether this historic fine relating to Openreach will be funded out of the BT Group or Openreach’s budgets.

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