Ofcom Fines BT £42m For Breaching Ethernet Contract Commitments

Ofcom has fined BT £42 million for abusing its dominant position in the broadband market by  reducing compensation payments to third party communications service providers (CSPs) for the late installation of Ethernet lines for businesses.

BT Openreach is required to install new leased lines within 30 days, after which it must pay compensation to customers which include the likes of Vodafone, which made the allegations, and TalkTalk.

However Openreach is able to apply an extension should it encounter problems that are deemed to be beyond its control. However an Ofcom investigation found that during a period between January 2013 and December 2014, BT applied this ‘deemed consent’ retrospectively.

This, Ofcom said, damaged competition and harmed end users.

Ofcom fine

“These high-speed lines are a vital part of this country’s digital backbone,” said Gaucho Rasmussen, Ofcom’s investigation director. “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 has admitted liability and its fine was reduced from £60 million because of its willingness to settle. It has also set aside as much as £300 million to compensate its customers, which it must do within 12 months. BT was fined an additional £300,000 for failing to provide enough information.

Openreach said it had made “significant” changes to training, systems and practice to ensure there wasn’t a repeat and that it would speak with Ofcom about how the process can be changed for the benefit of everyone.

BT liability

“This shouldn’t have happened and we fully accept Ofcom’s findings,” said Clive Selley, Openreach CEO.

“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.

“This issue is unrepresentative of the vast majority of work conducted by Openreach and we are committed to delivering outstanding service for our customers.”

“We take this issue very seriously and we have put in place measures, controls and people to prevent it happening again,” added BT Group CEO Gavin Patterson.

Following Ofcom’s once-in-a-decade review of the UK communications market culminated in the decision to make Openreach a legally separate company with more transparency and greater independence of BT.

Observers say the regulator’s latest action demonstrates the concerns many held over BT’s ownership of Openreach prior to the settlement.

“Today’s ruling offers insight into just some of the factors contributing to Ofcom’s decision to split BT and Openreach into two separate entities,” said Dan Howdle, telecoms expert at cable.co.uk.

“Clearly, being the sole owner of shared infrastructure has given rise to precisely the sort of conflict of interest of which BT has long been accused.

“Customers must never be allowed to become collateral damage in the battle to gain the upper hand in the market. Fines such as this, painful though they are for those on whom they are levied, are vital in maintaining a fair, competitive marketplace in which business can thrive.”

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