BT receives record £42m Ofcom fine over cable delays - but will it make a difference?
PUBLISHED: 08:51 27 March 2017 | UPDATED: 13:48 27 March 2017
BT has been given a £42m fine by the telecoms watchdog and is expected to pay out £300m in compensation to rivals over delayed high-speed cable installations.
Ofcom said BT Openreach committed a “serious breach” of its rules for reducing payments to other providers between January 2013 and December 2014.
The telecom giant was supposed to pay out compensation after failing to deliver Ethernet high-speed services to rival telecom companies in adequate time.
It said it “apologised wholeheartedly” over the incident.
A broadband expert has said the fine could have a trickle down affect for Openreach’s services going forward, with the company set to split from BT.
Karl Alderton, managing director of telecoms firm Comms Supply, said: “I think it is a warning shot. The fine is 10 times that of any other and I can’t see why they would have such a big fine if it wasn’t a warning shot to Openreach to get its house in order before it separates.”
Ofcom has rules to curb the company’s “significant market power” to ensure competitiveness, as other providers rely on access to its vast network.
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.”
Compensation will now have to be paid to affected providers – including Vodafone – within 12 months, Ofcom said.
BT had faced an even greater fine, but this was slashed by 30% after it admitted full liability.
It was fined a further £300,000 for “failing to provide information” to Ofcom.
The investigation found BT “misused” a contract to slash its payments to providers over the delayed installation.
Ofcom said it was required to install the high-speed lines to wholesale customers such as Vodafone and TalkTalk within 30 days or pay compensation.
Ethernet lines are often used by large businesses and broadband providers to ensure fast services and was said by the regulator to “underpin the UK’s communications infrastructure”.
BT said it estimated the total cost of the compensation payments would be around £300m.
Openreach chief executive Clive Selley said: “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.”
Dr Richard Cadman, director of communications consultancy SPC Network, said: “I would say that it fits into a pattern of decisions that includes legal separation of Openreach.
“Although the fine applies to a period in the past, It seems that Ofcom is increasingly willing to demonstrate to BT that it is not willing to put up with service quality that does not meet its expectations and will do all in its power to force BT to deliver better quality of service for customers.
“Ultimately this should result in better service for all.”
BT’s fine a record
Here are some of the bigger financial sanctions Ofcom has given to both telecoms companies and broadcasters.
:: ITV - £5.7m
ITV was fined in 2008 over a series of premium-rate phone-in scandals.
Several shows - including Ant and Dec’s Saturday Night Takeaway - were found to have duped the public by not selecting entrants for phone-in competitions at random, instead by factors such as proximity to studios.
Ofcom said at the time: “This was a thorough set of investigations which uncovered institutionalised failure within ITV that enabled the broadcaster to make money from misconduct on mass audience programmes.”
:: Vodafone - £4.6m
Vodafone was punished by Ofcom for breaching consumer protection rules last year by mishandling customer complaints.
It was found the provider had not credited the accounts of more than 10,000 pay-as-you-go customers after they topped up their balance.
Ofcom consumer group director Lindsey Fussell said: “Vodafone’s failings were serious and unacceptable, and these fines send a clear warning to all telecoms companies.”
:: TalkTalk and Tiscali - £3m
TalkTalk billed customers for services they had not received and was fined in 2011.
The company’s wrongly issued bills had resulted in Ofcom receiving more than 1,000 complaints from disgruntled customers.
:: EE - £2.7m
EE was found to have overcharged tens of thousands of customers and was slapped with a penalty of more than £2m in January.
Nearly 40,000 customers were overcharged a total of around £250,000.
Lindsey Fussell, Ofcom’s consumer group director, said: “EE didn’t take enough care to ensure that its customers were billed accurately. This ended up costing customers thousands of pounds, which is completely unacceptable.”
:: GMTV - £2m
GMTV was given what was the largest financial penalty dealt by Ofcom in 2007 over a TV competitions scandal.
The breakfast broadcaster was found to have been charging viewers to enter competitions even though they had no chance of winning.
The regulator said the breaches “constituted a substantial breakdown in the fundamental relationship of trust between a public service broadcaster and its viewers”.
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