Telco BT fined record ?345 crore for serious breach of rules
Telecom giant BT has been fined $53 million (?345 crore) for a "serious breach" of rules, making it the largest fine imposed on a telco. BT will also have to pay $376 million (?2,440 crore) in compensation to rivals. BT allegedly misused its contracts to cut compensation payments for delays in connecting high-speed business lines to other telcos including Vodafone.
BT has been fined £42m, the largest penalty imposed by regulator Ofcom, and will have to pay an estimated £300m in compensation to rival telecoms companies over delays installing high-speed internet connections.Ofcom found that BT broke rules put in place to stop Openreach, its subsidiary that controls the UK broadband infrastructure network, abusing its ?significant market power? by cutting compensation payments to rivals, blaming installation delays on factors beyond its control when this was not the case.BT said it expected to pay out £300m in compensation to rivals including Sky, Vodafone and TalkTalk for the ?serious breach? of Ofcom?s rules.?The size of our fine reflects how important these rules are to protect competition and, ultimately, consumers and businesses,? said Gaucho Rasmussen, investigations director at Ofcom. ?Our message is clear ? we will not tolerate this sort of behaviour. Millions of people rely on BT?s network for the phone and broadband services they use every day.?Compensation must be paid to affected providers within 12 months, Ofcom said.The record £42m penalty, which was reduced from £60m after BT admitted full liability and agreed to pay back rivals, is more than 11 times greater than the previous largest fine levied on a telecoms operator by Ofcom. Last year, Vodafone was fined £3.7m for taking pay-as-you-go customers? money without providing a service. BT?s fine is more than seven times that of the second largest penalty handed down, the £5.7m ITV had to pay in 2008 over the ?abuse? of premium-rate phone lines in a number of hit shows.Ofcom?s investigation into BT focused on the installation of high-speed business lines, known as ethernet services, which provide connections for big businesses as well as organisations including schools, hospitals and libraries, between January 2013 and December 2014. It was instigated after a complaint from Vodafone, which relies on BT ethernet services to transmit data between its mobile masts. Vodafone accused Openreach of failing to meet its 30-day installation guarantee but then reclassifying the delay as having been agreed by rivals which allowed it to avoid paying compensation.?These high-speed lines are a vital part of this country?s digital backbone,? said Rasmussen. ?We found BT broke our rules by failing to pay other telecoms companies proper compensation when these services were not provided on time.?BT was also fined £300,000 for ?failing to provide information to Ofcom?.?We apologise wholeheartedly for the mistakes Openreach made in the past when processing orders for a number of high-speed business connections,? said Clive Selley, chief executive of Openreach. ?This shouldn?t have happened and we fully accept Ofcom?s findings.? A spokesman for Vodafone said: ?We hope this ruling will encourage BT Openreach to finally drop the unacceptable practices it has used to avoid paying compensation for late delivery of fixed fibre lines, which have impacted businesses across the country as well as our own 4G roll-out.?Less than half (48.8%) of high speed ethernet installations were completed within 30 days, according to Openreach?s own statistics for the final quarter of last year.However, Openreach said that almost 87% of installations are completed by the original agreed date, and that the number of outstanding orders is at a 34-month low.Rivals have repeatedly called for Openreach, responsible for building and maintaining the tens of millions of copper and fibre lines that run from telephone exchanges to homes and businesses across the UK, to be split from BT.They argue that BT has dragged its heels in opening the network to their engineers, which has hampered their ability to offer homes superfast broadband access.This month BT finally agreed a halfway house deal to legally separate Openreach, after two years of wrangling with Ofcom, which wants to strengthen the independence of the broadband network operator to promote competition and boost superfast services.The £42m penalty follows a bad week for BT after Ofcom fined subsidiary Plusnet £880,000 for continuing to charge more than 1,000 customers more than £500,000 after they had cancelled their accounts.The fine is the latest headache for Gavin Patterson, the chief executive of BT, who has endured a torrid year that included an accounting scandal at its Italian operation that wiped £8bn off its shares.?The investigation ? revealed we fell short of the high standards we expect in serving our communications provider customers,? Patterson said. ?We take this issue very seriously and we have put in place measures, controls and people to prevent it happening again. My management team and I are determined that BT applies the highest standards when serving our customers.?This month BT, which is to introduce inflation-busting price rises for its customers, denied it was forcing them to foot the bill to pay for its new £1.2bn Champions League football rights deal.