Ofcom Fines BT £42M Over Openreach
March 27, 2017
penalty is a result of an investigation by Ofcom into BT’s network arm,
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
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
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 is obliged, under Ofcom’s rules, to install Ethernet services to its
wholesale customers (providers such as Vodafone and TalkTalk), in
accordance with its contracts, and to make compensation payments for
late delivery. BT’s contracts require it to deliver Ethernet services
within 30 working days, or pay compensation to the company affected.
If BT encounters problems that require more time to resolve, in certain
circumstances it can assume that a customer has agreed to an extension.
But Ofcom found that BT did this retrospectively over a sustained
period, to reduce the level of compensation it owed to telecoms
providers. Not only did this harm other telecoms companies, but it was
also likely to have harmed the UK businesses and consumers who rely on
high quality, high-speed, broadband services every day.
Ofcom opened the investigation in November 2015. This happened shortly
after Vodafone brought allegations to Ofcom that BT had misused its
contractual terms through the late delivery of Ethernet services without
Vodafone’s consent, and by failing to compensate the company for these
Financial penalty and compensation
a result of these findings, Ofcom will impose a penalty of £42,000,000
The penalty incorporates a 30% reduction to reflect BT’s agreement to
settle Ofcom’s investigation by admitting full liability, and to set up
a scheme to compensate the telecoms providers that have been affected.
BT must compensate, within twelve months, all the telecoms providers who
faced financial loss because of its conduct. We anticipate that BT’s
customers will engage constructively in the compensation process.
Additional £300k fine
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
Ofcom takes any breach of our information gathering powers very
seriously as such failures undermine the integrity of the regulatory
regime. Any company that breaks these rules should expect similar