BT to pay £342m in fines and compensation for cuts in broadband delay payouts
BT has been fined £42m by regulator Ofcom for cutting compensation payouts to rivals for delays in providing high speed broadband.
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The company will now have to pay £300m in compensation, the watchdog added.
The fine includes a 30% discount for BT admitting its liabilities. It was also ordered to pay £0.3m for failing to provide information.
Ofcom said BT's Openreach unit, which installs broadband lines misused the terms of its contract to cut payments to other providers between January 2013 and December 2014.
The company was supposed to pay out compensation after failing to deliver ethernet high-speed services to other, smaller providers in adequate time.
"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," the regulator said in a statement.
BT has 12 months to compensate all of the telecoms providers who faced financial loss because of its conduct.
BT’s budget-oriented retail brand Plusnet was last week fined £0.88m by Ofcom for continuing to bill more than a thousand ex-customers.
An investigation started in May last year found the company broke what Ofcom called a “fundamental billing rule” by continuing to charge a group of customers for landline or broadband after they had cancelled their service.
Analyst George Salmon at Hargreaves Lansdown said BT was "on the naughty step" as this misdemeanour follows the accounting scandal in Italy and the enforced separation of the Openreach business.
"As a result the demands on BT’s cash flow are adding up, in the short term at least," he said.
"What’s more, net debt and the pension deficit each stand at over £9.5bn, and more cash could be needed to plug that pension shortfall after a review later this year. With BT targeting dividend increases of at least 10% this year and next, the pressure is increasingly on the consumer facing divisions to generate continued growth.”
Dan Howdle, consumer telecoms analyst at Ofcom-accredited broadband advice site Cable.co.uk, says the decision offered insight into "some of the factors contributing to Ofcom's decision to split BT and Openreach into two separate entities".
"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," he said.
"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."