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Ofcom Slaps BT with £42 Million Fine for Delayed UK Leased Line Installs

Monday, March 27th, 2017 (6:54 am) - Score 1,542

BT has set aside £300m to repay ISPs, such as TalkTalk and Vodafone, after an investigation by Ofcom found that their network arm (Openreach) had cut compensation payments to other telecoms providers for late installs of high-speed business lines (Ethernet). BT must thus pay a £42m fine.

Lots of big businesses, ISPs and Mobile Network Operators (MNO) buy wholesale leased line style solutions from Openreach, which holds a position of Significant Market Power (SMP) across most of the United Kingdom. As such Ofcom imposes certain regulatory obligations upon BT, which are intended to promote competition by enabling rivals to compete without needing to invest in a national network.

This also means that if BT doesn’t play by the rules then rival ISPs can easily end up being stung, although proving that can be difficult. In this case the regulator has 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 on time (original news here and here).

The contracts require Openreach to deliver related Ethernet services within 30 working days, or pay compensation to the company affected (TalkTalk, Vodafone etc.). However the related contracts (clause 2.3) also contain a Deemed Consent mechanism, which exist to cover a variety of factors that could cause delays (e.g. when dealing with infrastructure damage, clear blocked cable ducts, tackle asbestos, gain specific approvals for street works or a variety of other issues).

So if BT encounters problems that require more time to resolve (i.e. extend the provision window), then 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“. The regulator’s view is that this harmed ISPs, businesses and consumers who all rely on such services.

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.”

On top of that BT will also be fined £300,000 for failing to provide Ofcom with accurate and complete information for the original dispute, the Business Connectivity Market Review 2016 and this investigation.

An Openreach spokesperson previously told ISPreview.co.uk (here), “Ethernet provision is very complex and errors can occur in the process, though these were neither deliberate nor systematic.” Clearly Ofcom seems to disagreed with some aspects of that viewpoint.

Clive Selley, Openreach CEO, 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.

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.”

Gavin Patterson, BT Group CEO, said:

“The investigation into historical Deemed Consent practices at Openreach revealed we fell short of the high standards we expect in serving our Communications Provider customers.

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.”

BT said that they don’t agree with elements of Ofcom’s decision, but that they “decided to accept it in the interests of reaching a swift and final resolution.” No doubt they wouldn’t have wanted this cloud to hang over Openreach, particularly now that it’s adopting legal separation from the main BT Group.

Openreach now intend to contact all affected network operators over the “coming weeks,” when they will set out their intention to offer a “full and fair settlement” and interestingly this will cover the period from January 2013 to September 2016 (beyond Ofcom’s investigation and to the point at which Openreach introduced major reforms). Further changes may also be made to the Deemed Consent process.

Apparently 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 now compensate, within 12 months, all of the affected providers who faced financial loss because of its conduct.

In-between Italian accounting scandals (here) and having their Openreach division forced into “legal separation,” the first quarter of 2017 hasn’t been much fun for BT. Lest we forget the fines against their EE (£2.7m for overcharging) and Plusnet (£880,00 for incorrect billing) divisions.

UPDATE 12:53pm

A comment from urban fibre optic network builder Cityfibre.

Mark Collins, Director Strategy & Policy at CityFibre, said:

“Whilst welcomed by those service providers, which for decades have had no choice but to use a creaking BT Openreach and its out-dated copper networks to serve customers, this fine and compensation highlight a stark truth. The historic absence of at-scale digital infrastructure competition has resulted in reputational damage and lost business for service providers as well as delays and unreliable/inadequate services for the UK’s businesses and consumers. Thankfully the tide has changed.

The rise of alternative, agile, full-fibre infrastructure builders is providing the industry, government and regulator with a choice for the first time. It is only through the continued investment and dynamism of full-fibre challengers like CityFibre, that we can hope to offer the UK an alternative digital future.”

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
Leave a Comment
21 Responses
  1. Avatar Chris says:

    My heart bleeds for BT & related companies. As far as I can see BT is institutionalized with an ethos to abuse its position of power. Only heavy policing by Ofcom keeps BT in any semblance of order. Our village wireless internet project is stuck waiting for BT to deliver the fiber but BT is being very tardy. I tend to think the fine is too weedy to change BT’s ways and that is a shame.

    Chris.

    1. Avatar Lee says:

      Waiting for Openreach. Not BT.

    2. Avatar Gadget says:

      Have they given you any indication of what is causing the delay?

    3. Avatar wirelesspacman says:

      @ Lee

      Openwretch is BT

    4. Avatar Lee says:

      Are Plusnet BT? Are EE BT?

      No, they’re separate businesses within BT group.

    5. Avatar Bob says:

      Chris, your village is installing wireless access because of the lengthy, complicated and expensive nature of providing wired connections in rural areas. You then complain about BT delay in providing a wired connection to the very area your village has decided it is too difficult to provide wired connections.

      Irony, much.

    6. Avatar wireless pacman says:

      @Lee

      At least with Plusnet and EE you pay your invoices to them. With Openwretch you pay BT. Agreed this will change once they have legally separated the employees, but the assets will still remain with BT. Even then the payments get auto swept from the Openwretch account to a BT one if I remember correctly.

    7. Avatar Chris says:

      @Bob

      You don’t have all the facts but spout anyway. There is already BT fiber in the village with dark fiber that terminates a couple of meters away from the wireless equipment. The trench is already there for the last couple of meters – all BT need to do is connect it up. The fiber is there for the local primary school.

      So, no, there is no irony.

      Chris.

    8. Avatar AndyH says:

      @ Chris – What does your account manager say? Have you made a complaint to DSO?

    9. Avatar fastman says:

      the fibre for the school will be a dedicated connection funded by the local authority so surprised you can get to use it !!!! — or perhaps that’s the issue

    10. Avatar bob says:

      @ Chris

      Man spouting without all the facts rebukes people for spouting without all the facts.

      Double irony, much.

      Fact remains, wired connections in rural areas are difficult, expensive and time consuming. A fact your own village acknowledges.

  2. Avatar wirelesspacman says:

    “Wrongful or criminal deception intended to result in financial or personal gain.”

    I think the above just about sums it up. That is the definition of fraud as provided by the Oxford University Press, by the way.

    And no, the leopard has not (so far) changed its spots.

    1. Avatar AndyH says:

      Go to the SFO then with your evidence.

    2. Avatar dragoneast says:

      The important word is “intended”. Prove it, beyond reasonable doubt.

      BT’s great sin was to mislead the authorities. That will always get a hammering.

    3. Avatar AndyH says:

      Where did OFCOM state that BT misled them?

    4. Avatar dragoneast says:

      Actually, that’s the sort of semantics that gets BT into trouble!

      BT have regulatory obligations (= legally enforceable directions from Ofcom) rather like injunctions to the rest of us. When they fail to comply (in a persistent and blatant fashion) which Ofcom expect them to do; and BT do have to make returns to Ofcom to show they are complying, Ofcom are for all practical purposes being misled. Courts and every other regulatory authority in the world (well, at least where is there is some semblance of rule of law) take a very dim view of that behaviour, and quite rightly. Just try disobeying an injunction and using as your defence “it’s not my fault, nobody was standing over my shoulder, checking up on me”!!!

  3. Avatar dragoneast says:

    Alas I think these sort of tricks are an endemic part of British business. Always have been. I’ve never yet met any native workman in this country who doesn’t make an excuse and give the customer a load of bull when they think they can get away with it.

    Good for Ofcom clamping down. Still leaves everyone else at it, though. Might it put us lazy Brits off working for Openreach, just when they are trying to recruit? Just wondering too, how many third party contractors were OpenReach using at the time? True they obviously weren’t managing them well or perhaps at all, but when were they, ever; and who does?

  4. Avatar Apolloa says:

    This utterly stinks of an under the table deal they’ve reached in order for Ofcom to not completely split BT and OpenReach up. Stinks of it. If it wasn’t why is BT so willing to pay up!
    This is such strong evidence of why they should be totally split apart, BT have such an utter ball clenching monopoly on the UKs telecommunications it’s ludicrous!

    1. Avatar dragoneast says:

      I suspect you could say the same about National Rail, National Grid, the electricity distribution, water supply and rail operating companies in their areas; and so on. Indeed any utility. The Banks and the supermarkets aren’t immune either. Or Google or Microsoft for that matter. Or the EU or Westminster. The nameplate changes, but what else? Beauty, as they say, is in the eye of the beholder.

      To me, Openreach resemble the henpecked husband. Nag, nag, nag. Yep, things get done, but often one thing at the expense of another. Effective, that’s another story. Caught between the Ofcom devil and the real world of limited resources, something has to give. Just what next?

  5. Avatar GwynnR says:

    This was less than a year ago. Definitely a degree of misleading somewhere along the line. http://www.ispreview.co.uk/index.php/2016/07/bt-openreach-ceo-claims-strong-uk-customer-service-improvements.html

  6. Avatar Fastman says:

    the period of issue was between – In this case the regulator has found that, between January 2013 and December 2014

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