Ofcom fines BT record £42m for failing to compensate rivals for late delivery of infrastructure

'BT broke our rules by failing to pay other telecoms companies proper compensation when these services were not provided on time,' says Ofcom

BT has been fined £42m by telecoms regulator Ofcom for a "serious breach" of the rules governing the provision of Ethernet services to other telecoms companies.

It must also pay compensation estimated at £300m to rival operators.

Ofcom found that BT's Openreach arm, which is responsible for managing the copper and fibre cables and supporting infrastructure that provide telephone and internet services to almost all homes and businesses in the UK, acted improperly in its dealings with other operators.

Rival firms depend on this infrastructure, which is almost all owned by BT, to supply their own services. There have been many accusations over the years that BT has been too slow in it rolling out, and that compensation has been delayed.

Prompted by an initial complaint by Vodafone that Openreach had failed to compensate it for late delivery of Ethernet cables, an Ofcom investigation found that between January 2013 and December 2014 BT had commited a "serious breach" of the terms of its contracts in order to reduce compensation payments to its rival operators.

"We found BT broke our rules by failing to pay other telecoms companies proper compensation when these services were not provided on time," said Gaucho Rasmussen, Ofcom's investigations director, in a statement. "The size of our fine reflects how important these rules are to protect competition and, ultimately, consumers and businesses."

Rasmussen added: "Our message is clear we will not tolerate this sort of behaviour."

The record £42bn penalty includes a £300,000 fine for BT's failure to cooperate fully with Ofcom during its investigation, and the firm must pay compensation payment to other providers, which BT estimates will be around £300m.

In a statement Openreach CEO, Clive Selley, apologised for the firm's "mistakes".

"This issue is unrepresentative of the vast majority of work conducted by Openreach and we are committed to delivering outstanding service for our customers," he said.

The Ofcom investigation "revealed we fell short of the high standards", said BT Group CEO, Gavin Patterson.

"We take this issue very seriously and we have put in place measures, controls and people to prevent it happening again," he said.

The fine comes at a bad time for BT which in January issued a profit warning for the next two years after financial irregularities were discovered in its Italian operating arm.

Earlier this month it was announced that Openreach will become a separate business following pressure from Ofcom and industry rivals. It will be a fully independent entity within the wider BT Group with sole focus on managing the fibre and copper broadband infrastructure.

However, BT will still legally be the owner of the company and set the budget Openreach is given each year.