Ofcom has got out the big stick today to beat up BT Group, and has issued a record breaking £42 million fine due to BT breaking rules around how extensions to the 30 day install period for Ethernet services should have been handled between January 2013 and December 2014.
"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."Gaucho Rasmussen, Ofcom’s Investigations Director
The basic install period given for an Ethernet leased line is 30 days, but when problems are encountered extensions can be granted (e.g. wayleave is taking time to negotiate) but if the 30 working day rule is broken when no extension was agreed compensation is due, no matter whether that business is a big company like Vodafone, or a medium sized company seeking to install reliable business broadband. It seems BT was making some assumptions based on carefully worded contracts that meant it thought customers had agreed to the time extension, thus reducing the compensation due.
The fine would have been 30% higher but BT has accepted full liability and is in the process of setting up a scheme to compensate companies affected and this must be completed within 12 months. The ubiquity of the BT footprint means that even for many Ethernet services sold by third parties the actual physical connection is via BT but this is slowly now changing as more options appear.
There is also a £300,000 fine for not providing Ofcom with information that was complete in its Business Connectivity Review 2016, and this once paid to Ofcom will be passed onto HM Treasury. There will no doubt be a lots of analysts looking to the financial results to see if this record fine does make an impact on the profit margins which it should do, increasing the price for Ethernet services is something that cannot happen as Ofcom has been pushing down the prices of the product for sometime.
So how did BT let this happen? Difficult to know for sure, but if you rewind your memory to the 2013 and 2014 period it was a time when lots of third party contractors were being used and consumers were complaining about the standards Openreach was delivering, plus the commercial VDSL2 roll-outs and BDUK projects were at peak delivery volume. So perhaps someone took their eye off the ball and diverted resources to hit some metrics in one area, but failed to appreciate the eventual impact on other areas of doing so.
This record fine helps to underscore why there was so much campaigning for the full breakup of Openreach away from BT Group, i.e. the other communications providers were viewing things in light of what they knew about this on-going investigation. The real question is whether Openreach has actually turned the corner now and changes of the last 18 months plus the new board mean that once people stop beating them up other past transgressions that things are materially better. Though ironically for those that want a less powerful national telecoms operator, a Laurel and Hardy delivery service with a sea of calm visible PR veneer might be an easier market for others to compete in and undercut on the four key metrics of speed of service, delivery time, reliability and pricing.