BT fined record £42million by regulator Ofcom for 'serious breach' of rules

Telecom giant BT has been fined a record £42 million by watchdog Ofcom over a “serious breach” of rules.

An investigation found BT did not pay out adequate compensation to rival telecom companies after failing to deliver Ethernet high-speed services in time.

The fine is believed to be the largest ever penalty imposed by the regulator.

In addition to the fine, the company is also expected to pay out £300 million in compensation to rivals over the delayed high-speed cable installations.

Ofcom rules state that BT has to set-up Ethernet services to its wholesale customers - providers such as Vodafone and TalkTalk - and make compensation payments for late delivery.

Ofcom said BT Openreach made the reduced payments to other providers between January 2013 and December 2014.

The company said it "apologised wholeheartedly" over the incident.

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."

Ofcom has rules to curb the company's "significant market power" to ensure competitiveness, as other providers rely on access to its vast network.

Compensation will now have to be paid to affected providers within 12 months, Ofcom said.

BT had faced an even greater fine, but this was slashed by 30 per cent after it admitted full liability.

It was fined a further £300,000 for "failing to provide information" to Ofcom.

The investigation found BT "misused" a contract to slash its payments to providers over the delayed installation.

Ofcom said it was required to install the high-speed lines to wholesale customers within 30 days or pay compensation.

Ethernet lines are often used by large businesses and broadband providers to ensure fast services and was said by the regulator to "underpin the UK's communications infrastructure".

BT said it estimated the total cost of the compensation payments would be around £300 million.

Openreach CEO Clive Selley 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."

An investigation into BT's conduct was launched after concerns were flagged by Vodafone that it had been misusing contractual terms.

Earlier this month, BT reached an agreement with Ofcom to legally separate its infrastructure arm Openreach.

It followed growing calls from rivals to hive off Openreach and in November the communications regulator ordered a legal separation of the firm.