BT Openreach must compensate its wholesale customers if it doesn't deliver an adequate service, according to recommendations published today by Ofcom.

"Ofcom is proposing new requirements on Openreach to compensate all communications providers, including BT’s retail divisions, where it fails to provide and repair services according to agreed targets," a statement from the regulator said.

"Ofcom also proposes simplification of the process for claiming such compensation."

The new measures would see Openreach paying out compensation proactively, without any need for its customers to make a claim.

Payments would be made every time service or quality falls below the contractual threshold, rather than allowing for payment only if the performance average is below par over a certain period.

Ofcom also proposed that compensation would be paid for every problem, with "no upper limit to the amount that must be paid".

BT Openreach could also be asked to pay twice the current level of compensation for failing to activate 'live' lines.

Openreach was spun out of BT to ensure fair competition in the UK market.

The separately operated company sells and rents access to the parts of the BT network that give it market power, providing wholesale products such as basic telephony and broadband services.

The deadline for responses to Ofcom’s consultation on Openreach service performance is 25 January 2008.

Elsewhere, Ofcom's yearly report praised BT for "the real progress that has been made to date".

This included lower prices, greater choice of provider and more customers switching services.

"BT has made very significant progress in implementing the undertakings and has committed considerable resources to meeting its obligations, including the creation of Openreach as an independent business unit in January 2006," the Ofcom report said.

"These changes have benefited competition and end consumers."