Ofcom said the fine was the largest it had ever handed down.

It found BT's Openreach division had cut compensation payments to telecoms providers for delays in installing the lines between early 2013 and late 2014.

Openreach chief executive Clive Selley said the firm "apologised wholeheartedly" for the mistakes.

The investigation found BT had broken rules put in place to counter its "significant market power" by cutting the payments.

Gaucho Rasmussen, Ofcom's investigations director, said: "These high-speed lines are a vital part of this country's digital backbone.

"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."

'Appropriate notice'

Openreach provides the wires and cables that powers the UK's broadband and landline phone network.

In this case, it failed to pay full compensation to providers when it was late installing ethernet lines - high-speed cables used by large businesses, and mobile and broadband providers, to transmit data.

BT is supposed to roll out high-speed lines within 30 days. If it cannot do that then it can give notice and say it needs a little longer, and that is acceptable under the rules.

However, Mr Rasmussen said that if BT did not provide "appropriate notice" it had to pay compensation to its telecoms provider customers for the delay.

"We have found in our investigation that that notice was not always appropriately provided and that BT would go back in time to try and justify its delay to avoid paying compensation."

BT was also fined an extra £300,000 for not providing Ofcom with all the information it asked for.

"We have powers to compel companies to provide us information and it's important that that information is provided to us both on time and in complete manner," said Mr Rasmussen.

"We found that sometimes there were delays, sometimes information was incomplete and that obviously has an impact on how quickly we can do our job."

'Fall short'

Earlier this month, BT agreed to Ofcom's demands for it to legally separate Openreach from its main business.

Under the changes, Openreach will become a distinct company with its own staff, management and strategy "to serve all of its customers equally".

BT chief executive Gavin Patterson said Ofcom's investigation "revealed we fell short of the high standards" for serving telecoms providers.

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