Telecoms providers must automatically compensate customers for slow repairs, missed appointments and delayed installations, Ofcom has said.
Under the new system, consumers will receive £8 for each day that a fault is not repaired and £25 compensation if an engineer does not turn up for a scheduled appointment.
Providers must also pay £5 a day if a broadband or landline service is not working on the day it was promised.
BT, Sky, TalkTalk, Virgin Media and Zen Internet, who collectively serve about 90 per cent of the UK's landline and broadband customers, have all signed up to the agreement, while EE and Plusnet are expected to do so at a later date.
The new system will be implemented in 2019, so providers have time to change their billing systems, online accounts and call centres accordingly.
Lindsey Fussell, Consumer Group Director at Ofcom, said: "Waiting too long for your landline or broadband to be fixed is frustrating enough, without having to fight for compensation.
"So, providers will have to pay money back automatically, whenever repairs or installations don’t happen on time, or an engineer doesn’t turn up. People will get the money they deserve, while providers will want to work harder to improve their service."
The announcement has been hailed by Citizens Advice, which said providers are failing to deliver the service their customers are paying for "all too often".
Gillian Guy, Chief Executive of Citizens Advice, said: "The introduction of this voluntary scheme means that consumers will no longer have to waste valuable time negotiating with providers and is therefore welcome."
However, Ms Guy said it is essential that Ofcom holds broadband companies to account through strict reporting to ensure people receive the compensation they are entitled to.
She therefore insisted that Citizens Advice will look closely at Ofcom’s full review of the scheme after 12 months "to make sure it works for consumers".
Digital Minister Matt Hancock stated that he is "pleased progress is being made" on automatically compensating telecoms customers.
"It now needs to be implemented as quickly as possible for it to deliver meaningful improvements in service quality," he said.
Mr Hancock added that broadband is now a modern necessity, rather than something that is "nice to have", which means it can be very frustrating when it does not work.