The correct way to deal with this is to involve the Ombudsman however the Ombudsman will not take on your case unless and until you have the internet provider's final response, following a complaint to them.
Given the dispute you can avail of the Financial Ombudsman Service dispute resolution scheme - which is much quicker than court action and free to use. You have to go through a complaints procedure first.
During this time (8 weeks for the insurer then 16 weeks for the Ombudsman) the internet provider should not attempt to recover the money from you.
You are covered under the Consumer Rights Act 2015 here which means you have a right to expect a service (from the internet provider) carried out with reasonable care and skill. Furthermore, the internet service they offer should be “fit for purpose” and “as described”. It is clear they were unable to provide the service to you.
You should now make a formal complaint and if that does not resolve the matter ask them for a "deadlock letter", which is a letter giving their final response. Their complaints policy will be detailed on their website if you take a look.
Once you have the deadlock letter the next step would be to escalate this to the Ombudsman - they will investigate and liaise with the provider which would hopefully result in a resolution and a cancellation of that bill. They can order the internet provider to make a financial award for inconvenience if they have acted poorly.
Once you have their final response, you can make the complaint to the Ombudsman here : www.financial-ombudsman.org.uk/consumers/how-to-complain
Or by email:***@******.***
Based on the circumstances, assuming the internet provider does not uphold your complaint, I am sure the Ombudsman will do. The Ombudsman will look at this case independently and will make a decision based on what happened. Their decision is binding on the provider.
If the Ombudsman does not find in your favour the provider may escalate this and use a debt collection company.
Debt collectors are not bailiffs - they have no powers as such. They will simply try to collect the money their client thinks you owe. You can turn them away if you dispute the debt and they visit you - they can’t enter your home and take goods. They would report back to their client they were unsuccessful and it’s then up to their client whether to take matters further.
They will send a letter before action to you if their debt collection attempts fail - which is required under the pre action protocol to give you the chance to avoid court action. They usually give you 14 days to pay before they will take civil court action.
If they do sue, you will receive court documents (a response pack) which you must complete and return to the court. It is a tick box exercise for the most part and there is a short section to write a defence which is easy enough though please feel free to come back to this site if you need any more help.
You should not ignore the court papers as if you do, the claimant will apply for judgment in default meaning they win and you would not be allowed to defend the claim.
A claim will also take 9-12 months to be decided at court. If you lost then you would get 14 days to pay the judgment before the claimant can enforce the order, and 30 days to pay in full before it is registered with credit agencies. The claimant cannot recover legal costs if they win, in a claim under £10K (a small claim), all they can claim are the court fees and interest.
If the claim has no merit then you have an option (after your defence is filed) to apply to strike the claim out. The court will consider an application if the claim has no merit, or is misconceived.
You should first invite the claimant to voluntarily discontinue their claim within 7 days if it gets to this point - tell them if they don't then you will apply to strike out and seek your costs if you are forced to do so. If you have no response or they reply and refuse then you could apply to strike out.
The application costs £255 but this is recoverable if your application succeeds. If you are on a low income, have low savings or in receipt of benefits then you can ask the court to waive the court fee. If you won the application, the claim is struck out.
The hearing (if the case gets that far) is likely to be held remotely, it's you, a district judge (who is a practising solicitor or barrister) and someone from the claimant company. The Judge decides and if you lost, you get 14 days to pay the sum. If paid in full within 30 days then nothing goes on your credit record. But certainly I think you would succeed in a defence, just to be clear.
I can assist you going forwards if it gets to the point they issue a claim.