29% cost blow out for the NBN ??? | Dirt Report

The reported cost blowout

NBN Co revealed that building lead-ins for 285,000 premises upgraded from copper or fibre to the curb to full fibre cost between 27% and 29% more than forecast during the financial year ending June 2024. The figure was highlighted in an iTnews report and discussed alongside NBN Co’s FY24 financial reporting under its Special Access Undertaking, or SAU.

The SAU is the regulatory framework covering areas including NBN pricing, service standards and financial reporting. The cost increase is notable, although the available reporting does not provide the complete underlying lead-in cost because parts of the information have been redacted.

NBN Co’s FY24 financial position

NBN Co reported approximately $5.23 billion in revenue for FY24 under the SAU framework. Revenue exceeded the forecast, with higher demand for broadband services contributing to the result.

Operating expenditure was approximately $2.94 billion, slightly below forecast. The figures discussed included around $1.34 billion for infrastructure payments, approximately $644 million in employee benefits and $681 million in network costs. Operating efficiencies and lower service assurance costs helped offset higher expenses in areas such as network maintenance and power.

Capital expenditure was $3.88 billion, which was $248 million above forecast. The additional spending was linked to accelerating network upgrades and responding to demand. NBN Co also deferred some spending on HFC and transit capacity upgrades.

Where the capital spending went

Approximately $1.124 billion was directed towards upgrading fibre to the node services to fibre to the premises. Fixed wireless upgrades accounted for $492 million, with the spending driven by the need for additional capacity as usage increased. New developments accounted for $260 million, reflecting increased demand and inflationary pressures.

The figures show that NBN Co spent more than forecast on capital works while keeping operating expenditure slightly below forecast. The higher capital spending was therefore presented as part of broader network expansion and upgrade activity, rather than as an increase in routine operating costs.

What a lead-in involves

A lead-in is the physical connection between the main NBN infrastructure near a property and the fibre connection into the home. The work can involve conduit, cabling, trenching or drilling beneath a driveway, and the installation of an NBN utility box at the property.

The cost can vary depending on the location and condition of existing infrastructure. Remote or difficult-to-access properties may require more labour, while damaged pits or conduits may need repair or replacement. Skilled labour and material costs were also identified as contributors to higher project costs.

NBN Co’s network construction can involve putting fibre connection points into a street before every property is ready to connect. This creates upfront infrastructure costs, while later connections can use the network that is already in place.

Ownership and transparency questions

The transcript also refers to a Communication Workers Union argument that NBN Co should remain under elected government control as a national security measure. The related parliamentary inquiry concerns NBN Co’s commitment to public ownership.

The union’s stated position is that communications and transmission infrastructure is important to national sovereignty and security, and should remain publicly owned and accountable through Parliament. This is separate from the FY24 cost figures, but forms part of the wider debate about NBN Co’s future ownership and accountability.