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NBN Co faces legal issues at first sites

The National Broadband Network Company (NBN Co) has reached a settlement with a contractor, which faced delays during the National Broadband Network's first release site roll-out, the company's financial report has revealed.

The National Broadband Network Company (NBN Co) has reached a settlement with a contractor, which faced delays during the National Broadband Network's first release site roll-out, the company's financial report has revealed.

The report (PDF), released by Finance Minister Penny Wong and Communications Minister Stephen Conroy to the Joint Committee on the National Broadband Network last night, revealed that the fibre-to-the-home project was already facing legal issues with its first roll-out sites.

"NBN Co has entered into negotiated settlement with one supplier of pre-release and has received a claim from another supplier. NBN Co has settled with one contractor company who was delayed in the [first release site] deployment," the report stated.

The report didn't give any further details of the settlement, or grounds for dispute. NBN Co declined to provide further detail. As the settlement is around involvement at the first release sites, it would appear to be unrelated to the halted construction tender process in April.

For the 2010 financial year, NBN Co reported a $323 million loss, according to the document. NBN Co reported no operating revenues during the year to 30 June 2011.

The result took NBN Co's losses to $403.06 million for the past two years. NBN Co had not been charging its retail service providers for the wholesale cost of providing services on the mainland. When this charge kicks in from the beginning of October, NBN Co will then start seeing significant revenue increases.

Capital spending by NBN Co was $463 million in the year, which was nearly a $1 billion less than forecasted in the company's corporate plan of $1.42 billion. This was partly due to delays in signing the definitive agreement with Telstra for the use of its ducts and the decommissioning of its copper, as well as delays in selecting a satellite provider for the remote parts of the network, according to the report.

While capital spending was below forecast, the number of 18,243 premises passed was more than the 17,000 in the corporate plan.

The Commonwealth had provided $1.362 billion in funding to the NBN Co as at 30 June 2011, with the total amount capped at $27.5 billion during the project's build, which is expected to finish in 2021.

NBN Co said its main costs were $119 million for employee-related expenses, $161 million for legal and technical advice expenses, and $37 million for information technology and facilities expenses.

There were more staff, 906, than the number of activated premises, 622, as at 30 June 2011, the unaudited report said, but the number of employees was lower than estimated in the corporate plan, which had estimated that headcount would be 1091 at this point.

An internal NBN Co document released under Freedom of Information on Monday also revealed that NBN Co expects to cut the number of jobs required at the peak of the NBN roll-out. While original forecasts put the number of employees and contractors required by the company at 37,000, the document revealed that based on the signing of the $11 billion agreement with Telstra to lease the telco's pits and ducts, NBN Co expects to only require between 16,000 and 18,000 jobs at peak.

The top five jobs that will account for 80 per cent of the forecast workforce demand will be labourers, earthmoving plant operators, road traffic controllers, cablers and telecommunications lineworkers, according to the document.

The financial report handed down yesterday was due earlier this month: the delay in releasing the document was a source of disappointment to NBN committee chair Rob Oakeshott MP, who last week cut short a committee hearing and rescheduled another hearing on 11 October.