The Australian Competition and Consumer Commission (ACCC) has published the National Broadband Network (NBN) company's FY16 regulatory documents, revealing that it more than doubled its capital expenditure spending over the year, with operating expenditure jumping by 42 percent.
The documents are part of its Long Term Revenue Constraint Methodology (LTRCM) determination for the financial year, as required under the Special Access Undertaking (SAU).
While most of the NBN Co limited Special Access Undertaking Report For the year ended 30 June 2016 [PDF] was commercial in confidence -- blanking out the opex involved in NBN's Telstra arrangements; Optus arrangements; interim satellite network; interim transit arrangements; Tasmania tri-area service arrangements; first release trial sites; third-party funded network changes; urgent or unforseen network issues; and force majeure -- total opex was AU$2.26 billion, up 42 percent on last year's AU$1.59 billion, with total expenses of AU$3.2 billion.
The opex costs that were provided were: Direct telecommunications costs of AU$1.29 billion, up 50 percent from AU$861.7 million; employee benefit expenses of AU$558.5 million, up 50 percent from AU$372.2 million; outsourced and corporate services expenses of AU$93.3 million, down 17 percent from AU$112.4 million; IT and software expenses of AU$149.4 million, up 18.8 percent from AU$125.7 million; communication and public information expenses of AU$51 million, up 79 percent from AU$28.5 million; and other expenses of AU$112.8 million, up 24.4 percent from AU$90.7 million.
NBN said its other expenses rose due to including information that was previously contained in the telecommunications revenue category. The ACCC approved the cost variation in June, with the change to allow NBN to recover a further AU$6 million in future.
In regards to capital expenditure, the majority of the information was commercial in confidence, with NBN revealing a yearly grand total capex spend of AU$4.52 billion -- more than double last year's AU$2.17 billion.
NBN's FY16 financial results showed a life-to-date capex for the project of AU$13.6 billion, with a breakdown by technology showing hybrid fibre-coaxial (HFC) cost AU$448 million over the year, up significantly from AU$48 million; fibre to the node (FttN) cost AU$1.668 billion, up from AU$334 million; fibre to the premises (FttP) cost AU$1.078 billion, down from AU$1.692 billion; satellite cost AU$135 million, down from AU$247 million; fixed-wireless cost AU$354 million, up from AU$340 million; transit cost AU$252 million, up from AU$233 million; and common capex cost AU$734 million, up from AU$434 million in FY15.
The multi-technology mix (MTM) NBN model adopted by the Coalition after being re-elected at the end of 2013 involves a mix of technologies including FttP, FttN, fibre to the basement (FttB), FttDP, and HFC; the former SAU took into account only FttP.
The ACCC first published NBN's proposed variations back in May, when the broadband company said it already offers FttN, FttB, and HFC technologies in an SAU-consistent manner, with the SAU variation to simply formalise the process. However, several other amendments would see NBN forced to provide rollout progress information to access seekers, as well as changing the dispute resolution mechanism to allow a body corporate to be appointed as a resolution adviser.
"None of the changes which NBN proposes alter the underlying regulatory principles, structure, and incentives embedded in the SAU, which the ACCC has previously accepted as being reasonable, including being in the long-term interests of end users," NBN said.
"NBN's changes are limited in scope and mechanical in nature; they represent an incremental change to reflect current policy settings.
"Fundamentally, the change to the MTM model does not change the underlying regulatory principles, structure, or incentives embedded in the SAU and they apply equally to the MTM as they do currently to the services and products under the SAU."
The ACCC will publish its preliminary views on capital expenditure and operating expenditure in December. It will issue a draft decision in March 2017, hold consultation on this in April, and present its final decision in June.
At the end of each year, NBN is required to provide forecasts on its capex, opex, asset disposals, and capex that has yet to be placed in service for the financial year ahead, and on October 30, it must submit its LTRCM proposal in accordance with the SAU.
The LTRCM consists of its actual financial information, proposed financial information, an expenditure compliance report, a procurement compliance report, a price compliance report, and several independent limited assurance reviews conducted by PricewaterhouseCoopers.
The ACCC thus regulates the amount of revenue NBN may earn each financial year, the pricing caps for its services, the net value of its assets, and the accumulation of its unrecovered costs. Under the price controls, NBN is permitted the opportunity to recover shortfalls in predicted revenue once take-up of NBN services grows.
The ACCC must each year also consider whether NBN has adequate rules for procurement, whether there are controls and processes for compliance with the SAU's prudency conditions, and whether those controls and processes operate well.