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B1. Revenue and other income

NBN Co generates revenue primarily from the provision of telecommunications services to its customers. Other sources of revenue include new development fees, lease and license fees and commercial works activities.

Revenue from contracts with customers

NBN Co Group

30 June 2020

30 June 2019

For the year ended

$m

$m

Telecommunications revenue - Residential

2,979

2,168

Telecommunication revenue - Business

666

475

Other revenue

192

182

Total revenue

3,837

2,825

Telecommunications revenue

Telecommunications services are facilitated through contracting with Retail Service Providers (RSPs) under the Wholesale Broadband Agreement (WBA). The revenue from the provision of telecommunications services includes recurring wholesale-only broadband network revenue and recurring facility access services revenue. There are also non-recurring revenues in the form of ancillary and service charges. Pricing for the various product offerings is set out in the WBA. The WBA also contains credits and rebates that are available to all RSPs on an equal basis.

Telecommunications revenue currently accounts for 95% of Group revenue.

For telecommunications revenue, NBN Co recognises revenue for the amount to which it has a right to invoice.

Recurring telecommunications revenues

Broadband network services relate to the provision of NBN Co’s wholesale broadband products to RSPs which are then sold to customers. The performance obligations associated with these products are satisfied over time, as the RSPs receive the benefits of NBN Co’s wholesale broadband products throughout the period. NBN Co transfers control of the wholesale broadband products to the RSP evenly over the period and recognises revenue accordingly. Over this period, the RSPs are able to obtain value from NBN Co’s products through the sale of broadband services to customers. The Group invoices the RSP on a monthly basis, with standard short-term payment terms and therefore no financing component exists. Applicable credits and rebates are recognised as a reduction to the transaction price during the period to which they relate.

Non-recurring telecommunications revenues

Telecommunications revenue includes non-recurring non-refundable upfront fees for connection charges, installation charges, service transfers and RSP end-user contributions to connect new developments. Upfront fees will be recognised at the point in time when these services are provided.

Other revenue

NBN Co generates other non-telecommunications revenue from construction and lease activity, via separate contractual arrangements. The construction contracts include commercial works, technology choice and new development fees. Invoices are on standard short-term payment terms and therefore no financing component exists.

Commercial works are construction type contracts based on requests from customers for NBN Co to relocate cables and network equipment, while technology choice revenues relate to application, design and construction fees from customers who opt for alternative technologies other than those being offered at their premise. New development fees represent consideration for the deployment of infrastructure and backhaul construction.

For construction-type contracts, NBN Co recognises revenue over time on a straight-line basis over the construction period as this represents the transfer of benefits to the customer. NBN Co also earns non-telecommunications revenue through the license of copper and HFC access to Telstra. Under the RDAs, NBN Co progressively takes ownership of elements of Telstra’s copper and HFC networks. NBN Co assures and maintains these copper and HFC network elements and provides a license back to Telstra for the right to access the nbn™ network and deliver legacy services during the co-existence period. NBN Co charges Telstra recurring license fees, which are billed quarterly, and one-off upfront installation fees where Telstra orders new licenses from NBN Co.

Recurring license fees paid in advance each quarter are deferred and recognised to revenue on a straight-line basis over the quarter they relate to, as this is the period that NBN Co satisfies the performance obligation. Upfront installation fees are recognised as the service is rendered.

Further disaggregation of revenue

The Group has not provided further disaggregation of revenue based upon the timing of recognition (i.e. whether products are transferred at a point in time or over time) as the revenue transferred at a point in time is not material.

Assets and liabilities related to contracts with customers

NBN Co has recognised the following assets and liabilities related to contracts with customers:

30 June 2020

30 June 2019

$m

$m

Trade receivables (note C2)

396

304

Contract liabilities (note C6)

120

123

Contract liabilities are recognised due to differences between the timing of consideration received and satisfaction of the associated performance obligations in relation to contracts with customers.

A contract liability for deferred revenue is recorded for obligations under contracts for which payment has been received in advance. Contract liabilities unwind as “revenue from contracts with customers” upon satisfaction of the performance obligations under the terms of the contract.

There were no significant changes in contract balances due to remeasurement or impairment in the year. Changes in the balances were related to the performance of obligations under contracts, or the deferral and accrual of new revenues related to contracts in the year.

NBN Co applies the practical expedient in paragraph 121 of AASB 15 and does not disclose information about remaining performance obligations that have durations of one year or less. Significant changes in the contract liabilities balances during the year are as follows:

Contract liabilities

30 June 2020

30 June 2019

$m

$m

Balance at 1 July

123

90

Revenue recognised that was included in the contract liability balance at the beginning of the year

(91)

(70)

Increases due to cash received, excluding amounts recognised as revenue during the year

88

103

Balance at 30 June

120

123

Revenue recognition policy

Revenue is measured based upon the consideration specified within a contract with a customer and recognised as the Group transfers control over an asset or service to a customer. The Group follows the 5–step approach outlined in AASB 15.

Other income – gifted assets and government grants

NBN Co Group

30 June 2020

30 June 2019

For the year ended

$m

$m

Other income - gifted assets and government grants

24

23

Total other income

24

23