Superloop puts functional separation bid to ACCC

Superloop is seeking regulatory approval for a joint structural separation plan extending from its $165 million acquisition of fibre-to-the-premises operator Lynham Networks.

The Australian Competition and Consumer Competition (ACCC) has opened an industry consultation on the undertaking which, if approved, will allow the expanded Superloop and its entities to continue retailing broadband services.

Currently, Superloop and Lynham – which currently both have retail arms – rely on special regulatory provisions that allow smaller non-NBN providers to escape rules that would otherwise limit them to selling services on a wholesale-only basis.

Superloop currently operates under a class exemption that allows it to retail its superfast network services directly and through entities it owns.

Lynham, which specialises in multi-dwelling units, also sells superfast broadband to residential customers through its retail subsidiary, Lightning Broadband, but under a deemed functional separation undertaking approved by the ACCC.

However, as part of its recent acquisition of Lynham, Superloop has applied the ACCC for a greenlight for the newly formed entity to operate under a new joint voluntary separation undertaking.

Under the terms of undertaking, which would apply to local access lines controlled by Superloop, Lynham Networks is to be functionally separated as a wholesale network provider prohibited from selling broadband services directly to residential customers.

The newly formed group’s retail divisions - Superloop Broadband, Exetel, Veda Networks and Lightning Broadband - would functionally split to retail services to residential end users, competing with other wholesale customers on non-discriminatory terms.

The retailers will also operate under separate brands and in physically separated premises, and not be subject to management direction from Lynham leadership and vice-versa.

Superloop acquired FTTP network operator Lynham and its retail subsidiary brand Lightning Broadband in February, framing it as a bid to boost its ability to challenge incumbents in the superfast broadband infrastructure market, including NBN Co.

Superloop has argued to the commission that its undertaking will promote competition in the market superfast broadband infrastructure.

“If the ACCC rejects the undertaking, Superloop would be required to operate its local access line networks on a wholesale-only basis … discouraging network expansion and competition in new infrastructure builds, as it would be prohibited from using such networks to provide retail services,” it wrote in its application.

The ACCC said it had taken an initial view that the joint structural separation would serve the long-term interests of consumers.

“The ACCC’s preliminary view is that Superloop’s undertaking is likely to promote competition in the deployment of fibre infrastructure to new developments,” it wrote.

“The ACCC also considers that accepting Superloop’s undertaking is likely to promote greater downstream retail competition through increasing the number of RSPs offering retail services across Superloop’s combined networks and providing end users with a greater choice of retail service provider,” it added.

The ACCC has given stakeholders until May 8 to lodge submissions on the undertaking and expects to make a decision on whether to accept the proposal late that month.