TPG Buys iiNet: What will happen to the plans?

TPG’s announced that it’s going to buy — or at least attempt to buy — iiNet in a move that’ll further consolidate the Australian ISP space. All very interesting if you’re a reader of the business pages, but what will it mean for consumers?
The news only just broke that TPG intends to purchase 100 per cent of iiNet’s business in a deal worth some $1.4 billion. I’ve written it up over at PC Mag, for what it’s worth.
It’s not quite a done deal, given that iiNet shareholders have to vote in relation to it, and of course the ACCC could become involved if it feels there’s some prospect of monopolistic play to deal with. My gut feel is that this is unlikely; with the spectre of the NBN (even the horribly botched MTM NBN) on the horizon, consolidation of ISPs shouldn’t, in theory, be an issue. But my gut isn’t in fact where the ACCC lives, so anything’s possible.
Still, let’s say that it’s a done deal and that by July, iiNet is not much more than a brand that TPG happens to own. There’s precedent here, set by none other than iiNet itself, which owns a host of smaller brands, from WestNet to Internode to TransACT. All those brands become part of the TPG empire in one fell swoop.
Where there’s a point of difference is in the plans, or at least the plans as they stand. TPG’s big sales proposition is as a “value” ISP, with its most heavily promoted plan being its $69.99 per month “Unlimited” ADSL2+ home phone bundle. It doesn’t have the best reputation for customer service, and it doesn’t particularly bundle other premium goodies, like quota-free access or specific entertainment services in with its other bundles. Obviously for an “unlimited” customer, that might not matter as long as your speed is good enough, but again I’ve hit some interesting reader anecdotes on that score relating to TPG. It sits where it does, in the budget end of the market in any case.
iiNet doesn’t quite play there. It’s more on the premium end of the scale. iiNet’s promoted bundle plan runs $10/month more than TPG’s, and it only gives you 100GB to play with on that plan, although it does include calls to mobiles in its phone bundling, something TPG omits. It has customer service centres across Australia and in South Africa to ensure 24/7 support. Due disclaimer: Before switching to a cable connection (because living 5km from an exchange really sucks when it comes to ADSL2+, but that’s physics for you) I was an iiNet customer, and I’d have to say anecdotally that their support just got better and better over the years. Yes, I was paying for it, but it was worth it.
The thing is, there’s again precedent for a buyout ISP leveraging its existing plans and schemes onto its subsidiaries — and again iiNet’s the model here. It’s what it did with both Westnet and Internode over time, such that plans were mostly identical. That makes sense both for the business and the customers, because that way they didn’t have, say, Westnet customers complaining that iiNet customers were getting something they weren’t, or vice versa.
TPG’s plan modelling is quite different, and as such, they could go either straight to the budget plan model, which is their core business. But that would have to affect things like customer service, quotas, offers and so on, and that could see any number of iiNet customers jumping ship… to the few remaining other ISPs. Go the other way, and bump “up” TPG’s plans, and you risk the same thing in reverse. Equally, they could run iiNet as a completely separate business — from memory, iiNet did this with Internode for a while — but then they’d be paying for a lot of service duplication in employee terms, and that seems unlikely too.
Unless you’re an iiNet or TPG shareholder, today’s news isn’t going to immediately impact you. It’s in the aftermath of the takeover that we’ll see exactly what it’ll do to the consumer in the already shrinking Australian ISP space.

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