The Australian Competition and Consumer Commission (ACCC) has said that despite assurances from TPG, iiNet customers have voiced their concerns that the ISP's proposed acquisition of iiNet could see customer service levels fall.
In May, TPG outbid M2's offer for iiNet, with the board recommending that shareholders approve a new AU$1.5 billion bid for the company.
The ACCC is considering the impact on competition in the fixed broadband industry that would result if the merger was to go ahead with shareholder approval, and has today released a statement of issues surrounding the deal for public comment.
The watchdog indicated that many customers had raised concerns that TPG -- with its reputation for lean costs -- would reduce the level of customer service that iiNet is known for, despite the assurances from both iiNet and TPG.
"A number of consumers noted in submissions to the ACCC that they had switched their service provider from TPG to iiNet because they value iiNet's perceived superior customer service," the ACCC said.
In addition to the potential impact on competition -- with the combined TPG-iiNet entity making up 27 percent of the industry -- the ACCC said some were concerned that if TPG did not maintain iiNet's customer service, then its rivals would not match the service iiNet offers today.
"Further, these parties submit that iiNet customers would be unlikely to switch to other competitors in the event of a price rise or reduction in service quality."
One particular sticking point for customers was iiNet's reputation as an advocate for customers. Prior to the takeover, iiNet had been on the forefront of challenging issues facing its customers, including the mandatory data-retention scheme and taking on rights holders in court in the Dallas Buyers Club and Village Roadshow cases.
"Beyond customer service, some market participants have also singled out iiNet among the largest five providers for its strong consumer advocacy in an evolving policy environment. Consumers and some other interested parties are concerned that TPG will apply a strategy based on low prices and cost minimisation to iiNet, leading to a degradation of iiNet's high level of customer service."
ACCC chair Rod Sims said the overall deal would reduce the number of large ISPs from five to four, and could impact competitive tensions in the market.
"The ACCC is also considering whether the competitive constraint posed by the remaining competitors, namely Telstra, Optus, M2, and the much smaller market participants, would be sufficient to prevent a substantial lessening of competition in the supply of fixed broadband services. As a general proposition, competition is stronger when the market contains more competitors," Sims said in a statement.
The ACCC said it did not think the acquisition would impact competition in the supply of backhaul, mobile broadband, or voice services.
Submissions are open until July 2, and the ACCC has said that it will defer making its final view known by August 20.