iiNet ramps up Internode digestion


news iiNet has taken several key milestone actions over the past week as it continues its ongoing efforts to integrate the operations of fellow national broadband provider Internode into its own, following its acquisition of the company in late December last year.

When iiNet announced it would buy Internode in late December last year, the two companies were careful to highlight their plans for the South Australian ISP led by well-known industry figure Simon Hackett to remain independent from its new parent. “This is another iiNet acquisition and Internode will just disappear, right?” stated a question posted as part of Internode’s frequently asked questions document for the transaction. “No, it isn’t,” came the answer from Hackett. “Internode will be remaining as a separate operating company within the group, with its own identity and its own staff. I am staying at the helm of Internode as is the rest of the management structure of the Internode & Agile company group.”

At the time, Hackett emphasised that his new status as a major shareholder of iiNet itself would mean that Internode would not “just disappear into iiNet without trace”, and that there was little reason for the company to harmonise its broadband plans and offerings with those of iiNet, as other companies subsumed into iiNet — such as Netspace, Westnet and AAPT — had in the past.
However, over the months since the acquisition, iiNet and Internode have increasingly tied their operations together.

Late last week, iiNet confirmed that one of Internode’s most high-profile executives, current chief technology officer John Lindsay, would take up a position as CTO of iiNet, replacing Greg Bader, who left the CTO position recently to become iiNet’s head of its growing business division. Lindsay was seen as one of Hackett’s main lieutenants and had succeeded Hackett himself in the Internode CTO position earlier this year. He previously acted as Internode’s carrier relations manager for a decade to March 2010, when he achieved a higher profile as the company’s general manager of regulatory and corporate affairs.

With the departure of high-profile executives Matthew Moyle-Croft and network engineer Mark Newton from Internode’s ranks in September, the only remaining executive at Internode who has a high public profile as a commentator in the telecommunications industry is Hackett himself.

iiNet chief executive Michael Malone noted in a brief comment on the appointment by email that it was the third time that Lindsay had been iiNet’s chief technology officer, having served in the position twice throughout the mid to late 1990’s. “I’m now delighted he’s moving to take over tech for the group, a role that’s been vacant since Greg took over Business in July,” Malone said. “Being iiNet’s CTO is the most exciting technology job in Australia,” added Lindsay.

The news came after iiNet last week also announced the merger of the 3FL and Internet gaming platforms which had separately been operated by iiNet and Internode respectively. The new merged platform will combine “the best features” of both and will retain the brand name, according to an iiNet media release issued last week. “By combining iiNet and Internode resources and staff, we can offer the latest news, reviews and interviews plus more than eight terabytes of files, trailers, mods and patches and a 10,000 player capacity,” iiNet chief product officer Stephen Harley said last week. “The best bit is that all servers, files and content will remain in place so it’ll be an easy transition for our customers.”

Internode content manager, Heidi Angove, said the combined forces of iiNet and Internode would change the Australian gaming landscape for the better. “Premium titles, a plethora of servers with a choice of rulesets, fast gameplay and excellent editorial. Together we’re committed to be the best possible ISP for gamers in Australia,” Angove said. The merge is expected to be complete by July 2012.

iiNet and Internode have also integrated a number of other areas of their businesses since the acquisition was finalised earlier this year.

In March iiNet introduced Internode’s data blocks feature to its own broadband plan structure, and then several weeks later iiNet also dumped the on-peak/off-peak split of its broadband plans, offering customers the same base system as Internode has long promoted for its own plans. Both moves came after Internode announced its intention in February to migrate customers using wholesale offerings from rival companies like Optus and Telstra to iiNet’s ADSL infrastructure where possible. With similar moves occurring on iiNet’s end, the move effectively integrates the ADSL infrastructure owned by the two broadband companies.

However, iiNet and Internode do retain separate operations in a number of areas. The pair’s wider plan structures remain separate, and each has a slightly different product offering set.

When reading of and considering the latest actions taken by iiNet in its integration of Internode, I felt continually reminded of the overall philosophy which iiNet has with regard to competition in Australia’s telecommunications sector.

As best highlighted through this recent omnibus feature I produced on the subject, iiNet’s view in general appears to be that real competition in Australian telecommunications will only be provided once industry giant Telstra is substantially attacked by rivals, with the sector’s available market share split up more evenly between its players. Right now, Telstra still has a huge market share in Australian fixed telecommunications, with the remaining portion being largely owned by iiNet, TPG and Optus.

Secondly, iiNet has always appeared to feel that competition in Australia’s telecommunications sector is best served by better customer outcomes. In this sense, iiNet has never viewed its acquisitions of rivals such as Westnet, Netspace, OzEmail, Internode, AAPT’s consumer arm and so on as harming competition in the sector, because, it has argued, those customers will get a better overall deal as part of the broader iiNet group than they would have with the companies remaining separate.

I agree that Telstra’s market share is an issue in the sector, but I do not agree with iiNet’s view that better outcomes for customers through acquisitions is the same thing as increasing overall competition in the sector.

My view of competition is that this ideal is best served by having a multitude of strong, innovative companies in the marketplace, offering a variety of different solutions to customers. What we’re seeing right now with iiNet’s integration of Internode is a weakening of competition. Previously, amongst my peer group, most people really only chose between iiNet and Internode when it came to their broadband connection, eschewing companies such as Optus, TPG and Telstra because of their lack of innovation and often lesser customer service levels compared with iiNet and Internode.

iiNet may not have harmonised Internode’s broadband plans with its own. But increasingly, it is harmonising lots of other areas of its former rivals’ offering with its own. First came the integration of ADSL infrastructure, then iiNet adopted some of the best aspects of Internode’s broadband plans, and now the two will share a gaming platform, a value-added service which, I would argue, Internode has always done better. The shift of John Lindsay to the iiNet group will also radically diminish Internode’s public profile in the regulatory space. Overall … I think in a year or so there will be very little competitive difference between iiNet and Internode for customers.

Now, I don’t want this article to be all doom and gloom. After all, customers of both iiNet and Internode are still getting a great broadband service, and the quality of that service is likely even increasing, following the Internode acquisition.

But I do want to highlight the fact here that iiNet is not leaving Internode as a separate company, as both said it would during the acquisition. Slowly but surely, Internode is being subsumed into iiNet as all of iiNet’s previous acquisitions were. And with that action, dies a strong competitor in Australia’s telecommunications market, and one of the only companies which was keeping iiNet (itself, one of the only decent mid-range players in the market) honest in the first place.


  1. Not very surprising really …. economies of scale dont happen if you leave the 2 companies completely separate.

  2. I think your reasoning is sound Renai, however I have to agree with iiNet on their competition theory. I don’t think I’ve noticed any difference in competion, either as an end-user or as an interested observer, since 2007. TPG building their DSLAM network was the last major thing I can think of, and none of the consolidation since then seems to have had any impact on Telstra. Optus are lost in the wilderness somewhere, aimlessly meandering to nowhere in particular.
    My prediction for the next big competition shift is when “alternative media” services become available in a way that mainstream people are interested in. Think subscription service to all-you-can-eat iTunes in real-time or similar. FetchTV and the Telstra equivalent are nice, but more of a gimmick than anything for the moment.

  3. Internode will always be branded the geeky isp. Because thats why people join Internode or were recommended by a friend/relative with geeky knowledge

    Over the past 4 years Internode has struggled with various changes to lure non-geeky people into signing up. Firstly by cutting the fat of choice of plans into a tiered stuctures. Always duplicating and replicating what IINET did

    IINET brand about the mum and family internet provider company

    With the two companys merge you got two options
    Your a geek go internode
    If your a 60 year old with limited computer use hate telstra/optus then go with iinet

    • No.. you’re a little out with the demographic there for iiNet there.

      Westnet brand does the oldies, iiNet’s majority customer base is Gen X and Gen Y.

      No idea what internode is, but I don’t think it’s majority geek at all.

      • I did notice a lot of people moved to Internode every time iiNet took over an ISP (I was one). A lot of people were shocked when iiNet bought Internode because of previous bad experiences in exactly those situations. After iiNet bought Internode, if they did the same thing they did to other ISPs, where was there to go if you wanted a quality ISP? TPG, Dodo? Gimme a break.
        Their performance at moving people onto the iiNet netowrk was somewhat less than stella. I was with Netspace and it seemed that those moved to Telstra DSLAMs were pretty much screwed, bandwidth down to 50KBs of an evening. There were 30 I know of all over Australia that happened to, none that it didn’t. After 4 months of iiNet not being responsive on the mater, blaming Telstra, saying there was nothing they could do, most moved to Internode. One Netspace rep who decided to find the problem in his own time did sort it out. Not very nice being put on a DSLAM with no backhaul paid for… Hey our plans were only a little cheaper than the iiNet ones. How about iiNet grow some balls and ask us to pay more or some other way change our plan rather than just force people off with dirty tricks like only paying for absolute minimum Telstra backhaul to force people to leave.

  4. Ofcourse iinet are going at least merge most of the services and internal departments together. Since Internode is a strong trusted brand they could potentially still keep the name alive. I come from a company that has done a merger, the brands are still separate but everything internal including all IT infrastructure has been merged. The only problem I guess with something like Internode is that the ISP is more than just a trusted name, the geeks know they build good networks and services and so if iinet and Internode will be running the same infrastructure then what’s left to the advantage of Internode?

    • Exactly. I’m an Internode customer and going by traceroutes, at least some of my traffic does route through iiNet links – I never checked but doubt this was the case before.
      I’m guessing the reverse is even more true and will become more true over time.

      This makes me a little sad as Internode’s diagrams of their ridiculously good national and international networks are one of the key reasons I signed up!
      iiNet are a good ISP but this particular acquisition has always been of some concern because, though iiNet has mainstreamed over the years, Internode were still the main “competition” they had to worry about; the main ISP that was likely to take their customers if they didn’t keep a high quality of service. With Internode out of the picture, iiNet is by themselves at the top of the pack for consumer ISPs – and can now go ahead and participate in the race to the bottom with the likes of (ugh) TPG without any consequence.

      • I’m with Internode too. One of the refugees from one of iiNet’s takeovers. Netspace, where those who couldn’t get an iiNet port were moved to Telstra and left to rot with insuficient backhaul. If Internode goes the way of some of the other ISPs acquired by iiNet there isn’t much choice. The only choice I can see left for a quality connection is the evil one, Telstra.

  5. When I read this article, the only thing that came to mind was Om nom nom nom….. As if the Heavy was iiNet and Internode was the sandvich.

    Also, no surprises that iiNet is slowly integrating Internode into the collective.

  6. Hot tip, Adam Internet will be one of the next acquisitions, it’s just a matter of time before Greg decides to sell to Michael (I know for a fact that Michael has his eye on Adam and has made informal offers in the past).

  7. As I stated in December it was a pure fantasy by Simon Hackett to deny that Internode would be absorbed by iiNet. Somehow they were to be the only acquisition merger in history where the smaller company was not eventually integrated into the larger with resulting jobs losses. Slowly but surely that fantasy is unravelling and I wonder how Mr Hackett will spin this or how long he’ll even be bothered with aking a statement and hopefully will assume we just will forget. This is the start of the death of competition in Australian broadband, next all we need is TPG to consume iiNet and the puzzle will be complete.

  8. On the flipside…

    iiNet actually chose to merge their gaming site and servers (3FL) into Internode’s framework (Games On Net), since it was bigger, more established and more popular.

  9. I was with Westnet got taken over by iinet or should I say iiNOT, then I went to Internode taken over (NOT MERGE SIMON) by iinet.

    Next thing you know there well be on Telstra, Optus and iinet?

    Big companies taking your money with poor customer service continuing.

    Thanks Simon and Michael. You have been big help NOT!!!

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