Inside The Downfall Of iiNet Sydney

Image: iiNet

TPG currently stands as the second largest internet service provider (ISP) in Australia and is a force to be reckoned with in the telecommunications industry. Its rapid growth is mainly attributed to strategic acquisitions it has made in recent years. One of those acquisitions was iiNet, an ISP that boasted high customer satisfaction rates and was well-respected in the telco community.

It has been over a year since TPG bought iiNet and the situation looks bleak for the ISP that was once the darling of the telco industry. Most recently, iiNet's Sydney office was closed down and most of the staff were made redundant. We spoke to one former iiNet employee to get the insider story on the aftermath of the TPG acquisition. We also spoke with iiNet to get its side of the story.

Updated 9/12/16 5:38pm: Added comments from former iiNet employee from the Melbourne office.

This story originally appeared on Lifehacker Australia.

Conflicting values

TPG completed its acquisition of iiNet for $1.56 billion late last year. At the time the acquisition was announced, questions were raised over how iiNet's culture and operations would be impacted.

The Perth-based ISP was founded in 1993 by Michael Malone and Michael O'Reilly in a garage. Despite the company's rapid growth, iiNet held on to its relaxed and open attitude not only towards staff, but to customers and the media as well. iiNet's executive team were approachable and outspoken about industry topics even if it ruffled a few feathers. The company was also undeniably skilled at providing good customer service, which has been well-documented.

Meanwhile, TPG was a low-cost ISP and had garnered a less-than-desirable reputation, racking up a long list of customer complaints. You sign up to TPG not because of its customer service, but because the internet packages were dirt cheap. TPG CEO, David Teoh, was a notoriously reticent and reclusive man who rarely gave interviews. Today the telco is a force to be reckoned with, having snapped up PIPE Networks, the business arm of AAPT. It now owns a 100% stake in iiNet, one of the most well-loved ISPs in the country.

While it made sense for TPG to grow through acquisitions, there were concerns about the future of iiNet. The two companies held completely different values on a number of industry issues.

For one, iiNet has been willing to protect customers from big Hollywood studios that wanted to sue them for alleged copyright infringement. It has gone to court to do so, refusing to bend to studios' requests to send infringement notices to subscribers and refusing to surrender information on suspected content pirates.

Meanwhile, TPG was happy to send infringement notices to customers suspected of pirating copyright material.

iiNet was vehemently against data retention laws the Australian Government introduced earlier this year. TPG remained silent over the matter.

iiNet had been eager to ingratiate itself with customers to build up trust in the brand. TPG doesn't seem too worried about that. At the time of the acquisition, there was apprehension over how the buyout would impact iiNet's loyal group of customers and its team of dedicated employees.

Malone, who left his post as iiNet's managing director in 2014 but remained a shareholder of the company, was opposed to the acquisition.

Business-As-Usual?

iiNet has offices in nearly every capital city in Australia. When news of the TPG acquisition was made public, iiNet staff were reassured by both the management and human resources teams that it would be business-as-usual.

Commentators in the telco industry had already noted that it would be a bad idea for TPG to make changes that would tarnish iiNet's stellar reputation. iiNet was the premium brand here and it was best it remained that way.

But changes started happened at the beginning of 2016. A source from iiNet's Sydney office told Lifehacker Australia that it began with small changes, mainly cost cutting. Customer service members were no longer able to apply credit to customer accounts without approval from upper management; they had previously been able to offer $50 without seeking approval.

iiNet general manager of customer service Matt Conn spoke to Lifehacker Australia about the changes.

"There has to be a balance with our credit policy," he explained. "Fixing the root cause of a problem instead of applying credit to appease a customer is something we're focused on."

According to our source, major changes didn't kick-off until March. Teams in the Sydney office were being shut down every few weeks and some members were shuttered over to TransACT, a division of iiNet that maintains the VDSL network in the ACT and the HFC network in parts of Victoria.

iiNet's Sydney office was down-sized as well. Staff were moved from a newly furbished modern office on Market Street in the CBD to a smaller premises on George Street nearby.

Local customer service roles were increasingly being shifted to overseas call centres, mainly in South Africa. Up until that point, overseas call centres were only supposed to provide support outside of Australian working hours.

Customers noticed the difference.

"Our Net Promoter Score (NPS), used to measure customer satisfaction with a company, started to drop dramatically and customers started to complain about bad customer service," the source said. In fact, the TIO documented a whopping 48.2% jump in complaints against iiNet this year.

Conn refuted this claim, stating that the company's NPS has remained consistent and is currently at 54. However, iiNet's NPS was well over 60 - closer to 64, according to our source - back in 2014.

Some iiNet employees left of their own accord, fed up with the constant changes and uncertainty that TPG had brought in. At one point, over a two-month period, there was only one person in the iiNet Sydney office taking customer service calls.

The Sydney office began to empty out and by the time it was completely shut down on December 2, only a skeleton staff remained - 30 employees were manning the fort, down from around 200 just over a year ago, according to our source. They had been moved to a smaller office formerly occupied by staff from AAPT, another one of TPG's acquisitions.

iiNet's reason for closing down the office was that it had always been predominantly a contact centre site and natural attrition led to a smaller team, which made it difficult to manage, Conn said.

In TPG's Annual Report released in September this year, Teoh had this to say about iiNet:

"While there is still much to do, I am pleased to report that the integration is progressing well. Employees from both sides of the merger have risen to the challenge of the integration and have continued to deliver the premium levels of customer service for which iiNet has gained a strong reputation."

That sentiment was not shared by iiNet's Sydney office. On November 25, just a few weeks before Christmas, the remaining workers at the Sydney office were told that they were being let go.

Conn said that he spoke to each employee directly about the office closure and that iiNet had tried their best to offer roles to the remaining staff but most of them refused the opportunity.

"We still had several roles that weren't filled; there were a substantial number of roles and we wanted to attempt to retain most of the staff. There was almost enough roles to fit office," he said. "The benefit of iiNet becoming a part of a bigger group [TPG] is that that there are more opportunities available.

"We were committed to retain as many staff members as possible."

iiNet was even willing to consider creating new roles for the remaining staff, internally or at other TPG-owned companies, to ensure all the staff had a chance to remain with the business.

Our source refuted Conn's claims.

"I don't know about other staff but I never had a conversation with Matt Conn," our source said. "The majority of roles offered through to us were roles well above what we were suited for (high-level tech and managerial positions) and even the people who were suited for managers roles had a hard time getting them. Our team senior was knocked back for a management role though he had been doing it for years."

The Future Of iiNet

Our source suggested that the Melbourne iiNet office will also be shut down shortly. Lifehacker Australia questioned Conn about whether there were any plans to close other offices around the country.

"We have to constantly review operational structure, but there are no immediate plans for anything," he said. "However, in saying that, we are reviewing all parts of the business. It will depend on timing and the number of available roles; our focus is on redeployment."

We pressed him further on whether there were any discussions about closing down the Melbourne office.

"The Melbourne branch does specialist tasks for us; right now, that is the focus for them," Conn said. "There are roles with in the [TPG] group that are open to staff, depending on how it all plays out. Today, Melbourne is a key part of our business."

However, a former employee from iiNet's Melbourne operation told Lifehacker Australia that the company had sent out an official email internally to informed staff that the office was to be closed down and the remaining staff would be moved to TPG's offices in Richmond, Victoria. Lifehacker Australia was unable to verify this because our source no longer had access to his former work email account. We have contacted iiNet again for additional comment.

Our source from the Melbourne office claimed that before he left, a huge portion of the staff had already been culled and office perks such as fresh fruit and coffee machines had been taken away from the break room.

"From a technical staff point of view, no major changes were allowed due to TPG management, which meant that project work and improvements had been thrown to the wayside which effectively turns engineers and admins into zombies, firefighting the same occurring issues over and over again," our source said.

On the iiNet official website, it currently states: "We employ more than 3,000 enthusiastic staff across three countries - 80 per cent of whom are employed to directly service nearly one million customers."

On the iiNet official website, it currently states: "We employ more than 3,000 enthusiastic staff across three countries - 80 per cent of whom are employed to directly service nearly one million customers."

Our source from the Sydney office speculated that most of the 3000 staff are in overseas contact centres and highlighted that the page hasn't been updated for some time. Right now it seems like a relic of iiNet's golden days.

"The worst part is not that we are losing our jobs; we will bounce back," our source said. "It's the loyal iiNet customers who will suffer the most out of all of this. It need to be known that iiNet is just TPG wearing the shredded remains of iiNet's skin and taking advantage of (a quickly disappearing) reputation to gain customers."

Conn, on the other hand, believes iiNet has benefited a lot from being a part of TPG.

"In the last 12 months, we've released new products that have been beneficial to our customers and that is a positive thing that is overlooked at times," he said. "There is a heavy focus on our network stability, which has increased, and there are other products that TPG have that we can take advantage of.

"Being part of the bigger group, I honestly believe, brings benefit to our customers."

This article originally appeared on Lifehacker Australia


Comments

    Sooo...

    iiNet caught lightning in a bottle.
    TPG bought that bottle and let the lightning out, so all they're left with is an empty bottle and the label on it.

    Good job, TPG.

      The main problem being that many of us have no alternative but to rely on the power generated by the lightning bottle...

    I have been with iinet since 2004, and have just now switched providers.
    It is such a shame, their customer service and stance on privacy were a beacon in darkness in times past.

      So true. I was an iiNet customer from about the same time until I moved last year. It just didn't make sense to move my existing account over as the problems were already kinda visible. Goodbye iiNet, it was good knowing you.

        Apologies if my curiosity is unwelcome, but which ISP did you move to?

          We jumped to Optus in the end. My family were all using Optus Mobile so we went with the family home bundle. It's about as average as you can get, some connection problems here and there, but a restart of the modem fixes it most of the time. (Other times it's network maintenance which is annoying)

    Sounds like I should consider switching ISPs. It's a shame, because as the article said iiNet had great customer service. I remember once calling them at 3 in the morning and being connected to a woman who was happy to spend half and hour walking me through the problem I was having and went absolutely above and beyond. Best customer service I've ever had.

      Much like anything else, I probably wouldn't bother until something goes wrong. Even TPG is considered great by people who've never had any trouble.

      And changing things is a sure-fire way to increase your chances at having trouble.

        TPG feel like one of those super discount online retailers, if nothing goes wrong then they're fantastic but as soon as trouble hits...

    Are there any good customer service ISPs left? I was happy to pay a premium for Internode for their service and quality, but now I'm paying twice as much for the same crap I was specifically trying to avoid by not choosing TPG in the first place.

      I switched from TPG's adsl to Telstra's cable when I moved and I've had a surprisingly good experience with them. It was a rocky stsrt, when their tech didn't show up on the scheduled day, but their CS representative got me a priority install, refunded the install & modem costs and gave me a few months' connection worth of credit.

      Haven't had a single problem in 8 months now.

        I concur, when we move to Melbourne we had Telstra Cable as an option and took it. The price might be more but I can't fault the service and the technicians are quick. We have moved and now get ADSL 2(ish) with our telephone cable running across 200 meters of paddock - line was hit twice by falling trees, tech out THAT day and back on line by the afternoon.
        They have picked their game up!

      I've stuck with Internode even though they were owned by iiNet who are now owned by TPG. I've had no real reason to switch from them but that doesn't mean I won't if the service takes a nosedive.

      In all seriousness, how often do you use your ISP's customer service?

      I've been with TPG for about a decade. I've contacted their customer service department once, and honestly the experience wasn't that bad. A little slow, but generally fine.

      It's certainly not something I'd consider paying a monthly premium to improve.

        We had to use TPGs CS once and I really never want to use it again

    Neither of those providers has infrastructure in my area, 26 kms from the Brisbane CBD in a suburb with a population of over 15K

    So from this angle all the unrelenting praise heaped on iiNet I always took with a grain of salt because they couldn't be arsed setting up services in suburbs built after 1990

    Last edited 09/12/16 1:30 pm

    So what does this mean for Internode (which I am with)? They were bought by iiNet some years ago, and now apparently TPG owns iiNet.
    The only changes I've noticed with Internode is that all their new plans no longer have unmetered access to steam servers and some other services. Last time I had to call them (long time ago) I talked to an Australian. Should I expect this to deteriorate similarly?

    Matt Conn, what an ironic and appropriate surname...

    To be fair, iiNet did the same thing themselves. They'd buy out other ISPs, swear to the staff and customers that there'd be no changes, then later on lay off a bunch of the staff, migrate customers over to iiNet systems, and soon there's nothing of the old ISP left but a logo on invoices.
    It sucks for the industry and customers, but it's hard to feel sympathy for iiNet.

      Exactly. On top of that, the "source" they use here contradicts themselves in two sentences.
      First they are upset as being offered alternate roles (some even higher than their current ones) and then claims that they were knocked back for those roles.

      Something doesn't sound right. Sounds like there's a bunch of butt hurt people on both sides.

      Sucks for the customers of course but at the end of the day you get what you pay for.
      The real problem is not the $50 per month unlimited broadband ISP having poor customer services. It's the $120 per month ISPs also having shit customer service.
      I'm stuck on Optus Cable, with the only option being a terrible ADSL2 connection. While they've been OK for service, there's absolutely no reason is should be paying more than double what other ISPs charge.

        From my reading, they were being offered 'priority' placement. This means that if they meet the criteria, they automatically get the job. Their point is that they weren't going to get the matched positions.

    i work for Internode in Adelaide. My department has been moved entirely to Manila and the staff moved to sales/help desk. Good we still have jobs but the lack of information from upper management doesn't give us much hope that Internode will be Australian based or even a brand within the next few years.

    Although Cape Town do have the majority of staff it has been heard that TPG want to move their roles to Manila in the future. It was fun while it lasted, guess all good things come to an end.

    Good old fashioned Capitalism at work. I guess if anyone is to blame it's IINet for selling out, as if they wouldn't have seen this coming. Hmmm the business that bought us run their operation at dirt cheap rates with offshore support... I'm sure they're willing to keep all of our AU offices....

      iiNet was publicly traded. I'm pretty sure this means they didn't really have an option to NOT get bought out.

      Last edited 13/12/16 9:02 am

    As someone who was with Ozemail before they were bought by iiNet, they have always had fantastic service and very short wait times, had a billing issue last as they charged me twice, left a call back number and 3 and a half hours later they called me back and couldn't resolve the double payment. Glad it wasn't a tech support issue.

    I miss the old iiNet, the fears of how TPG would ruin the company look like they have come true.

    I've only been with iiNet for around three years since I moved, at the same time. I loved their customer service.

    As my past post show I have below zero patience when it comes to resolving critical issues but despite the odd hiccup in the first two years iiNet somehow even kept within my limits and went above and beyond what was needed.

    In the last year alone I have seen the steady drop and the latest incident where I had not connection for 11 hours without an clear explanation nor warning completely put me off. This is beyond the pale so I will be finding another provider in the new year.

    Besides being short on patience I also have a one strike rule; screw up big once and I'm out.

    Will miss the old iiNet but the one I am with now is not the one I signed up for.

    There's no point changing providers. More and more ISPs (and others) will move to Manila because they pay their employees around 22k philippino pesos - below $1k AUD. When the average contact centre wage for a full timer is about $48k not including super, and the average contact centre has at least 30 heads, on top of it already being cheaper to outsource locally, that's an enormous saving. It's astronomical.

    Consumers keep demanding lower prices, shareholders demand higher returns, and there's only one way for businesses to meet them. You upset either one of these demographics, and you don't have a business anymore.

    If you want your service to stay in Australia, you need to support one of two things - lower corporate taxes and slowing minimum wage increases; or you suck it up and pay a premium for a retailer based in Australia.

    I hate it, and I wish it would change - I've lost three jobs thanks to redundancies to places that moved to Manila and it's awful, but there's literally nothing we can do about it; at least until we have our own Trump threatening to penalise employers that take off overseas.

    Last edited 09/12/16 4:21 pm

      This. A lot said in this article is true but I would take a lot of it with a grain of salt as well. They stated that Michael Malone left after the acquisition was announced but he had left long before that. He officially resigned as CEO in March 2014 but had been on extended leave prior to that and David Buckingham was CEO.

      Also, iiNet's NPS has never consistently been around 64%. In the year mentioned, 2014, the Annual Report shows that it was 58% (https://www.iinet.net.au/annual-reports/2014/iiNet_Annual_Report_2014.pdf).

    Just an update, iinet bought the consumer division of AAPT 5-6 years ago. TPG bought the wholesale and business arms 2-3 years ago. They performed a similar gutting of the company, offshoring lots of jobs to Manilla and just making a lot of the rest redundant

    I was with iinet since the 90s. I worked there back before it was a corporation and staff were numbered in the tens, not hundreds, and the customer service was the finest I have seen in my life.

    I shifted to Optus four months ago because the iinet service had deteriorated so much.

    And that's just the start.

    Yay capitalism.

    Last edited 10/12/16 10:27 am

    the funny thing is their South African customer service is hands down THE BEST customer service I have dealt with in years. I have never ever had an issue in understanding them, their abilities and they truly are really lovely people to chat to.

    there is something nice/weird about when stuck on hold waiting for something to go through the system and they are their asking your what its like in Sydney today and me asking them what's their city like.

    Sure i would always rather customer service be in Australia but the IINET people are truly lovely.

    Last edited 10/12/16 8:43 pm

      Yeah, I've always had good - if not great - interactions with their South African staff. Most know exactly what they're doing, and are given the leeway to engage in follow-ups and take ownership of cases personally, instead of 'tick and flick' KPI-generation.

      That kind of service isn't tied to nationality, it's down to the policies of the call centre.

    I knew this was coming a mile away. When iiNet bought Internode, things ran as was. The sites that Node ran (like Games.on.net) where as good as ever. However, as SOON as TPG got iiNet, and I am talking with in a week or so here, the site was shut down. The staff, going from there reaction, had no warning it was going to happen ether. And, to top it off, the last article on a PC gaming focused website was about the Playstation. Was NOT a good day...

    "Today the telco is a force to be reckoned with, having snapped up PIPE Networks, the business arm of AAPT. "

    You need to seriously fact check.

    TPG purchased PIPE well before it purchased AAPT. PIPE had absolutely nothing to do with AAPT prior to both being purchased by TPG.

    I'll also point out that AAPT was a business ISP, having sold its consumer business years ago.

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