The Australian Competition and Consumer Commission (ACCC) says it will take several more weeks before a final decision on the proposed merger between Telstra and OzEmail is made.
In a preliminary statement, the consumer watchdog said it has "significant concerns that the acquisition will lessen competition".
In the short time the Commission has had to consider the acquisition, it cannot yet agree to the merger, Professor Allan Fels, ACCC's chairman, said.
"It is possible that the proposed acquisition could have a detrimental impact on the competitive dynamics for Australian online content, online advertising and electronic commerce," Fels said.
"The Internet markets are still in the early stages of development in this country. The emergence of a dominant Australian ISP could retard competition and stifle innovation in these evolving markets."
According to mergers commissioner Ross Jones, the ACCC had been working towards a January 28 deadline following a request from Telstra for a preliminary notice. Yet the telco itself only issued its written submission to the Commission yesterday afternoon.
"I was most hesitant to release a preliminary notice before a submission from [Telstra was received]", Jones said. "I am most puzzled by the fact it came in late yesterday."
According to Jones, three teams from the ACCC will continue to examine the acquisition over the next few weeks. It is expected further meetings will be held with Telstra and other interested parties as more information comes to light.
Jones was unable to comment on what was contained in Telstra's submission, but speculated that it would focus on "trying to convince [the ACCC] that there was not a problem".
Jones said the ACCC has not received a submission from OzEmail, but has had several meetings with the ISP. "It's no surprise when the partner being acquired doesn't make a submission. I would think there may be other bidders around," he said.