A regular Dispel Magic counters one magical effect or counters a specific spell being cast. Greater Dispel counters all effects on an item/person. I've rarely seen a Dispel being used for counterspelling, 90% of the time it's used for dispelling magical effects already in place. I'm not sure about the balance, but I don't really see a problem with a Counterspell-spell being a level 2 spell, for example. It's a powerful effect, but it's very specific, and not as broadly useful as Dispel Magic.
I'd leave the balance up to you, but to me it's narrow enough to drop it in spell level by one. Especially since you've found a third-party product that does the other half (assuming it's a decent third-party product and not weirdly powerful and such). I'd say allow it, but with the provision that you can take it away if he's abusing it.
I've taken another look at counterspelling, and I retract my previous statement. Giving one spell to counter every spell in existence seems weird. Counterspelling itself seems way too limited and very impractical, but a second-level spell being able to counter theoretically any spell seems way overpowered. Then again, Dispel Magic is third-level, so that's not that much of a difference.
Still, if you allow it, go for it. I'm curious to see how it turns out. Also, there's the Improved Counterspell-feat, which is less restrictive. You only need a similar school, rather than the exact same spell, at the cost of a higher spell level expended. Not sure if the tradeoff's worth it, but maybe you can come to a compromise.
Getting it as a level 1 spell seems a bit strong, IMHO. He's level 3, he should be close to getting his second level spells.
That said, a counterspell not being an actual spell but eating up spell levels seems fine. The Improved Counterspell feat has more workarounds, but as I said, I don't really like how counterspelling works in general. Still though, be wary of giving something for free to players while it's actually worth a feat.
I'd propose the following: you can ready to counterspell and expend equal spell slots as the spell being countered. A third-level spell would cost three first-level spell slots, or one second and one first-level slot. That seems like it'd be a fair tradeoff. You can only do it so many times a day before you run out of spell slots, or have to eat up your higher spell slots. A Sorcerer PC has a limited amount of spells, but as a GM you could theoretically throw unlimited numbers of spellcasters at him.
Then there's the choice you have to make: is the tradeoff of possibly expending more spell slots per spell to counter any spell about equal to what Improved counterspell does, namely eating up a higher spell level of the same school. Maybe tweak the numbers a bit, have the counterspeller lose spell level +1 slots, to signify you're overwhelming the other caster with your own magic or something. Then it's not an equal trade anymore, like Improved Counterspell seems to want to do. You can't just keep saying "Nope" to the other guy, as you'll run out of resources faster than the opponent. That ensures that your player won't just counter any spell he comes across, as he's losing out more on it and has to pick his battles.