Sonic.net brings All You Can Eat broadband and phone to Northern California

Us_dp In an era where the buzzwords about broadband and the internet seem to be caps and hogs, it's reassuring and exciting to see someone trying to buck the trend and offer what customers want as opposed to what he thinks customers should get.

Seen from the outside, the US market is often considered to be a static duopoly, but clearly there are still interesting initiatives out there (in addition to municipal fiber, of course) to try and break the mold. I’m really excited therefore to present the following interview with Sonic.net CEO Dane Jasper. When European style disruption hits the Californian shores.

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Benoît Felten: Dane, you're the CEO of Sonic.net, a Californian ISP. Can you tell us quickly about Sonic and what makes it different from other ISPs out there?

Dane Jasper: Sonic.net is the largest independent ISP in Northern California. Founded 1994, we have survived the difficult changes in the US broadband industry. Today we provide retail broadband services, plus wholesale solutions for partner ISPs in California and beyond.

As the economics of providing service over incumbent telco wholesale DSL services became more challenging for smaller service providers, we created a platform to allow those service providers to remain relevant in their marketplaces.

And today we move to the next level, with our own deployment of facilities based next generation products. These include ADSL2+ and POTS voice for residential and small business customers, plus Ethernet over copper for Enterprise customers.

BF: Now Dane, the common view certainly from Europe (but I've also heard this in North America) is that telecom regulation makes the unbundling of copper loops impossible in the US. I'm assuming that's how you're powering your services though, correct?

DJ: Yes, these services are based upon unbundled network elements (UNEs), meaning incumbent copper loops. The telecom act of 1996 created a great competitive framework, it hasn't been totally successful in the US, but the legislation remains in place.

The US market enjoyed an explosion of competitive energy in the late 1990's, followed by a crash from 2002-2003 as a raft of competitive startups consolidated or failed. At the same time, the incumbent telephone companies worked cooperatively with independent ISPs. This meant that service providers did not have to build their own networks. This has created an effective duopoly in the US: telco and their partners, versus cable.

We were pushed out of the nest by the FCC's fiber and DSL forbearance decisions. These decisions removed the requirement to sell next generation (FTTN) and current generation (CO & RT served ADSL1) services to independent service providers. Without a wholesale offering of FTTN services, or even assurances about legacy ADSL1 services, we were forced to build our own network.

The construction of that network brings us to the exciting new services and business models that we're engaged in today.

BF: So tell us a little bit more about that. Sonic.net is about to make an important announcement about a new service concept, I believe.

DJ: During the construction of this network we have given a lot of thought a lot to the business model in the US, and how we could do things in a different and more interesting way. The natural model when you have a simple duopoly capturing the majority of the market is segmentation: maximize ARPU by artificially limiting service in order to drive additional monthly spending. But fundamentally this is the wrong model for a service provider like us, and we have looked to Europe for inspiration. The model pioneered by Iliad under the Free brand is a better fit, both for us and for our customers.

As the marginal cost of providing more bandwidth or less, and providing POTS voice or not are both minimal, we have adopted a simple flat rate model instead of the more typical US model of "$5 more goes faster".

To provide an example, our primary residential product, Fusion Broadband+Phone, is ADSL2+ uncapped (up to 20Mbps), plus POTS voice with flat rate nationwide usage included. The product is $50/mo. I believe that removing the artificial limits on speed, and including home phone with the product are both very exciting.

Other product offerings included bonded ADSL2+, which can deliver up to 40Mbps of broadband, plus two phone lines. The cost is simply twice the single line offering.

BF: Will the product be available over the whole of your footprint in Northern California?

DJ: Our facilities based network reaches the greater San Francisco Bay Area at this time. For customers beyond the reach of this new network, we continue to offer our legacy ADSL1 products through our partnership with AT&T.

BF: When will Fusion be available?

DJ: We quietly launched the product a few weeks ago, and customers are signing on at a pretty healthy rate today. Details are available at http://www.sonic.net/sales/fusion/. There is a tool there for customers to check availability.

BF: How will the service be installed in the customer’s premises?

DJ: We will ship an ADSL2+ modem to the customer for the Fusion service. We also offer a technician install if they require it. That’s optional, and most people will simply plug in the modem themselves. As it's POTS, it's all the same wiring that was in place, so it's very easy.

BF: You’re taken a fairly radical approach with this for the North American market. What are you hoping to achieve?

DJ: I hope to see independent operations like ours continue to have relevance in the broadband marketplace. The US market has been largely stagnant in this regard for many years, and I hope we can change that.

BF: There's a meme that goes around the telecom business that content is king. Cable operators and incumbent telecom operators are now fighting each other around a product footprint that's broadband, phone and TV. Why aren't you offering TV?

DJ: We are working on video options, but I believe that in the long run, the Internet will be the application. So while I'm open to the idea of including some limited video programming over our network, I think that more and more users will turn to Netflix, Hulu, Apple iTV, Amazon, etc for their content. (Note that we do sell and service DirecTV, so we can bundle Fusion with a conventional satellite TV product if customers desire it.)

Incumbent cable and telco operators today serve the vast majority of consumers. As a result, in order to grow they only have two options: win customers from the other side of the duopoly, or increase the per-customer spend. This is done by segmenting (charge $5 to go faster, create tiers), value-add (sell backup service, etc), or by getting into another business. This means that cable companies have gotten into the phone business, and phone companies have gotten into the TV business, as that (and segmentation) is the way for them to grow.

To us the approach to video is the same as on uncapped data + voice: we would embrace a different business model, one more like those seen in Europe where the triple play is offered for a single low price point.

BF: Dane, I thank you for sharing this with the Fiberevolution readership, and I wish Sonic.net a great success with this Fusion offer!

Sonic.net Network Capture
This map shows the current status of the Sonic.net network footprint in California. Red flags are points of presence.