PD: Reinventing Sonic

[Barry]

Reinventing Sonic

By NATHAN HALVERSON
THE PRESS DEMOCRAT

Published: Sunday, October 19, 2008 at 4:43 a.m.

Sonic.net, the homegrown Internet service provider, is unveiling a slew of new products from TV service to faster broadband as it attempts to become a full-fledged telecommunications company.

It recently began launching new services to both its business and residential customers after spending months jumping through regulatory hurdles and investing about $2 million in new equipment and training.

Over the coming year, the Santa Rosa company will continue to roll out new products such as traditional phone service, satellite TV and possibly even cell phone service as it takes advantage of its recently awarded governmental status as a telecom.

Nothing less than the future of the 14-year-old company is at stake, said Dane Jasper, who built Sonic.net from a startup on the Santa Rosa Junior College campus into a business with more than 70 employees and $17 million in annual revenues.

"This is the future for us," said Jasper, president and CEO of Sonic.net.

A key element of its strategy is the relentless pursuit of greater bandwidth and faster Internet speeds.
Sonic is building next-generation DSL networks throughout the Bay Area, and it plans to offer download speeds up to 18 Mbps to residential customers -- and even faster speeds for businesses.

Its prices for the faster DSL services range from $45 to $80 for residential customers, and a bit more for businesses. Customers who bundle together phone and TV service get a discount.

The company hopes to capitalize on the growing demand for bundled services and blazing-fast Internet.
"The market potential is huge," Jasper said.

However, the initial deployment of the new service, which it dubs Fusion Broadband, will be very limited. Its technology only allows it to offer services within one mile of the hardware it has installed in central offices run by AT&T. Most cities only have one central office, which hampers Sonic's ability to blanket a market. Santa Rosa has two central offices, enabling Sonic to serve customers in the city's downtown and western sections.

The big exception is San Francisco, which has nine central offices. There, Sonic's services will cover nearly the whole city.

Sonic currently provides Internet service to about 46,000 homes and businesses. About 14,000 of those customers are in Sonoma County, where its highest concentration of customers live.

The Santa Rosa-based Internet provider has spent the previous 14 years as a small operator with a reputation for customer service. Now it hopes to expand into a significantly larger role, while holding true to its hard-earned reputation.

Customers within areas served by the new network will be able to buy traditional phone service from Sonic when it becomes available early next year. Or they can go without a landline. Previously, Sonic's DSL customers were required to have phone service with AT&T.

Sonic will also offer satellite TV service to any household within a 50-mile radius of Santa Rosa sometime early next year. It is working with El Segundo-based DirecTV, which provides the satellite connection while Sonic provides installation, customer service and a single bill. Monthly service starts at $29.99.
Eventually, the company hopes to bundle mobile phone service onto the same bill and is in talks with a major mobile provider, Jasper said.

Customers who bundle traditional phone service and Internet will receive monthly discounts of about 20 percent, and even more for adding TV service.

It started offering faster Internet on the new network to Santa Rosa business customers in April, including a line of high-end products with download and upload speeds of 30 Mbps.

Last week, Sonic hooked up the first residential customer to its high-speed DSL network.
"It's a great deal for the speed," said Santa Rosa resident Bob Amen, who was Sonic's first residential customer.

Amen, who works as IT director for O'Reilly Media in Sebastopol, is paying $65 for a 10 Mbps connection. Sonic also offers 6 Mbps for $45 and 18 Mbps for $80.

For comparison, AT&T's fastest DSL speed with its new U-verse network is 6 Mbps, which also costs $45.
Comcast offers stand-alone Internet service up to 4 Mbps at a cost of $56.95 in Santa Rosa, according to its Web site.

Like Sonic.net, both Comcast and AT&T offer discounts for bundled services. Comcast also offers customers who bundle a higher speed of 6 Mbps with bursts up to 12 Mbps.

But Comcast has faced criticism from broadband analysts who say its network is overloaded and slows down during peak hours. Because AT&T and Sonic.net use copper wires -- not coaxial cable -- they don't experience the same type of congestion.

Sonic's transformation wasn't exactly a decision of choice, Jasper said. Its growth into new services was forced by rapid changes in technology, government regulation and major moves by its competitors.
Both AT&T and Comcast have recently upgraded their networks in Santa Rosa and elsewhere to deliver bundled services that include TV, phone and faster Internet.

"People want the convenience of bundling," Jasper said.

Meanwhile, new government regulations have kept Sonic.net from buying wholesale DSL service on AT&T's new, faster U-verse network.

Until now, Sonic.net's only business model for DSL service was to buy wholesale access on AT&T's old network, and repackage it under the Sonic brand. That will remain a major component of Sonic's business, because its new network still covers far, far less area than AT&T's old one.

But Sonic needed to figure out how to begin building its own network, Jasper said. In less than two years, AT&T will no longer have to sell wholesale DSL access -- even on its old network -- as a result of recent government deregulation.

To begin serving customers outside the 1-mile limitation of its new network, Sonic will have to install equipment throughout neighborhoods -- perhaps 28 locations to cover all of Santa Rosa, Jasper said. The company is currently exploring that option.

The other major change Sonic is facing is consumer demand for ever faster connection speeds. If customers were still satisfied with dial-up, then the company wouldn't have to do a thing. But that's not the case.

"There is a sizable pool of broadband users who want even higher speeds," said John Horrigan, associate director of research for the Pew Internet & American Life Project. "And dial-up is slowly withering."
In late 2007, a milestone was reached as more than half of all households were connected with broadband access, according to a study of Internet trends by Horrigan. One-third of those households have ultra-fast access of 6 Mbps or faster, and that number is growing.

People increasingly want faster access because Web sites are increasingly packed with video and embedded applications that require greater bandwidth.

Still, Sonic has big challenges facing it. It will need to manage a whole new slew of services, and deal with outside companies that back its TV and mobile services.

Also, while its download speeds are significantly faster, its upload speeds max out at 1 Mbps, which has drawn criticism from some potential customers. People continue to upload bigger files such as photos and videos, and so they want more speed there, too.

Sonic is working with technology that will increase upload speeds as soon as next year, Jasper said.
"I think copper (phone lines) still have a lot of life left for delivering services," Jasper said.

You can reach Staff Writer Nathan Halverson at 521-5494 or nathan.halverson@ pressdemocrat.com.