Sonic.net builds super-fast network for future
Published: Sunday, May 6, 2012 at 4:15 a.m.
Last Modified: Sunday, May 6, 2012 at 8:33 a.m.
On a small, quiet street in Sebastopol, in a neighborhood better known for its eclectic sculptures than for early adopters of the hottest technologies, residents are surfing the Internet at some of the fastest speeds available in the country.
Sonic.net, the Santa Rosa-based Internet provider, has strung a network of fiber-optic cables delivering Internet speeds up to 1 gigabyte per second, about 100 times faster than most household Internet connections.
The company is expanding the network's reach to about 700 homes in Sebastopol within the next month, and plans are underway for a total of 2,000 Sebastopol homes and a similar number in San Francisco over the next few years.
So far, about 60 Sebastopol households are online with fiber, and Sonic.net is asking roughly a quarter of the price charged by its competitors, which include national giants like Verizon and Comcast.
The hometown company's pioneering strides in high-speed Internet are welcome in a market where the U.S. lags behind other countries in speed and affordability.
The higher speeds enable video conferencing, telemedicine and — perhaps more importantly — faster downloading and smoother viewing on websites like Netflix and Hulu.
Sebastopol is just the beginning, and where the company brings its fiber next will depend on how the product is received, said Dane Jasper, co-founder and CEO of Sonic.net.
“If we find that consumers take it up, then we will use that as a guide for our continued investment in the fiber network,” Jasper said. “We have to think about, how are we going to get more people on board with this? And we want to remove any barriers that we can.”
Founded in 1994, Sonic.net has grown into the largest independent Internet service provider in Northern California, with more than 40,000 customers, Jasper said. The company has 150 employees, up 50 percent from last year, Jasper said.
Today, Sonic.net provides services in cities throughout the Bay Area, and is continuing to expand its reach by building its copper broadband network in communities around Sacramento and Los Angeles.
Its annual revenues in 2009 were $21 million — up about 23 percent from the year before. Jasper declined to release current revenue figures, but said both revenues and customers grew by about 25 percent from 2010 to 2011.
One of the barriers to fiber expansion is the construction cost. Stringing fiber over power lines, Sonic.net spends about $500 per home that it passes, Jasper said. In Sebastopol, when construction began, about a third of households were Sonic.net customers. If those customers switched from copper broadband to fiber — a likely scenario considering the pricing and benefits — Sonic.net would have effectively spent $1,500 per customer to offer the fiber service.
Despite these costs, there are some savings when customers switch from the copper broadband network to fiber. In many cases, Sonic.net leased the copper from incumbent operators like Verizon and AT&T, at a cost of about $20 per month.
“We will go door-to-door and ask those people to become customers, and if the economic model works, we're shedding the costs of the copper products,” Jasper said.
That's part of the reason Sonic.net offers far lower rates than its competitors. The fiber Internet at 100 Mbps costs about $40 a month, and includes a home phone line with unlimited national calls. The 1 GBps speed option costs about $70 per month.
By contrast, Comcast offers non-fiber broadband service with Internet speeds of 105 Mbps for about $200 a month, according to its website. Verizon's FiOS plan, its fastest advertised fiber-enabled option, gets speeds of 150 Mbps and costs about $200 per month.
“If by being less expensive you get two or three times as many to buy it, then you get a return on your investment,” Jasper said.
The infrastructure of a neighborhood is another hurdle. Less than a half-mile from that first street where Sonic.net deployed, Jerry Newman, president of the Colonial Manor Homeowners Association, was disappointed when he learned that his condominium complex wasn't currently a part of Sonic.net's fiber plans. The reason: his complex is served by underground cables, instead of overhead wires, making construction too expensive for Sonic.net at this point.
“So many of us, including some of the elderly residents here, have become very dependent on the Internet,” Newman said. “Let's face it. That's a very important part of our world.”
Perhaps even more concerning to Newman is the potential hit to property values in the complex, which will soon be an island surrounded by lightning fast Internet.
Jasper has been in touch with the residents to try to find a cost-sharing solution so residents of Colonial Manor, and other carve-outs, aren't left behind.
“It creates an interesting situation where there are fiber haves and have-nots,” Jasper said. “You look at (overhead wiring) and it's unsightly, but the folks who have this unsightly stuff outside the home are in a better position.”
Market share is another hurdle. In Sebastopol, about 39 percent of households are now Sonic.net customers, Jasper said. In Forestville, 20 percent of households are customers. Healdsburg is third on the list of Sonic.net's cities by market share, with about 11 percent, and then Santa Rosa, also with about 11 percent. Petaluma is ninth on the list, with only about 5 percent of households on Sonic.
Where Sonic.net will deploy next depends in part on how many households in those communities subscribe to its current service. In order to make it worth the investment, Sonic.net needs a good chunk, about 30 to 50 percent, of those homes to become customers.
“That means we're going to make communities compete, and the one that's got the most customers will get the fiber,” Jasper said. “If you build it and you end up with 2 percent, you're never going to get your money back.”
In San Francisco, only about 2 percent of households are Sonic.net customers, but residents in neighborhoods like the Mission District have expressed more interest than anyone, Jasper said. But instead of starting its San Francisco deployment in that popular neighborhood that attracts many who work in the tech industry, Sonic.net plans to start in the Sunset, where power lines are above ground, and the homes are relatively uniform. The Mission includes a mix of multi-unit dwellings, commercial buildings, and overhead and underground power lines, but the Sunset is homogenous, Jasper said.
“It's a better market trial for your average home,” Jasper said. “The technology early adapters, people who tweet and work in tech and go to Blue Bottle (coffee), they are not the average household. So the Sunset District is more typical of what you'd find in the average household.”
As it gradually expands, Sonic.net is likely to face more competition. Sonic.net worked with Google to string fiber to several hundred homes on the campus of Stanford University. Now, Google is building its own network, called Google Fiber, starting in Kansas City, Mo., and Kansas City, Kan.
“We hope that Kansas City is the beginning of our work on fiber, but we haven't made any announcement about other cities,” said Jenna Wandres, spokeswoman at Google.
Verizon's fiber network is currently available in cities within a dozen states, but it's not available in Northern California.
“It's going to be an interesting campaign over the next couple of years,” Jasper said. “This is a slow process, it's an expensive process, and we're being methodical about it. I can't claim that this is going to happen really rapidly anywhere.”
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