|Dane Bringing High Speed, Low Price to California|
|Tuesday, 31 August 2010 12:18|
Xavier Niel's 30 euro unlimited triple play took 5M customers from France Telecom, transformed the European Internet, and made him a billionaire. Dane Jasper's Sonic.net is (finally) bringing the same "low price, maximum speed, high volume" model to California. Sonic.net is offering 100's of thousands of Californians "up to 20 megabits" + unlimited national phone service for $56, about the same price as Verizon is charging for the 10-15 megabit DSL service alone. Verizon charges about $75 for similar and AT&T probably $84, about 50% more.
Unless you live far from the exchange, Sonic.net offers a better deal than any large U.S. carrier. Dane has some interesting ideas about TV to implement as soon as practical, although I think he's going to be very busy just filling orders for a while.
The word came first from Paris. Benoit Felten, Europe's most interesting fiber analyst, wrote I should read his interview with Dane. Now that I've reported from the states, look for reporters to check this out and create a storm. I told Dane - who's been asking me for years whether the Free.fr model would work in the U.S. - that the low price, high volume model has proven itself time and again. He hasn't quite brought U.S. prices down to French levels, but this is the biggest move in that direction since Mike Powell's rules killed the last big CLEC in 2003-4.
AT&T had literally hundreds of people working on a plan like this and colos bought from NorthPoint across nearly 50% of the U.S. After the FCC triennial, they decided it couldn't work and instead sold the company to SBC, which took the AT&T name. Most in D.C. have forgotten the U.S. had six+ broadband competitors in 1999 across most of the country, which fell to 3 in 2001 and the last big enough to make a difference was killed by the FCC in 2004. If the FCC had chosen instead to protect competition, U.S. consumers would have better service and be paying $5-10B less per year. Probably a quarter of those without broadband would have signed up because of the lower prices.
Dane will do remarkably well, I'm sure, unless the FCC and California regulators allow the majors to crush him. He's a good operator and can look to ten times as many customers as his current 35K.
Unfortunately, Dane and others have to turn away about two-thirds of prospective customers. About two-thirds of lines in the U.S. are behind remote terminals or fiber (U-Verse, FiOS, etc.) Our rules prevent a competitor like Dane from getting access. That doesn't just limit the ultimate potential to less than a third of the market, it cuts back the scale and efficiency and seriously raises costs. Canada's CRTC just made the opposite decision, requiring fiber unbundling. I doubt anyone in D.C. has the courage, so no matter how successful efforts like Sonic.net they won't affect most of the market.
With today's low bandwidth prices, it's an unnatural act to charge one price for a one meg service and much more for ten meg. The four major British carriers don't even seem to have an offering below ten megabits; the four in France not below 8 megabits. Most are at "up to 20." 50-100 meg cable is $25-45 as part of a package. With very high volume prices for bandwidth now below $2/megabit in major markets, the difference between one meg and ten meg service is dimes/month. Where competition is strong, almost everyone get high speeds at low prices.
Dane is likely to do extremely well because he will now make substantially more on each customer. Including voice, even cheaply, ups the gross margin. Offering a great deal eliminates most of the expensive "customer acquisition." Once he has the network in place, he just pays for the bare line (UNE-L), covers his voice and bandwidth costs, and has a generous margin on every new customer.
He's been in the business since 1994, runs a very efficient operation. Sonic.net has a remarkable customer rating of 4.64 at DSL Reports, a full point above telco DSL and well above Verizon FiOS, generally America's favorite service.
Dane has ADTRAN DSLAMs in 50 Bay Area exchanges and enough fiber connectivity to avoid any problems. Sonic's other smart moves include 2.5 meg upstream at no additional cost, bonding available throughout (double speed, double price for now) and no contract required, a big deal.
Verizon deserves kudos for calling their similar service 10-15 megabits and only selling it to customers likely to get those speeds. Verizon reminds me that those far from the the exchange can't get the high speeds from Sonic.net. At about 13-15,000 feet from the CO, Sonic.net will be 3 megabits or under and not such a great idea.
I've been waiting for this since 2002 when Masayoshi Son in Japan proved low prices yield their own reward. This is exciting.
|Last Updated on Monday, 06 September 2010 19:46|