At a time when the costs of fixed networks, plus the level of competition in virtually all markets, makes a triple-play service approach a virtual necessity, Sonic.net is a stark exception. Sonic.net is a pure-play broadband provider. It doesn’t provide video entertainment services, though it does bundle voice with broadband.
Now Sonic.net has applied to build an initial pilot network capable of serving 2,000 homes in the Sunset District of San Francisco, with expectations it will follow with a five-year plan to build fiber access infrastructure that would "reach most San Francisco premises."
Pending permit approval, the ISP, which currently offers copper-based broadband and phone service in the Bay Area, intends to begin construction in 2012.
Sonic.net already has a similar network up and running in Sebastopol, Calif., where it sells a 1-Gig service for $69.95 per month.
The possible new network is significant as it tests the theory that video entertainment services are fundamental for success in the fixed network business. The basic argument is simple. In the older “monopoly” days, a voice provider could build an expensive plant in a community, and then expect to sell service to 95 percent of locations. A cable company could build a network and expect to sell service to 70 percent to 90 percent of homes.
With the advent of competition, those assumptions change. Neither a cable nor telco can assume they will get customers at such levels. In fact, each contestant has to assume it will, in the future, lose customers in its original market.
In essence, the shift is from networks that assume “scale,” to networks that must rely on “scope.” A scale network sells one product to lots of people. A scope network sells a range of products to a smaller number of customers. Scale and scope
There are practical implications. Where the older assumption had been that a given network could be built and funded by “X” dollars per subscriber, in the current market any such networks face much-higher “per subscriber” costs, much-higher “per location” costs and much higher stranded investment (facilities that are paid for, but result in zero revenue).
Sonic.net runs its business a bit differently. It essentially continues to operate a business fundamentally built on scale, rather than scope, even though it is a dual-play provider. Evolution
To be accurate, even the older “scale” models used by cable and telco service providers involved “scope” to some degree. Telcos sold different products to businesses, than to consumers. Cable companies sold “premium” as well as “basic” channels plus pay per view.
Some have argued Google (News - Alert) might also have to consider multi-play services to support its fiber to home networks, for similar financial reasons.
Gary Kim is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.
Edited by Rich Steeves