A few days ago, Sonic.Net CEO Dane Jasper announced in an interview the launch of a new all you can eat broadband + voice offering for their Californian customer base. Sonic.net is the largest independant ISP in California, and until now they were selling a mix of ADSL services (relying on a bitstream wholesale offer) and tiered ADSL 2 broadband (based on an unbundled local loop).
Their announcement is for a new offer entitled Sonic.net Fusion. Fusion is inspired by European all-you-can-eat broadband offerings such as those pioneered by Free in France. The concept comes from an understanding that broadband is an acquisition game and that if you can’t build scale, you’ll never have skin in that game. For $50, Sonic.net customers will get the best unlimited ADSL2+ throughput that is available to their homes and unlimited national POTS telephony. It’s simple, it’s cheap, and it should deliver better service than what’s available from incumbents and cable operators in most of California today.
Beyond the interest this represents for Californian residents, I believe that this offering has a deeper meaning on the US landscape for a number of reasons:
- It’s an attempt to play the unbundling opportunities right: copper unbundling as a remedy to lack of competition has been essentially written off in US regulation, mainly because it’s been around for a while and no one thrived on it. There are a variety of reasons why that is, but essentially it’s down to a lack of differentiation: the companies that tried to launch unbundled services in the late 90s and early 00s all went down the me-too route and ended up offering the same thing the incumbents were offering only not quite as good. Sonic.net is going down a different route and trying to offer something anathema to the incumbent corporate culture: more for less. If Sonic.net is successful, it will demonstrate that no matter what the lobbyists say, it wasn’t the open access remedy that was wrong, it was the strategies of those relying on it.
- It’s an attempt to work with the customer instead of against the customer: the trend in the broadband market right now in North America is towards limitations. Sonic.net is going out to customers and saying: if you feel throttled by the other guys, come to us. It’s a smart marketing strategy and provided they get enough visibility and play the viral game, it could very well work. Is it economical ? Absolutely. As long as you keep acquiring new customers, the economics work just fine. Once your growth stabilises and your shareholders ask for more growth, that’s when the temptation comes to segment and maximize end-customer revenue by limiting what they can get.
- It’s a clever, low acquisition and low operation cost model: Some of the highest costs in traditional broadband offerings come down to acquisition costs (advertising, home install, etc.) and costs of managing complex product portfolios. By offering something that sounds too good to be true and having a single offer in their portfolio, Sonic.net maximises the changes of viral marketing and subsequent acquisition, and drastically reduces the need for complex OSS/BSS to manage their service provisioning and billing. Optimized cost structure + sexy offering = maximised chances of winning.
It’s going to be interesting and important to examine what happens with this offering: how successful it gets and what the local incumbent tries to do to counter it. Especially it’s going to be interesting to see if said incumbent fights fair or tries to hit below the belt. For those interested in promoting open access as a valid remedy for competition, this is the one project to follow closely!
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