Dane Jasper reaches between the seats of his Tesla (TSLA) and pulls out an AT&T (T) mailer offering broadband service for $20 a month. “Turn it over and look at the fine print,” he says. The $20 price is a one-year teaser rate. A $99 installation fee may apply. A $180 early termination fee definitely will. AT&T caps the plan at 250 gigabytes of data per month, and it doesn’t run faster than 0.8 megabits per second, less than one-fourth as fast as the Federal Communications Commission’s definition of broadband.
For AT&T, Jasper’s a long shot. He’s the chief executive officer of Sonic.net, an Internet service provider based in Sonoma County, Calif., that competes with AT&T in the San Francisco, Sacramento, and Los Angeles metropolitan areas. It plans to expand further, using gigabits-per-second fiber-optic cable where possible. A quiet, local player for most of its two decades, Sonic has built up a bit of a halo lately as the good ISP, a purveyor of cheap, fast connectivity that caters to tech geeks, is friendly with Google (GOOG) and Netflix (NFLX), and fought a government court order demanding data on a customer who supported WikiLeaks. “Dane’s a geek,” says privacy researcher and activist Christopher Soghoian. “He’s one of us.”
As Sonic tries to grow, there’s a catch: Its network is built principally on digital subscriber lines (DSL), a technology that sends data over ordinary telephone wires, and is now considered so 2005. In some ways, the company hasn’t changed much since Jasper and a friend launched it as Sonoma Interconnect from the computer lab at Santa Rosa Junior College with $3,000 in uncashed paychecks. They sold dial-up access first, and later resold DSL from their local phone company, Pacific Bell. That was common practice for ISP startups at the time, but the market didn’t last. “Sonic.net is unique in that it managed to survive,” says Karl Bode, an industry analyst with DSLReports.com.
In an effort to encourage development of high-speed Internet infrastructure, the FCC under George W. Bush rolled back the 1990s-era “open access” laws that required phone and cable companies to share their wires with little guys like Sonic who were willing to pay. Verizon Communications (VZ), AT&T, and Comcast (CMCSA) spent tens of billions of dollars getting fiber closer to Americans’ front doors, but smaller companies couldn’t keep up. Sonic survived because it hadn’t taken on any debt during the dot-com boom, but customers who wanted resold, first-generation DSL started drying up. In 2006, when most other ISPs had given up on DSL, Jasper’s last-ditch strategy was to invest in it. He started to place his own second-generation DSL network hubs in the buildings that house Bay Area telephone exchanges, roughly one per census block.
At first, Sonic couldn’t sell the shiny new network. With its tiered service, charging more money for higher speeds, it looked like any other ISP, only smaller. Then Jasper began talking on Twitter to Benoit Felten, an industry analyst from France. In Europe upstart ISPs that rented capacity from old phone monopolies drove down prices. Jasper decided to adopt the same strategy, and offered as much as 20Mbps for less than $50 a month, with no added fees.
When Google began to install fiber in 2010 in homes around Stanford University, the search giant chose Sonic to run the new network, citing the company’s “open-access experience and well-regarded customer service team.” Jasper’s company was also one of the first test partners for Netflix’s content delivery network. Larger telecoms have been loath to cooperate with the streaming video service. Unlike those companies’ CEOs, many of whom have content interests at odds with Netflix, Jasper isn’t shy to admit that even as demand for his bandwidth increases, its costs are dropping. “They’re a great, tech-friendly ISP,” says Netflix spokesman Joris Evers. “We’re fans.”
So are privacy advocates like Soghoian, who points to Sonic’s quick deletion of user data as another means by which the company distinguishes itself from the telecoms tainted by disclosures that the National Security Agency is scooping up Americans’ electronic communications en masse. Sonic retains data for only two weeks, according to Jasper, and has dissuaded corporate takedown requests by charging for records. Says Soghoian: “Dane was interested in transparency before it was cool.”
That doesn’t mean Sonic, which has about 50,000 customers, is ready to take on AT&T, which claims 17.8 million broadband subscribers. Jasper says his 190-employee company has more than doubled in size since it stopped releasing revenue figures in 2009, when it took in $20 million. For other telecoms, that’s a rounding error. And DSL’s reliance on telephone lines limits its effective range, meaning the company has to stick to densely packed cities for now. Sonic is picking its spots carefully as it invests in new DSL and fiber links; Jasper cites Chicago as a prime target. In addition to Illinois, the company has registered as a utility in Texas, Missouri, and Kansas, though Google’s fiber experiment in Kansas City means Jasper won’t try his luck there. He declined to disclose how much he’s spending on infrastructure, saying he doesn’t want competitors to know how cheaply Sonic can manage it. “I’d like folks to presume that that’s”—he pauses—“infeasible.”
The bottom line: DSL holdover Sonic.net has built its customer base in California by undercutting the big boys with fast service.
