The employees of Sonic.net, a California ISP that threatens to expose the chasm between the cost of providing broadband and the profits reaped from it.

It doesn’t take trillions of dollars to offer world class broadband service in America.  Companies large and small are building gigabit broadband networks to reach customers at prices your local phone or cable company would charge at least $1,000 a month or more to receive, if you consider many charge around $100 a month for 100Mbps.  Now, 700 families in California are going to be offered 1,000Mbps service for just $69.99 per month — including a phone line.

Sonic.net has been in the ISP business for more than 15 years, selling DSL service to California customers at prices that offer value for money.  Most recently, Sonic has been pitching bonded DSL service offering speeds upwards of 40Mbps for the same price it plans to sell its new Fusion gigabit fiber broadband.  For customers who don’t need that much speed, Sonic recently reduced the price for its 20Mbps service to $39.95 per month (including phone line.)

For those in the Sebastopol area lucky enough to qualify for fiber service, Sonic promises unlimited access and an exceptional online experience.

Sonic’s qualifications to run the project are not in question, considering Google selected the company to operate and support the trial fiber-to-the-home network the search giant is building at Stanford University.

Google itself is building an extensive fiber to the home network to serve Kansas City residents and businesses, and promises service at a profitable, but reasonable price.  So has Sonic.net CEO Dane Jasper, whose written views on the state of American broadband explains his personal drive to make Internet access better and faster, without ripping people off with Internet Overcharging schemes or unjustified high monthly prices.

Jasper recognizes much of North America is trapped in a broadband duopoly that delivers all of the benefits to investors, while leaving the continent saddled with slow and overpriced service.  Nine months ago Jasper explained the business model to Benoit Felten, a Yankee Group broadband analyst:

During the construction of this network we have given a lot of thought… to the business model in the US, and how we could do things in a different and more interesting way. The natural model when you have a simple duopoly capturing the majority of the market is segmentation: maximize ARPU [average revenue per user] by artificially limiting service in order to drive additional monthly spending. But fundamentally this is the wrong model for a service provider like us, and we have looked to Europe for inspiration. The model pioneered by Iliad under the Free brand is a better fit, both for us and for our customers.

As the marginal cost of providing more bandwidth or less, and providing [phone service] or not are both minimal, we have adopted a simple flat rate model instead of the more typical US model of “$5 more goes faster”… I believe that removing the artificial limits on speed, and including home phone with the product are both very exciting.

It’s exciting to customers as well, most who give the company nearly five star reviews for excellence, without five-star pricing.  An added bonus: Jasper occasionally responds to customer service inquiries himself.

Reviewing Sonic.net’s blogs and website shows off a company that loves the business it’s in.  If a switch 100 miles away has a problem that interferes with Sonic’s service, you will promptly read about it on the company’s technical blog.

There are houses for sale in Sebastopol, Calif., if you want affordable gigabit broadband.

Jasper’s frustration with the enormous corporate-owned ISPs that dominate the country (and Washington) was on full display in a blog entry in March, answering a question about why American broadband is lagging behind:

[…] In 2003 and 2004, the then Republican led FCC reversed course [on policies guaranteeing a level playing field for broadband], removing shared access to essential fiber infrastructure for competitive carriers and codifying instead a policy of exclusive use and “multi-modal competition”.

This concreted our unique US duopoly: cable versus telco, the two broadband choices that most Americans have today.

In exchange for a truly competitive market, the US received promises of widespread deployment. And, to some degree this has worked. Unfettered by significant competition or price pressure, broadband in at least in its most basic form can now be delivered to most homes in America, albeit at a comparatively high cost to the consumer.

What was given up in exchange for this far-reaching but mediocre pablum was true competition and innovation.

Elsewhere in the world, regulatory bodies followed the lead of the US Congress and separated essential copper and fiber infrastructure from the services and providers who used them, and the result has been amazing. In Asia and Europe, Gigabit services are becoming common, and the price paid by consumers per megabit is a tiny fraction of what we pay here at home.

I won’t deny the innovation that has occurred in the telco/cable duopoly. They’ve got TV, Internet and telephone bundles designed to serve up prime time network shows in over-saturated HD glory, with comparatively middling Internet speeds, all offered with teaser rates and terms that would baffle an economics professor. The clear value of the bundle is to baffle, and pity the consumer who wants to shed a component. At least during the intro periods, it’s often cheaper to take the whole package than just a component or two.

For cable companies, the entrenched interest in the television entertainment portion creates a clear conflict: why should they offer an uncapped broadband connection that can deliver enough video entertainment to allow consumers to cut the TV cord? And if you do drop the TV, up goes the price for even this slow and capped Internet connection, so you pay more either way. And now that telcos have gotten into the television business too, their interest in slowing the pace of increasing broadband speed is aligned as well.

This has yielded a competitive truce in America.

In a slow tide, back and forth, cable delivers a slightly better product, then telco slightly better again, all at the highest possible cost. It is iterative, not innovative, and Americans deserve more. After all, we invented the Internet, right?

Among the giant phone and cable companies providing broadband today are a growing number of innovation outliers — companies challenging the prevailing views that Americans don’t need or want fiber-fast speeds (not at the prices some providers charge), that there is no economic justification for the capital spending required to construct fiber networks when incremental upgrades can suffice (the Wall Street view), or that the best way to drive increased revenue from a maturing broadband market is to throw away today’s flat rate pricing model and establish a guaranteed growth fund collecting tolls on Internet traffic that is sure to rise in the days ahead (Time Warner Cable’s CEO).

Google cannot understand why 1Gbps broadband “doesn’t work” in the United States and intends to construct its own network to prove otherwise.  EPB, a municipal utility in Chattanooga, Tenn. sells gigabit broadband, in their words, because they can.  The concept of a provider offering the fruits of their innovation, even if they aren’t certain how to price or sell the service, is a remarkable and refreshing change from the usual obsession with nickle-and-dime “extras” for add-on features or not selling service that your marketing department does not understand or find useful.

It also exposes the indefensible gap between the cost of providing the service and the price paid to receive it.

Thanks to Stop the Cap! reader Mark for sharing news about Sonic.net’s fiber network.

Verizon Communications is a study in contrasts.  It runs one of the most advanced wired broadband services in the country that wins rave reviews from consumers and businesses, is on the verge of ending its unlimited use data plans for smartphone customers on the wireless side, and has launched a major “police action” against individuals that are using their smartphones as wireless hotspots without paying an additional $20 a month for the privilege.

Verizon Says No to Data Caps and Consumption Billing

When you run an advanced fiber to the home network like FiOS, the concept of data caps is as silly as charging for each glass of water collected from Niagara Falls.  That’s a point recognized by Joseph Ambeault, director of media and entertainment services for Verizon.  Talking with GigaOm’s Stacey Higginbotham, Verizon continues to insist their network was built to handle both today and tomorrow’s network demands.

“Our network is always engineered for big amounts of data and right now there are no plans [to implement caps], but of course you never want to say never because things could change.”

However, in the same conversation he talked about how the FiOS service has gone from offering a maximum of 622 Mbps shared among 24 homes in the beginning to tests of 10-gigabit-per-second connections in individual homes that Ambeault mentioned. For now, Verizon is testing 10-gigabit-per-second-shared connections and offering up to 150 Mbps home connections. This kind of relish for massive bandwidth is not evident in conversations with folks at AT&T or even those cable firms deploying DOCSIS 3.0. Which is why when Ambeault added, “We don’t want to take the gleam off of FiOS,” as his final say on caps, I tend to believe that Verizon may be the last holdout as other ISPs such as AT&T, Charter and Comcast implement caps.

Verizon Says Yes to Ending Unlimited Smartphone Data Plans

Verizon is among the last holdouts still offering unlimited data plans for smartphone customers.  Priced at $30 a month per phone, these plans have proved very profitable for Verizon in the past, in part because they are mandatory whether you use a little data or a lot.  But now as data consumption grows, Verizon’s profits are not as luxurious as they once were, so the “unlimited plan” must and will go, probably within the next three months.

Verizon has always been hesitant about following AT&T’s lead for wireless data pricing, which delivers a paltry 2GB for $25 a month.  AT&T still sells its legacy unlimited plan, grandfathered for existing customers, for just $4 more per month.  So while AT&T can claim they’ve reduced the price for their data plans, they’ve also introduced a usage allowance.  Those exceeding it will find a much higher bill than the one they would have received under the old unlimited plan.

Verizon will probably echo AT&T’s tiered data plans, perhaps with slightly more generous allowances, but the real excitement came from Verizon CFO Fran Shammo, who told attendees at the Reuters Global Technology Summit it was prepared to finally introduce the much-wanted “family data plan,” which would allow every family member to share data on a single plan.  That’s a potential smartphone breakthrough as customers resistant to paying up to $30 a month per phone for each individual data plan might see their way clear to buying smartphones for everyone in the family if they all shared a single family-use data plan.

“I think it’s safe to assume that at some point you are going to have megaplans and people are going to share that megaplan based on the number of devices within their family. That’s just a logical progression,” Shammo said.

Of course, the devil is in the details, starting with how much the plan will cost and what kind of shared allowance it will offer.

Verizon Says ‘Oh No You Didn’t Tether Your Phone Without Our $20 Add-On’

Phandroid posted this copy of a message Verizon customers are receiving if they are using unauthorized third party tethering apps. (Click to enlarge.)

Earlier today, Verizon Wireless customers using popular third-party tethering apps to share their smartphone’s built-in Wi-Fi Hotspot with other nearby wireless devices began receiving the first of what is expected to be a series of warnings that the jig is up.

Tethering allows anything from a tablet computer to a netbook or laptop to share a Verizon Wireless data connection without having to pay for individual data plans for each device.  Third party software applications bypass Verizon’s own built-in app, the 3G Mobile Hotspot, which involves paying an additional $20 a month for a secondary data plan delivering a 2GB monthly usage allowance.

Just as AT&T hated to see the possibility of lost revenue passing them by, Verizon has begun ferreting out customers using these apps and sending them friendly reminders that tethering requires an official Verizon Wireless add-on plan.  While the third party apps are not yet being blocked, most expect Verizon to gradually crack down on their use if customers persist in using them.  Verizon can also block the sale of the apps from the Android Market and can also insert roadblocks to prevent their use.  Or they can follow AT&T’s lead and threaten (perhaps illegally) to automatically enroll customers caught using tethering apps in their paid tethering plans.

The People’s Republic of China is accelerating its deployment of fiber optic broadband at the expense of DSL, according to a new report from market research firm Infonetics Research.

“The major story in the broadband aggregation equipment market this quarter is the dramatic drop in DSL ports in China, which points to operators there continuing their dramatic shift away from DSL,” said Jeff Heynen, directing analyst for broadband access at Infonetics Research.  “The first quarter is typically one of the slowest for DSL, but the seasonal effect was worsened by Chinese operators’ continued shift away from traditional [DSL].”

The Chinese broadband market is increasingly based on fiber networks, especially in larger cities where broadband demand is rapidly increasing. Worldwide spending on advanced broadband networks is being driven by broadband expansions in China, Japan, and Korea — all accelerating their fiber deployments. For Chinese companies like Huawei and ZTE, the news is both good and bad.  Both companies profited from sales of EPON and GPON equipment which help power fiber networks, but lost plenty from the decline in spending on DSL technology.

The North American market has stalled, and is expected to remain in neutral until Verizon decides to re-initiate its FiOS buildout.  Broadband stimulus funding may also help boost spending, but most providers are relying on slow speed DSL to introduce rural America to broadband service.  In markets where providers are delivering fiber to the home, companies like Calix are reaping the rewards, with revenue up 222 percent this quarter, mostly earned from sales of Ethernet Fiber to the Home equipment.

America’s broadband ranking has fallen once again, mostly at the expense of other countries who have accelerated service and speed upgrades above and beyond what is available in the United States.  That is the conclusion one can reach after reviewing the Federal Communications Commission’s second annual broadband report, delivered to Congress to fulfill obligations under the Broadband Data Improvement Act.

Through a combination of data from OECD broadband rankings and actual speed test results collected by the Commission, the FCC report notes American cities are at risk of losing the broadband speed race.

“This report compares data on average actual download speeds reported by a sample of consumers in a number of U.S. and foreign cities and finds that some large European and Asian cities exhibit a significant edge over comparable U.S. cities in reported download speeds, though reported speeds for some other international cities are roughly comparable to speeds in many U.S. cities,” the report concludes.

“The best currently available data set comparing the United States to other countries appears to be from the OECD, which collects data on various broadband deployment, adoption, and usage metrics and publishes rankings of its member countries. The OECD’s deployment data ranks countries based on particular technologies, rather than overall coverage. The U.S. ranking in these surveys ranges from 27th out of 30 in DSL coverage to 1st out of 28 in cable modem coverage.  The U.S. ranks 6th out of 16 in fiber-to-the-home (FTTH) coverage and 8th out of 29 in 3G mobile wireless coverage.”

Broadband Rankings (click to enlarge)

Most of the countries accelerating far beyond the United States in broadband speed and quality are in Asia and Europe, and many are upgrading their networks to fiber-based broadband.  As these fiber networks come online, the United States can be expected to fall further behind.

The cable industry lobby attacked the report's findings.

Just like last year, the Internet Service Providers turning in poor grades are rejecting the report’s conclusions.

“While the Commission’s headline proclaims that 20 million Americans are denied access to broadband, by that measure private investment has fueled the build-out of broadband networks to nearly 300 million consumers and is responsible for the jobs that flow from that investment,” said Michael Powell, president and chief executive of the National Cable and Telecommunications Association.  Powell used to oversee the FCC as chairman during the first term of the Bush Administration.

Another trade association with ties to the telecom industry, USTelecom, attacked the findings noting most Americans think their existing broadband service is good enough.

Walter McCormick Jr., USTelecom CEO, noted the FCC’s own report found that 95 percent of Americans have access to fixed broadband and 93 percent are happy with their service.

...so did USTelecom, another industry funded group

But McCormick says nothing about the speeds those customers receive, a bone of contention with the Commission.  As part of this year’s report, the FCC is increasingly relying on its own verifiable data about broadband speeds, collected through its SamKnows broadband speed test project.  The Commission has repeatedly noted that broadband speeds marketed by ISPs do not always match the actual speeds customers receive.

Speed tests comparing broadband performance in comparably sized cities found some sizable differences.

The data suggest that mean actual download speeds in some European and Asian cities are substantially higher than in comparably sized U.S. cities (e.g., 24.8 megabits per second (Mbps) in Paris and 35.8 Mbps in Seoul versus 6.9 Mbps in San Francisco, 9.4 Mbps in Chicago, and 9.9 Mbps in Phoenix). Some of the U.S. cities in our sample have higher speeds than some foreign cities (e.g., Chicago with 9.39 Mbps versus Rome with 5.6 Mbps).

The most significant reason for the disparity in speed is the technology used in each respective area.  Fiber to the home service traditionally delivers the fastest broadband speeds.  Cable broadband technology, common in the United States but less so abroad, is responsible for a great deal of speed increases in the United States.  Telephone company DSL and wireless are responsible for some of the slowest speeds, with rural DSL service commonly providing just 1-3Mbps service.  Many European cities still relying on DSL technology have upgraded to bonded DSL, ADSL2+, or VDSL service, which can significantly boost speeds.

Unfortunately, the report concludes, the faster the broadband service delivered, the higher the price — often out of proportion with other OECD countries.

Results […] suggest that U.S. stand-alone residential broadband prices are generally “in the middle of prices in OECD countries,” after accounting for speed, terms of service, data caps, and service delivery technology. Similarly, prices in the United States for business stand-alone broadband services were fourteenth out of 30 among the OECD countries. A paper by the Berkman Center for Internet and Society at Harvard University found prices for U.S. broadband with download speeds of around 768 kbps to be “very good” by international standards. However, as download speeds increase, the paper found that U.S. prices become more expensive than most other OECD countries.

Some providers unimpressed by the independent research accused the FCC of using biased and inconsistent research methods.  AT&T, for example, was unhappy with comparisons among U.S. cities and those of comparable size abroad.  They accused the Commission of not using “a well-defined or consistent methodology for choosing the ‘communities’ or offers.”  In fact, several providers suggested the Commission’s pricing comparisons ignored significant, albeit temporary, discounts some new customers receive, as well as discounts for bundled service packages.  Promotional pricing factors are acknowledged by the Commission, but the report notes the findings do attempt to collect real world pricing paid by actual customers.

For consumers in the United States, broadband envy is as close as the next news report highlighting broadband expansion efforts abroad.  Some countries are deploying 1Gbps broadband networks that deliver consistently faster speeds than American providers, at dramatically lower prices and without a usage cap attached.

Buffalo’s communications labor unions are behind an organized effort to push Verizon Communications to expand its fiber-to-the-home service to the city of Buffalo, despite the fact the telecom company has a moratorium on service expansion beyond its existing commitments.

Buffalo AFL-CIO Central Labor Council President Michael Hoffert and CWA (Communications Workers of America) Local 1122 President James Wagner teamed up with the city’s elected officials and community advocates to pressure the phone company to expand service beyond several suburbs that currently get the service.

A professionally designed website, DontBypassBuffalo.com, is the home of the campaign, collecting signatures from interested residents and sharing late-breaking developments.

Verizon has a moratorium on further expansion of its fiber to the home service.

“Verizon’s FiOS service is a cutting-edge technology that brings ultra-fast internet and superior video programming over fiber optic cables that run directly into customers’ homes,” reads a statement from the coalition. “While Verizon is deploying FiOS throughout many of the suburbs of Buffalo, they are not building FiOS in the City of Buffalo.  The residents of Amherst, Tonawanda, Kenmore, Orchard Park, Hamburg, West Seneca and Lackawanna, where Verizon has built FiOS, are, taken as a whole, more affluent and less diverse than Buffalo residents.  The deployment of broadband technologies is a key to economic redevelopment in the City, especially since health care and higher education, both very dependent on cutting edge technologies, are leading employers in our area.  If Verizon continues to bypass Buffalo, residential consumers, children, and area businesses won’t be able to thrive in the 21st century economy.”

The union shares an interest in bringing the advanced service to more residents across Erie County as it collectively represents some of the Verizon employees who will service the fiber network.  Three western New York chapters of the CWA – Locals 1122, 1115 and 1177 – represent nearly 750 Verizon Workers across Erie, Genesee and Niagara counties, as well as across the Southern Tier, including field technicians, central office technicians and clerical staff.

Curry (WIVB-TV)

Verizon stalled new rollouts of its fiber optic network more than a year ago, and has consistently said it would only expand service in areas where it already has signed agreements with local communities.  In many regions, Verizon has completed agreements with towns and villages before reaching accommodations with larger urban areas.  Buffalo is not alone in protesting for improved broadband service.  Washington, D.C., Baltimore and Boston have also complained about being bypassed.

Last week, Coalition Director Janique Curry stepped up the pressure on the phone company at a press conference in front of Verizon’s Elmwood Avenue headquarters.

“Verizon’s lack of commitment to the minority population in the city of Buffalo is unacceptable,” Curry said.  “This community deserves an equal opportunity as our neighbors in the suburbs experience.”

Verizon’s FiOS network in New York State currently serves parts of metropolitan New York City and suburban areas around Albany, Syracuse, and Buffalo.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/DontBypassBuffalo Apr-May 2011.flv[/flv]

Here are three reports on the protests: WIVB-TV and WKBW-TV’s coverage of the protest in April, and WIVB’s most recent story covering last week’s return to Verizon headquarters to apply additional pressure on the company.  (3 minutes)