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.

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.

Homes and businesses across Singapore are rapidly being wired with fiber to the home broadband service as part of the country’s Next Generation Nationwide Broadband Network.

Under the Intelligent National 2015 Master Plan, the Infocomm Development Authority of Singapore (IDA) has specified fiber broadband as the only technology capable of meeting the country’s requirement that all homes, offices, and schools have a minimum capacity of 1 Gigabit per second broadband no later than 2015.

Government officials have declared Gigabit broadband “a national priority” to keep Singapore a world leader in high tech business, medical care, and innovative education.  The country considers older broadband standards, including ADSL, cable broadband, and wireless service inadequate or outdated, and began installing fiber optic cables in 2009.

Singapore’s advanced fiber network is a public-private partnership between four partners – Axia NetMedia (Axia), Singapore Telecommunications (SingTel), Singapore Press Holdings (SPH) and SP Telecommunications (SPT).  Government policy has helped reduce red tape and the country’s largest telecommunications companies are working together to build a single fiber platform on which various services can deliver what they call “a richer broadband experience with more choices at more affordable prices.”

Residents and businesses are being encouraged to participate with incentives like free installation, which represents a savings of $300 or more over regular installation costs.  A third-party company, OpenNet, has been contracted to handle wiring, installation, and maintenance of the fiber network.

Once installed, customers can choose any provider they like to establish service.  One of the country’s largest — SingTel, is already selling access at speeds currently up to 150Mbps:

Once the country’s fiber network is firmly established across the entire country, speeds will be increased.  Singapore has solved the domestic broadband speed problem, but like other countries in and around the South Pacific, international capacity remains constrained, and so are broadband speeds for international destinations.  But several undersea fiber projects are expected to vastly expand capacity within five years, allowing providers to eventually lift speed caps.

While many of Singapore’s residents live in multi-dwelling units like apartments and condominiums, many others live in individual homes.  Singapore decided fiber access must be ubiquitous, so coverage will extend to all types of buildings.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/OpenNet Overview Singapore 5-2011.flv[/flv]

This video contains an overview of Singapore’s fiber network, how it will be installed, what services it brings, and how it is being marketed across the country.  (14 minutes)

Telefonos de Mexico is known as Telmex, the country's largest telecommunications provider.

Mexico’s largest phone company Telefonos de Mexico SAB is not about to allow themselves to be outgunned by upstart competitors like mobile-phone carrier Grupo Iusacell SA, which is installing fiber to the home broadband service in up to 40 cities offering 100Mbps speeds.  Now they are working on a fiber to the home network of their own, planned to reach up to one million Mexicans by the end of this year.

Mexico’s broadband expansion is coming on all fronts.  Cablevision (no relation to the U.S. company with the same name) is delivering cable broadband service to an increasing number of cities.  But news that consumers will soon have the choice of not one, but two fiber to the home networks has the country buzzing with excitement.

“Fiber-to-the-home is the best technology that exists,” Martin Lara, an analyst at Corp. Actinver SAB in Mexico City told Bloomberg News. “It’s going to be good for the consumer.”

The broadband speeds in Mexico will rapidly exceed those in the United States if the two fiber providers end up in a speed and pricing war .  For now, Telefonos plans on offering packages of 10, 20 and 50Mbps to subscribers.  That may increase to 100Mbps if competitors make an issue about maximum available speeds.  That’s quite a change from traditional DSL packages from Telefonos, which range from 1-5Mbps in most areas.

Upstart Iusacell is Mexico's third largest cell phone provider, but it has big plans for fiber-to-the-home service.

Iusacell, mostly known for its cell phone service, is building its own quad-play of wired fiber broadband, television, and telephone service — wireless and wired.  It’s Totalplay package risks Telefonos’ decades of dominance in the Mexican telecommunications marketplace, so the phone company is investing to compete.  The company’s Telmex landline customers are switching to wireless just like customers in the United States and Canada, so developing an attractive multi-element package is critical to keeping customers.

Mexico’s telecommunications laws are different from those in the United States.  Mexico’s dominant phone company has traditionally been prohibited from offering video services to their customers — a policy designed to protect cable providers and other competitors from heavyweight competition.  Those policies are likely to be revisited as a result of competitive fiber initiatives.  Additionally, Mexican providers have not been required to wire entire communities as part of operating agreements, and many don’t.  Instead, most cable and fiber providers build in lucrative neighborhoods where higher income residents live, often leaving poorer neighborhoods unwired. Foreign investment is also common in Mexico, with American and British companies joining Mexican super-billionaire Carlos Slim in financing and/or building out the advanced networks.

Mexico’s decision to adopt the latest fiber technology straight to customer homes increases questions about why American providers are mostly unwilling to do the same.

Qatar

The kingdom of Qatar announced broadband is of urgent importance, and has unveiled plans to deliver fiber-to-the-home broadband, phone and television service to 95 percent of the country by the end of 2015.

Under the auspices of a newly formed public-private venture, the Qatar National Broadband Network Company will construct the near-universal fiber network, extending it to every business and home it can reach.  On that network, private providers, including Qtel and Vodafone, will market their products and services to government, business, and consumers.

“The Qatar National Broadband Network represents a bold step forward in Qatar’s drive to be a leading knowledge economy. Ubiquitous access to a high-speed network is essential to business development, economic growth, innovation and enhanced government services for our citizens. This network will do more than connect Qatar to the world; it will truly help enrich the lives of those who live here,” said Dr. Hessa Al-Jaber, who leads broadband development matters inside the kingdom.

The project is specifically designed to address Qatar’s current broadband marketplace — slow and expensive.  Qtel markets its landline customers up to 8Mbps DSL at prices that can exceed $100 a month, but few customers actually achieve 8Mbps results.  The project would largely replace the kingdom’s copper-based phone network.

“A lot of Qatari citizens don’t use fixed line DSL and prefer the country’s mobile broadband networks which can be cheaper and even faster than DSL,” Abdul Al-Attiyah, who lives in Doha, tells Stop the Cap! “This fiber network will bring 100Mbps service to just about everyone at prices a fraction of what we pay for DSL today.”

Al-Attiyah recently had the opportunity to communicate with the kingdom’s telecommunications ministry on the issue of bandwidth caps.

“I asked them if there were any plans to allow providers to limit how much broadband service Qataris could use, because we have caps on mobile broadband today, and I was assured there was never any point to limit use on a limitless capacity fiber network,” Al-Attiyah says.

“Fiber is also a far better solution than wireless broadband because of congestion issues,” he adds.

Qatar is a small country — about the size of the state of Connecticut, and is located on a peninsula adjacent to the Kingdom of Saudi Arabia.  Thanks to significant oil and gas revenues, the kingdom enjoys the highest G.D.P. in the world, and will soon be one of the leaders in broadband as well.