It shouldn't be a big surprise, but the number one request by Sonic members today is for faster service. We see this every day, in our annual customer satisfaction surveys, and in exit surveys for those who depart.
And this isn't anything new. When we started in 1994, service was delivered over incumbent phone lines at 16.8kbps, then 28.8kbps. As "56k" modem technologies arrived, we rapidly adopted them, deploying digital circuits and modems in our network. And as these technologies were deployed, pricing gradually increased, from $12/mo, to $15/mo, to $18.95. The speed of just under 56kbps was a limit of the telephone line technology.
As I'm talking about the early days, it might be worthwhile to revisit some of the milestones of the last 22 years. Here's a glimpse of some highlights of just a few of the things we've done:
Then in 1998, we launched DSL service, using DSL lines which we purchased wholesale from the incumbent, at 1.5Mbps initially. This was T1 download speed, so it was pretty impressive. The service was initially $57.95, but over the years went down to as low as around $35, and now has climbed back up roughly to the initial level as membership quantities have decreased and costs have risen as a result. The speeds of 1.5Mbps to 6Mbps were limits of the technology, but also of the product design of our supplier, the incumbent telephone company.
Once we moved from being an ISP to a full-fledged carrier, in 2008 we launched ADSL2+, up to 20Mbps, then VDSL2 at up to 50Mbps or more. For the first time, we had raw copper lines as a carrier ourselves, at a uniform monthly cost, and we were free to deploy whatever technology would deliver the maximum speed. We rolled out Annex M technology for more upstream, PTM for lower overhead, and line bonding to offer double the speed. We also greatly expanded our reach, deploying Fusion equipment in central offices in 125 California cities in Northern and Southern California. With these products, the speed limits are created by the technology only - the physics of carrying capacity of a copper line over distance, but of course, subscribers want to go faster.
And because our members want more speed, and because central office loops can be long distances, we launched FTTN, back to a resale product leveraging the incumbent's equipment. In some ways a step backward, this product means less control over the deliver of the service, but in many locations, a higher performance product - so it's a good interim solution to fill the need for more performance.
For a snapshot of how Fusion has been improved by our team since launching in its current form in 2010, see our timeline:
Our goal has been to deliver more and more value for Sonic members with Fusion service, and it stacks up pretty well!
But performance is critical, and the next stage for Sonic is to deliver fiber to our members. With our own fiber, we are able to finally deliver a virtually unlimited-speed product, an offering where the Internet access itself is actually faster than many of the devices on the local network in the home, delivering Gigabit Ethernet, and faster than WiFi!
We have been working toward the capabilities to deliver fiber for a long time, so I think it's worth sharing some insight into the process and our progress.
Being an ISP is pretty easy. Being a competitive telecommunications carrier is harder. But building new fiber networks is a hugely complex undertaking. We haven't talked a lot about the challenges, but you've certainly seen the results of them in the long delay between our early start in Sebastopol, and today, when we've really begun to deliver over a decent sized area.
Now, we've got that process refined and we are scaling it up. I think folks may not be aware of the change in fiber construction and deployment velocity that we have achieved over the last year, so I'll share that here. Here is an image of what that has looked like to date:
As a private company, every improvement and every new technology, every new feature has been built using membership fees from our current members. Dialup members effectively paid for DSL technology, DSL members paid for CLEC deployment (and also, Northern California members paid for Southern California expansion!) That's how things work in a private company, with no outside investors, and until quite recently, no debt. (More on the debt part later.)
Now that we have proven the ability to deliver gigabit fiber service, and we are poised to scale it over a very large area, I don't think it is time to stop, to halt improving our services. Doing so would effectively set ourselves up to eventually cease as a business, as Fusion xDSL and FTTN technologies are supplanted by faster options in the never-ending quest for increasing speed.
In regards to debt, I should address this point specifically, because it ties in to the reason for a price increase from $40 to $50 for Fusion service. Clearly, we've built a pretty sizable fiber network already, and I am pleased to say that today we serve out of of ten Sonic members with a gigabit fiber connection right now. But we will soon reach the end of our ability to borrow funds to build more fiber, because our debt is tied to the limits of our current revenue. Like any other loan, the size of the debt is limited by the ability to pay it off, and without substantially more debt capital, we cannot built more fiber.
So we could stop, but doing so would give up on the mission our whole company and team is focused on: to build a faster, friendlier, more private and better Internet connection for Sonic members, an alternative to duopoly cable/telco, an unlimited service, and a compelling value. Fast access to the Internet shouldn't just be available from the cable company - you deserve a better alternative.
I do hope that you will take an interest in our mission, and I hope that you will help us achieve it by being a Member of Sonic.
