AT&T Gigapower

[kieran]

What is Sonic's strategy to compete with Gigapower? Are you seeking to roll fiber out to locations that already have Gigapower, and compete directly, or will you seek to roll out fiber to locations not yet served by Gigapower, to be the "first on the block" to claim that region?
It seems like given Sonic's relationship with (and dependence on) AT&T, this could get interesting.

[Guest]

Sonic will roll out their fiber network where there are a lot of current Sonic subscribers because it costs hundreds of dollars to pass each home, regardless if they subscribe or not. Using customer take rate as a metric will offer good return on investment. Dane had commented the investment required for their fiber rollout in San Francisco is $380 million. https://www.youtube.com/watch?v=iVIsbUd ... .be&t=2580 (low sound).

As a small company, it wouldn't make sense for Sonic to compete directly with AT&T/Comcast based on price because the incumbents will either match or take a loss in the short term in order to impact a competitive ISP like Sonic.

[Guest]

hundreds of dollars to pass each home? fiber doesn't cost THAT much, I suspect that's more of an overall price to do a particular area with X number of non-subscribers and then divide the total homes by the total cost of installation, so yeah if there are zero subscribers in a fiber loop then it would cost a ton per home, if there was more than 0 then it cost less per home.

That said I feel San Francisco has been abandoned by all but Comcast, they're the only one who seems to care about having any sort of reasonable speed unless you happen to live within a few blocks of a CO or one of the rare instances where AT&T actually has a live Uverse box... or maybe I'm just being bitter because for the past couple years I've seen Uverse boxes but AT&T has turned them on or they too have abandoned my neighborhood and are content with DSL.

And the big problem if AT&T has the same "why compete with Comcast, there are few subscribers there" is that it's a no brainer for ANYONE living in the area, for a similar price you get vastly greater speeds, and it's not Comcast undercutting. My 12 month promo for 150Mbps (180Mbps according to speed test) just ended at $50 a month, and that was cheaper than my 5Mbps Sonic line due to taxes on the DSL line, even if there were no taxes for $10 more a month for that much speed? Yes please, every day of the week and twice on Sunday. Now if I had access to a 20+ Mbps Sonic/Uverse line for $40/month that would be a lot harder call since the speed, while not as a great, would be fine for me and I can give my business to a company I actually want to support (Sonic not AT&T)... however that's not available to me (and there would probably be taxes on top of a equipment rental fee). Just like I would love to support American workers by "buying American" no way I'm going to pay $40 for a tshirt, or $90 for pair of pants, gotta meet me somewhere in the middle. So great for those in the Sunset who are getting fiber, for the 90% of San Francisco that is left in the dust, better options are available.

[Guest]

hundreds of dollars to pass each home? fiber doesn't cost THAT much, I suspect that's more of an overall price to do a particular area with X number of non-subscribers and then divide the total homes by the total cost of installation, so yeah if there are zero subscribers in a fiber loop then it would cost a ton per home, if there was more than 0 then it cost less per home.

How much do you think it should cost? How much would it cost to get permits? How much would it cost to pay people to trench/install fiber aerially? How much for the infrastructure on the poles and the back haul? How much to negotiate contracts? What about hiring more people for support (BTW I had to call support last week and instead of holding I decided to ask for a call back--I was contacted 20 min later; I had to call back again and was put on hold for around 5 min.)? How much to train technicians?

Just a fiber cable and a couple of fiber connectors don't cost that much but I think you're overlooking a lot of things here.

[kieran]

Sonic will roll out their fiber network where there are a lot of current Sonic subscribers because it costs hundreds of dollars to pass each home, regardless if they subscribe or not. Using customer take rate as a metric will offer good return on investment. Dane had commented the investment required for their fiber rollout in San Francisco is $380 million. https://www.youtube.com/watch?v=iVIsbUd ... .be&t=2580 (low sound).

As a small company, it wouldn't make sense for Sonic to compete directly with AT&T/Comcast based on price because the incumbents will either match or take a loss in the short term in order to impact a competitive ISP like Sonic.

I've heard that strategy dozens of times - that they will target areas with the highest subscribership. I don't buy it. Is the Sunset *really* their #1 neighborhood for subscribers? I find it hard to believe that. In my neighborhood in NE Santa Rosa (Skyhawk), at least half the people I talk to are Sonic subscribers (surprisingly). Basically if they have a satellite TV dish on their roof, you can bet they use Sonic. People in Santa Rosa know about Sonic, they like Sonic. Sonic has been here from day one. I can't believe that any city or neighborhood in all of Sonic's domain has higher subscribership than Santa Rosa.

There must be some other factors at work that inform their decision on where to roll out fiber next.

I've said it several times, but if a business wants to make money on their fiber investment, they need to get lots of people to buy their fiber product. Who are the people most likely to buy fiber service? The people who, when faced with a choice of DSL/FTTN vs Cable, choose cable. Obviously those people choose for speed, since there is no other reason to want to give Comcast money. People who already are happy with their Sonic service obviously don't really need/want faster service. Would they take it for the same price? OF COURSE. But comcast customers would likely take it for a higher price. I would gladly give Sonic the money I currently give comcast (which is more than Sonic charges) if I could get even HALF the speed I get from Comcast, let alone gig-fiber service.

Instead, Sonic wants me to give up my fast Comcast service, pay Sonic for slow-as-molasses service, and wait patiently and hope that they bring fiber to my neighborhood before I die. It's the most flawed business model I've ever heard of. Any other business would do market research and roll out their product in the market most likely to pay the most for said product.

All that said, I still speak highly of Sonic and recommend everyone check what speed they can get and recommend they go with Sonic if that's fast enough for them. I like their philosophy on privacy and net neutrality, I like that they are a private company still, and I love their customer service.

[kgc]

hundreds of dollars to pass each home? fiber doesn't cost THAT much

Well, yes, actually it does. Using Google Fiber's public information as a surrogate, "Some $38 million will go into Kansas City, Kan., and $46 million into Kansas City, Mo., with the cost per home respectively at $674 and $500." See https://techcrunch.com/2013/04/08/googl ... -estimate/.

[cdrayson]

[I've heard that strategy dozens of times - that they will target areas with the highest subscribership. I don't buy it. Is the Sunset *really* their #1 neighborhood for subscribers? I find it hard to believe that. In my neighborhood in NE Santa Rosa (Skyhawk), at least half the people I talk to are Sonic subscribers (surprisingly). Basically if they have a satellite TV dish on their roof, you can bet they use Sonic. People in Santa Rosa know about Sonic, they like Sonic. Sonic has been here from day one. I can't believe that any city or neighborhood in all of Sonic's domain has higher subscribership than Santa Rosa.

It's all about customer destiny, and it's really hard to beat the block after block or row houses in the Sunset and Richmond Districts. For example, our block in the Richmond has about 35 buildings in 500 feet, some with as many as 6 units in them. They'd have to lay a whole lot more line to reach that many potential customers in Santa Rosa.

[steelgaze]

There are a lot of fallacies.

1. Customer density is not the only factor in deciding where to build. There is also cost associated with building in specific areas. I assume while high in SF, the density is better than an area like Santa Rosa. There is also a competition factor. Who else is in the area? In the sunset, it is AT&T dsl, and Comcast. Comcast is the only thing coming close to fiber. AT&T will probably roll out fiber of it's own eventually.

2. Santa Rosa is #7 on the gigabit roadmap.

3. Sonic's already price to compete. By merely being in the same market, it forces AT&T AND Comcast to lower it's pricing. AT&T's Gigapower service costs 110/month, but only 70/month if in a google fiber market. Comcast has similar pricing but charge WAY MORE if AT&T or Google is not in the market.

[kieran]

It's all about customer destiny, and it's really hard to beat the block after block or row houses in the Sunset and Richmond Districts. For example, our block in the Richmond has about 35 buildings in 500 feet, some with as many as 6 units in them. They'd have to lay a whole lot more line to reach that many potential customers in Santa Rosa.

I think you meant "density" not "destiny" LOL... Choose Sonic, Luke! It is your DESTINY!!!!

Great point though, and this reinforces my thought that there has to be something other than pre existing Fusion subscribership that informs their decision on where to roll out fiber! I totally get the density logic, that makes sense, that makes it a sound business decision. Hearing Dane continue to say that they will just roll out to the neighborhood with the highest number of Sonic customers per capita, is unbelievable. I just don't buy it, as there's just no business sense or reason for that strategy.

[kieran]

2. Santa Rosa is #7 on the gigabit roadmap.

How do you know this? Is this roadmap posted/published somewhere?

Great points though, too.