It's the classic story of local boys making good. In the summer of 1994,
Dane Jasper and Scott Doty, two Sonoma County residents with Santa Rosa Junior College backgrounds, had a business idea that they knew had the potential for greatness. And as they took on the endeavor, they decided to keep their startup in Sonoma County.
Today's Sonic.net was originally Sonoma Interconnect, a company essentially ahead of its time. You have to understand, in 1994 the Internet was a new thing, and modems were running at a speed of 14.4 Kilobits/second, explains Mr. Jasper. The Web was brand new. But we saw a need for a community Internet service provider in Sonoma County. There were really no other ones in the area, and we knew the demand would soon be here. So with $9,000 in cash and equipment, the two young men launched a business based on a concept of providing inexpensive high-speed access with features that technical people would appreciate.
Their approach was admittedly conservative. We didn't take on debt, says Mr. Jasper. We simply penciled out on a legal pad what we figured it would cost to provide Internet service, and we set the price. Initially, it was $12 a month with a $50 set-up fee. Today, it's a flat $18.95 a month. Just as the company's fee structure has changed, so has its size. In this interview,Mr. Jasper talks about his company's growth and evolution and where he sees the industry headed. ***
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Your company is almost six years old now. Tell us about its growth.
Sonic.net has grown from a one-man operation in a home office to nearly 10,000sf of space and 30 employees. When we decided to move from the home office and find space of our own, I wasn't sure where to begin. So I just asked which building in Santa Rosa had the most free phone lines, and that's how we ended up here. We are the largest co-location data center north of the Golden Gate. That means other companies can locate their Internet and Web services here. For instance, we host thousands of Web sites. We are, by far, the majority player in the three-county area of Sonoma, Marin, and Napa.
How many customers do you have?
It's hard to pinpoint how many end users we have. We serve 15,000 accounts currently, but behind each account, there can be many, many users. For example, Next Level Communications is one of our accounts, and it has hundreds of employees who use our service. So I'd say we have about 25,000 end users and growing.
What are your revenues?
I'm projecting about $4 million in revenue for this year.
Which is your bigger customer base, residential or business?
In terms of revenue, about 45% comes from business and the rest from residential.
What companies are your biggest customers?
Agilent, Next Level, and O'Reilly & Associates.
Do you have any strategic partners? If so, who are they, and what do they do for you?
Akamai Technologies and Digital Island provide edge delivery of content, accelerating the Internet experience for our customers. We also work extensively with Cisco, 3Com, and Redback Networks.
What are some of the biggest challenges facing a local ISP?
The challenge for smaller, local ISPs is finding the capital to fund the technology needed to keep up with the industry. Some small, local ones just can't compete, because they don't have the customer base to fund the changes. So customers are leaving them for us or other national firms. We are in the category of mid-size regional ISPs. But we, too, had to change our business practice to meet the challenge I just talked about. The whole industry is just insane. No one is out to make a profit at this point; we just keep reinvesting in technology. Another challenge is the threat of those offering free Internet service. They are funded by ads. We've found many customers out there do not want to deal with that. And really, what the rest of us charge is a nominal fee for reliable service without annoying ads. People also shy away from the free services, because they want to have someone accountable if something messes up. If you're not charging to begin with, then you really have little to lose. But if you charge, you'll do more to save a paying customer.
How much do you invest in technology each year?
A lot. We spend more than $1 million on phone lines and probably $750,000 more on technology.
What are some of your competitive advantages over national firms?
We offer more features at a lower price. We can do that, because we've learned to be leaner than others. For instance, others may offer a Web page with three megabytes, whereas we give them 50 megabytes. Or they may offer three e-mail boxes; we offer five, etc. Another thing that works in our favor is our wonderful customer service and technical support staff. If you call one of the national firms, you may wait anywhere from 10-40 minutes for someone to get on the line. Our average wait time is 28 seconds. So when we get feedback from customers, they say the most valuable thing about our service is the responsiveness. Our goal now is to stay responsive even as we expand.
What are your expansion plans?
We are three months away from being a national provider. We will launch in the lower 48 states. We've been planning and building this nationwide deployment over the last six months. Our goal is to deliver enhanced high-speed service with rich feature sets for less money. We expect to double our customer base over the next 18 months and increase staff by 50%. What all of this means is that we're growing our network here in Sonoma County. We have invested a lot and have a huge, beautiful data center in downtown Santa Rosa. We are very proud of it.
Which companies are your biggest competitors locally and nationally?
Locally, there are none that are significant, but we do have pressure on the dial-up side from national companies. People will sign up with them to get their feet wet, then move on when they see there is something better to jump into.
Technology changes pretty fast in your business. What is different or new this year compared to last, and what will have the biggest impact over the next 12 months?
We just deployed wireless DSL [digital subscriber line]. Sonic.net was the first to market with DSL in the county last year. And we've got more DSL circuits in the area than anyone else. There are a lot of businesses and individuals that want DSL, but they are out of range. For example, Airport Business Center is just out of the three-mile radius of the DSL server in downtown Santa Rosa. But through our wireless product, we are able to reach there. In fact, we get more people converting to DSL now than those signing up for dial-up service. And finally DSL is becoming more affordable for small to mid-size businesses. We offer it at $57 a month and up. It will make a big shift in our business conducted in Sonoma County. Businesses will now be able to push data toward customers and beef up speed and access. The broadband momentum is growing. We'll see full-time 24-hour connections becoming more standard. We see tons of local businesses converting to DSL in this area, because the cost is justified now. Other than wireless DSL, there will be no other big developments near term just the continued evolution of the technology currently being used.
It's not a new game anymore. After six years, is the industry still exciting to you?
Yes. The thing I enjoy most is the dynamic nature of the industry. Customers continue driving it, wanting things faster and faster, and demanding more and more from their Internet technology. Our entire society is becoming more integrated. Because of the service we provide, people can reach others easier no matter where either party is located. In many ways, we improve quality of life; ISPs put us all together. And it adds to the thrill for us to be doing all of this in Sonoma County. We've been growing here for six years because of the support we have from the entire community. Seventy-five percent of new customers say they heard about us from someone else. That is our reward.
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