Dane Jasper is betting the future of his company on speed.
As president of Santa Rosa-based Sonic, Jasper plans to invest millions of dollars to provide customers with the next generation of Internet access for their homes and businesses.

He is betting customers will choose his blazing fast Internet connection over the service that his bigger and wealthier competitors -- Comcast and AT&T -- bundle with their TV and phone services.

Jasper's gamble is forced by a revolution in the equipment that feeds the Internet to customers, an expensive advancement that threatens to crush small ISPs such as Sonic.

"It is a strategy of survival," Jasper said.

The first hit to Sonic and other small Internet providers comes from the biggest technology shift in Internet access since broadband replaced dial-up about 10 years ago. The big players such as Comcast, AT&T and Verizon are beginning to install a new delivery system that provides both digital TV service and faster Internet access.

At the same time, changes in federal regulations mean telephone companies do not have to allow the small players such as Sonic to piggyback on key equipment that delivers this next generation of access into customer's homes.

Sonic and other small ISPs are in danger of being boxed out of the Internet's future.

So Jasper plans to roll out his own equipment, providing residential Internet access at speeds of up to 24 Mbps -- nearly four times the speed of what Comcast and AT&T currently offer on their next-generation equipment. And he plans to offer that service not only to some of its 32,000 customers, but also to other small ISPs across the state. These other ISPs will be able to buy wholesale access from Sonic, replacing AT&T's traditional role.

ISPs left to own devices

For years, federal law guaranteed small Internet providers, which do not actually own the data lines that go into customers' homes, the right to buy that access at wholesale prices from telephone companies. But the Federal Communications Commission essentially removed that guaranteed wholesale access during the past three years in a series of controversial policy shifts.

Now ISPs are left to their own devices to gain access to next generation technology such as AT&T's U-verse and Comcast's high-speed cable lines, which are being installed or upgraded in Santa Rosa and several other Sonoma County cities and across the nation.

AT&T is the nation's largest phone company, controlling more than half the telephone and Internet access lines in the United States. Most analysts say major players such as AT&T have little incentive to provide access to their next-generation equipment.

AT&T has not decided what it will do, said Ted Carr, a spokesman for the Texas-based telephone company.

Sonic has been trying to get that question answered for more than a year, Jasper said. It pays AT&T about $4.5 million of its annual $14.5 million in revenue for access to the current generation of DSL equipment.

Sonic can't wait any longer to find out if it can use the next-generation equipment, Jasper said. Nor does he think AT&T will provide it. And that is why Sonic is moving forward to install its own equipment.

Becoming phone utility

Perhaps even worse for Sonic was another rule change by the FCC. In three years, telephone companies can cut off additional access to the current-generation DSL equipment altogether, Jasper said. And if telephone companies cut off that access, small ISPs will be sunk.

"DSL today is 67 percent of our business, and we wouldn't have the ability to grow that segment. As there is churn of around 2 percent each month, eventually it would cripple us," Jasper said.

Faced with a prolonged death spiral, Sonic applied for the right and legally became a telephone utility in California late last year, allowing it to install its own Internet equipment in cities across the state.

Sonic plans to first deploy and test this Internet hardware in Santa Rosa starting sometime this fall or winter, Jasper said.

"We have to experiment with all that stuff. And we have to try," he said. "It is also a strategy of innovation."

Exact speeds and prices have not been determined, he said.

Equipping Santa Rosa

Santa Rosa likely will become one of the only U.S. cities of its size to have so many high-speed Internet options.

"What Dane is doing puts his ISP in a leadership position," said Alex Goldman, managing editor of ISP-Planet, a trade publication covering the industry. "What people will be able to get at home will be almost as good as what they can get at work."

Even in its hometown of Santa Rosa, Sonic will be limited by how many customers its service reaches. The company will need to install hardware in AT&T's main equipment building -- known as a central office. From there the signal will flow out to subscribers on copper lines, which AT&T is still required to provide access to. But data transmission along copper lines can travel only so far before it begins to degrade and the speed of the Internet access slows. Only customers within about one mile of the downtown central office in Santa Rosa will be able to access the full 24 Mbps service.

AT&T, which faces the same problem, is running fiber-optic lines from the central office to Santa Rosa neighborhoods to deliver its U-verse service. At some point in the future, Sonic might do the same thing, Jasper said.

Still, Sonic's immediate plans will allow it to deliver some form of broadband Internet -- albeit slower -- to people on the outskirts of Santa Rosa that currently don't have any DSL access, Jasper said.

"You can go to places that have no broadband access now, and push 384 Kbps or 768 Kbps to them," he said.

After testing the equipment in Santa Rosa, Sonic plans to expand to other Sonoma County cities including Sebastopol, Petaluma, Windsor and Healdsburg. Other cities, such as Rohnert Park, will not get the service because its central office is too far from the core of its residents, Jasper said.

Sonic also plans to move into San Francisco, installing equipment in all of the city's nine central offices. Because San Francisco has so many central offices, nearly all of its residents will be able to receive the fastest tier of Sonic's service, Jasper said.

"San Francisco is an exciting market for us," he added.

Wi-fi costly, less reliable

Other companies, which like Sonic do not own the infrastructure that carries the Internet into customers' homes, are testing different strategies to stay alive. The largest of these companies, Atlanta-based Earthlink, is betting largely on Wi-fi broadband networks, such as the one it is installing in San Francisco with partner Google.

"Earthlink is aggressively going after Wi-fi," said Michael Arden, principal analyst with research company ABI Research, based in New York. "They are trying to create their own network using wireless."

But Wi-fi is proving costly and less reliable than DSL, Jasper said. Wi-fi delivers broadband access on unregulated radio waves, which are prone to interference. So Sonic is pinning its hopes on the next generation of DSL -- the same or similar technology AT&T is using to deliver its U-verse service.

Unlike AT&T's U-verse service, which is allocating some of its bandwidth to send TV services to subscribers, Sonic will reserve nearly all its pipe to deliver the fastest Internet access it can, and reserve a small portion for phone service.

Sonic faces several hurdles. It has limited customer reach in cities because of the technical limitations of using copper wires and faces the expensive prospect of deploying its own fiber-optic lines.

The big players such as Comcast, AT&T and Verizon continue to crank up their Internet access speeds. In Southern California, Verizon is running fiber-optic lines directly to homes, which allows for extremely fast Internet. And cable companies in large cities such as New York are already delivering residential access at speeds up to 50 Mbps, with technology on the horizon that offers even faster access.

In these markets, Sonic might not be able to compete. But in the Santa Rosa, Bakersfield and Chico cities of the nation, it hopes to establish loyal customers and competitive networks.

And if its California deployment proves successful, Sonic has its sights set on Nevada and Texas, Jasper said.

"It's all steps along the path," he said.

You can reach Staff Writer Nathan Halverson at 521-5494 or nathan.halverson@pressdemocrat.com.;