Would your long-distance carrier call to tell you they will be offering lower rates from now on? Just . . . because?
Sonic Telecom Ltd. president and CEO Todd Ruelle didn't think so. Such is the premise for his Chantilly-based telecom start-up, the telecommunications industry's first network to offer international bandwidth on demand.
"It's a custom solution," said Michael Maurer, co-founder and chief operating officer. "The fiber we use allows the customer to use as much as they want or as little as they want."
Sonic's innovation isn't so much in technology, but in how it's priced, a lesson learned from long-distance, banking, health care and a host of other industries that have undergone pricing revolutions in recent years.
Instead of the usual fixed-price network, Sonic customers will pay only for what they actually use. If a company has a video conference call, for example, it pays for the bands used during that call. When they make a regular telephone call, the company pays just for the single band used during the call.
And instead of being on three networks for different uses, Sonic provides just one network for everything.
"Companies can streamline their operations," said Santiago Testa, co-founder and vice president of marketing and communications.
The majority of Sonic's presence is in Europe, where there are fewer broadband companies with which to compete, Ruelle said.
"It made sense to focus on the international [companies] while others work on the U.S. [market]," he said. "Americans as a whole don't have a lot of information on foreign markets."
Sonic has switches -- the hubs through which its network is hard-wired -- in Amsterdam, Brussels, Frankfurt, London, New York and Paris. The company plans to expand in both switches and personnel throughout the United States in the fourth quarter of 1999.
"We rolled out in Europe to make our statement there, rather than come up against U.S. companies," said Jerry Stern, co-founder and executive vice president and chief technology officer.
Selling Sonic to multi-national companies will be a challenge, but company officials feel they have a step up on the market.
"We put up a network that fits their applications. He doesn't pay for band he doesn't need," Stern said. "Other [telecom companies] don't do that because they don't need to do it."
Michael J. Balhoff, managing director and head of the telecommunications group at Legg Mason Wood Walker, acknowledged that bandwidth on demand is unusual.
"By and large, people have been trying to sell large blocks of capacity. That is a much more efficient way to sell bandwidth," he said. "You have less administrative and marketing costs associated with those sales, so you're able to pass those savings on to [the customers] because you're selling in bulk."
The larger telecommunications companies that dominate the market do not need to and probably can't easily change from fixed billing to "on demand" billing, Stern said. "It would be a major effort for established companies to change their billing systems," he said.
Ruelle thinks Sonic's customer service is also going to give them a step up on the competition. Most telecom customers are held hostage, he said. "Companies tell them `here are our products, make your applications work around them.' "
Telecommunications companies, particularly aggressive start-ups, recently have used customer service to try to differentiate themselves from the other big companies, Balhoff said. For example, MCI offered more detailed bills, along with other perks, to win customers from AT&T, he said.
Sonic's strategy is to quietly shine in the background, waiting for the customer to notice its performance.
"We're not going to give everything to [the company] right away," Stern said. "The strategy for us is to get into some accounts as backup."
Backup systems are less expensive than the full-time, fixed-price systems. Sonic hopes to move in as a secondary system and impress its customers, who in turn will want Sonic to be their full-time system. Once Sonic is in the door, Stern said, "we're convinced we'll take over that account."
The company's founders were not always that confident.
The seeds of Sonic germinated about two years ago, when Ruelle had the idea for the company. He called Stern, who was more than a little skeptical of the plan, but "after a bottle of wine," they started writing a business plan.
The co-founders, all previously executives in the telecom industry, used $300,000 out of their own pockets to get Sonic started. They eventually attracted 29 private investors with a history of funding start-ups such as theirs. Viatel International Inc. and General DataComm are strategic partners, and Viatel is an equity holder.
Sonic, which opened its doors the first week in July, declined to release its sales figures. But Ruelle said things have gone more smoothly than he expected and that sales are right on target. "We hit a few bumps along the way, but we haven't hit that ditch."
"The best time to launch a business is when there is chaos [in the industry]," Ruelle said. "Telecom companies are eating each other right now. We feed on the crumbs."
A Look at . . .
Founded: July 1999
Competitors: Any major telecommunications company, such as AT&T Corp.
Number of co-founders: six
Number of employees: nine
Market: Multinational companies, including tech, manufacturing, entertainment, financial and government companies.