Last month, I attended NAHB’s midyear meeting in Miami and had the pleasure of sitting in on a presentation by Daniel Swift, president and CEO of Des Moines-based architecture group BSB Design.
Movers and Shakers: Estridge Pioneers 'First Mile'
When we look back at the turn of the millennium from the perspective of a few years, we may count Paul Estridge Jr. as a personal giant in the history of the housing industry: the father of 'the first mile.'
|"We own that moment when people disconnect from the old and reboot into the new." - Estridge Cos. president Paul Estridge Jr.
When we look back at the turn of the millennium from the perspective of a few years, we may count Paul Estridge Jr. as a personal giant in the history of the housing industry: the father of "the first mile."
The CEO of Indianapolis’ The Estridge Cos. is busy right now, proving that builders and developers, as land owners, own the technology rights to what the New Economy calls "the last mile," the actual connection of voice, video and data services to the houses this industry builds. "We call it the first mile, because we have a little different perspective," Estridge says with a laugh.
The Estridge Cos. ranks 146th in this year’s Giants report, with 450 homes closed in 1999 for just under $100 million, but it may have the most significant single housing development in the country. "Centennial" is a 350-acre, 900-home community on the outskirts of Indianapolis that Estridge calls "a Hoosier TND," a Middle America version of the New Urbanism:
"It has a church at the center that we built on spec," says Estridge. "It has a business district with a supermarket and a lot of local service businesses. We have a townhouse section, and five single-family product lines scattered through little villages. There are no alleys, but a lot of the houses have hook-in garages, where the driveway goes down the side of the lot and hooks into a garage attached at the rear of the home. Prices run $115,000 to almost $300,000. We’ve sold 125 houses since last June, and closed about 60."
It also has all phone, electricity, gas, cable TV, and internet connection services provided via contracts negotiated by First Mile Technologies, Estridge’s breakthrough application of his right to control access of providers of those services to his customers.
"The deregulation of energy stirred my thoughts that we, as builders, are in a position to aggregate our customers, so that when they buy a home, they could be buying an energy package as well. We can get a better deal for our customers by pulling together that aggregation," says Estridge.
"That brought into focus a critical point: the "reboot phenomena," that when people move to a new house, they disconnect from their old life and "reboot" in a new one. Beyond any other industry, we control that step-by-step reconnection to service providers like local telephone, long distance, cable TV, etc.
"Our customers don’t shop at the same mall anymore. Their kids go to new schools. We own that moment in time," says Estridge. "It’s an advantage we have over AT&T, Yahoo, and AOL. Our customers are predisposed to accept all new connections. We own the last mile and we’ve been giving it away."
Estridge launched an extensive legal search. What he found confirmed his belief that builders’ rights to the last mile, as land owners, are unassailable. "Most builders believe that public utilities hold the right to immediately come onto our property and take our customers, but they can’t do it unless we grant them a public easement, or the courts take the property through condemnation. The only reason the courts ever do that is to provide last-resort access to utility services for a customer," says Estridge.
Through careful contract language, builders can protect their rights, says Estridge. "We can retain those easements indefinitely, and charge an access fee. It’s just like mineral rights; these are technology rights. It’s protected under the U.S. Constitution, property rights, and contract law precedent."
Indiana is still a regulated state for gas and electric utilities, so those services are not included in First Mile’s portfolio at Centennial. But as all the states play follow-the-leader on deregulation, Estridge looks forward to adding those basic utilities in future projects.
In the meantime, he believes the 1996 Telecommunications Act, which broke the monopoly of the Baby Bells on local telephone service, and established the rights of "competitive local exchange carriers," transforms the housing industry into the critical player in the last mile. "It’s ironclad," he says. "We can negotiate contracts for access to the customers we are creating."
However, Estridge is just as convinced that builders should not get into those businesses themselves. "A home builder can’t be a telephone company and be respected by consumers for being in that business. It’s vital for us to partner with acknowledged experts."
Estridge partnered with Nortel Networks. "We developed a whole technology design and deployed it in Centennial. We are providing local phone service, long distance, cable TV, internet access, and we’re now rolling out video-on-demand services, with 2000 movies available in 30 seconds, ordered right off the computer. We also handle security monitoring for all the homes, and we have an intranet service that provides local news, weather, and e-commerce shopping connections."
First Mile provides mind-boggling speed in internet connections, the equivalent of T-1 service, 1.5 megabytes per second. "We do a sample connection that takes 80 seconds on a 56k modem. It takes less than 3 seconds on our’s," says Estridge.
First Mile is also providing a key new appliance for the home: a "web phone," located in the kitchen. It’s a combination of telephone and viewing screen that is constantly connected to the intranet. At a touch, it provides local news, weather, and intranet connections with no computer boot-up.
Estridge believes the future of First Mile is unlimited. "The proof is in AOL’s purchase of Time Warner," he says. "The hidden reason for that deal is that Time Warner has 17 million subscriber connections. Without them, AOL is just another dot-com. You can see how valuable they think those connections are."
Also See Movers and Shakers:
Lennar Redefines Bigness
Spectrum Skanska Hits Highest Price Point
Regis Homes Ups Ante On Quality
Morrison Leads The Charge To TND
Newmark Has New Model For Growth In Roaring 2000s
Brookfield Has Steely Resolve
Crossman: Quiet, But Profitable
ALH: Private Acquisitor Rising