What’s a Home Without a Hookup?

ASHBURN, Va. — The quest for high-speed Internet access has frustrated millions of Americans who have found the service hard to come by from traditional suppliers--telephone and cable companies.

But like a growing number of people who have bought new homes recently, computer consultant Jerry Kessenich got high-speed access a relatively painless way: It came with the house he and his wife, Jerrie, bought in a private, gated community called Belmont Country Club in February.

“I had heard the horror stories” about high-speed Internet installations, said Kessenich, who relies on his connection to do consulting work for the federal government from home. “But this was a no-pain operation. The broad-band guy came in and did his thing. If I were in the market for another new house, this is something I’d look for.”

Chances are, he wouldn’t have to search long.

Across the country, more than half of the nation’s largest home builders are wiring new houses not only for electricity and telephones but also for cable and, most recently, high-speed Internet access.

“High-speed Internet service is very much sought after,” said Randall W. Lewis, a former California home builder who is executive vice president of the Lewis Operating Corp., which develops apartment buildings and commercial property. “It’s almost become as desirable as standard fixtures like carpet or dishwashers.”

The trend is being fueled in large part by the 17 million telecommuters--such as Kessenich--clamoring for faster Internet connections to ease working from home.

Nearly 12 million home users surfed the Web with a high-speed connection in December 2000, compared with 5 million during the same period a year earlier, according to NetRatings Inc. of Milpitas, Calif. The consumer demand has motivated builders to provide telephone and cable companies with some unusual new competition in creating faster pathways to cyberspace.

The popularity of high-speed Internet connections is also helping home builders forget a disastrous flirtation with high tech 15 years ago, when the industry failed to interest consumers in costly computer-controlled “smart homes” that could automatically turn off the lights, set the burglar alarm and even brew a fresh pot of coffee.

“There’s a lot more interest in high-speed Internet access than smart homes,” said Gobal Ahluwalia, director of research at the National Assn. of Home Builders, which registered the name Smart House and helped oversee a model smart home in Maryland that showcased the technology.

Ahluwalia said an association survey conducted last year found that 10% of new homes were wired for Internet access. Ahluwalia said he expects that number to more than double to 25% in the next three years.

Indeed, John Lhee, a Woodbridge, Va., electrician who wired the association’s model smart home, said that while he has wired hundreds of homes for cable and high-speed Internet access, he’s wired only three smart homes in the last 15 years.

“Smart homes are only for people who have so much money they don’t know what to do with it,” Lhee said. “But 95% of American people understand the value of computers” and high-speed Internet access.

It’s not just consumer demand fueling the trend. Many home builders who traditionally considered that their relationship with the buyer ended with the sale, are intrigued by the prospect of a continuing revenue stream.

That became possible with the 1996 Telecommunications Act, which opened the door for new rivals to the Bell phone companies, such as SBC Communications Inc., Pacific Bell’s parent.

Simply by installing a few hundred dollars’ worth of wiring, many home builders find they can earn $1,000 annually in Internet access fees.

In an article published in January in a special advertising section of Builder magazine, for instance, Lightsource Telecom, a Cleveland-based rival to the Bell companies, disclosed that developers could earn $100,000 a year from 100 homes under the firm’s typical high-speed Internet access partnership agreement.

The lure of such profits has touched off a high-stakes cat-and-mouse game between builders and traditional telecommunications providers, which have grown fearful that developers could dominate the high-speed Internet access market.

Lightsource, for instance, has lowered its profile since being featured in the lengthy Builder article. The company, which is backed by a group of investors including KB Homes of Los Angeles, indicated it is wary of incurring the wrath of the powerful regional Bell phone companies, whose cooperation Lightsource needs to connect the company’s high-speed Internet lines with the public phone system.

Lightsource spokesman Mike Ziegler declined to discuss the company at all, saying, “We are at a very sensitive stage in our development, and our management just doesn’t think it would be the wisest thing to talk right now.”

Limiting the potential profits for builders in providing high-speed Internet access is how much consumers are willing to pay.

Many of the new home developments that offer the technology are private communities that subsidize all or part of the cost of high-speed Internet access in annual homeowner association fees.

At Belmont Country Club, for instance, everyone gets free basic Internet access at 128 kilobytes per second--roughly twice as fast as conventional computer modems. But only about 30% of residents have chosen to pay between $10 and $30 a month extra to get still faster speeds.

Michael Zammit, who oversees the Belmont Country Club computer network for the technology subsidiary of luxury home developer Toll Bros. Inc., says the 30% figure exceeds the home builder’s expectations.

But some experts are surprised that the response has not been greater in a community where homes sell for half a million dollars and many buyers work at dozens of nearby high-tech firms such as America Online, Cisco Corp. and PSINet.

“I would have thought the figure would be much higher,” said one Washington analyst, who declined to be identified because he does business with some of the firms that help builders wire homes for high-speed Internet access.

Still, dozens of builders and their telecommunications partners are forging ahead with new high-speed networks.

In partnership with Optical Solutions Inc., a Minneapolis communications company, Renar Homes is constructing a 4,500-acre project of 6,000 homes in Orlando that will give residents Internet access at more than 30 times the speed of digital-subscriber line (DSL) service--the fastest connection currently available using conventional telephone wires.

Similarly, Home Fed Corp. in Carlsbad, Calif., has installed three fiber-optic loops in a 1,920-acre community in San Diego with several technology partners. The system will give residents a state-of-the-art computer network with high-speed access to the Internet, as well as electronic links with local schools and an interactive community Web site.

“The traditional considerations, like the quality of schools, parks and architecture,” still sway most home-buying decisions, said Curt Noland, a Home Fed Corp. vice president. But more and more buyers “have come to expect high-speed Internet access,” he said, and builders are “at a competitive disadvantage not to offer it.”