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The Texas Supreme Court has for the second time refused to hear a case in which an appeals court confirmed that the Texas Building Access Statutes are constitutional, which was a big win for the state's telecom carriers.  The contentious issue stems from a dispute between property owner and Time Warner Telecom, Inc., regarding how much Time Warner Telecom should be required to pay for access to the property.

When the dispute began, 10 telecom carriers had access to the property in exchange for monthly payments ranging from $450 to $1,000.  Time Warner Telecom offered $208.03 per month, but the offer was rejected by the property owner, which prompted Time Warner Telecom to bring the matter to the Texas Public Utility Commission. 

Before the PUC ruled, the Texas Building Owners and Managers Association, Inc., filed a lawsuit seeking a declaratory judgment that the state's statutes were facially unconstitutional because they resulted in a "taking" of property without adequate compensation.  Based on this alleged unconstitutionality, the association sought to enjoin the PUC from enforcing the statutes.

Although the issue is still before the PUC, a district court and state appeals court have sided with Time Warner Telecom in upholding carriers' rights in negotiating service rates.  In its June 2003 opinion, the Texas Court of Appeals, Third District (Austin) wrote that its decision "recognizes the important role that the building access
statutes play in achieving the state's policy objective to transition from traditional telecommunications regulation to a competitive marketplace."

Without the rules, a property owner could prevent access to a building or decide which service providers could access tenants, the court said.  The court agreed with the PUC's characterization of this lawsuit "as an
unsuccessful 'attempt to self-inflict a denial of due process.'"

Feature Article, July, 2003*


"Where Do We Go From Here?"

The Impact of Texas Building Access Appeals Court Decision on
Commercial Multi-Tenant Building Owners

By Manuel Fishman, Esq.*

Texas has, by statute, adopted a public policy of promoting diversity among telecommunications providers, encouraging competition in the telecommunications marketplace and maintaining wide availability of high quality affordable telecommunications services (see Tex. Util. Code Ann.§51.001(b)). In furtherance of this public policy, Texas law provides that a property owner may not prevent a licensed telecommunications company “from installing on the owner’s property a telecommunications service facility [that] a tenant requests,” and may not discriminate against such telecommunications company on matters relating to “installation, terms or compensation” of such a facility (see Tex. Util. Code Ann. §54.259(a)).  This law, referred to as the Texas Building Access Statute, requires that property owners suffer a physical occupation of space in their buildings by telecommunications carriers.  That is a governmental “taking” that is only permitted with “just compensation” (United States Constitution, Amendment V).

With this background, it is not difficult to understand the uphill fight BOMA International and Texas BOMA faced when one of its member buildings in Houston, the Geoquest Center, was confronted with a demand by Time Warner Telecom to allow coring and building penetrations in order for the provider to service a single building tenant.  The record in the case indicates that at the time of the tenant request the building was already being served by 10 other telecommunications providers, each of whom had reached agreement on the terms of an access agreement, and was paying a negotiated access fee.  Time Warner offered to pay an access fee that was at least 50% below that which any of the other providers serving the building were paying for building access, and the parties could not agree on the terms of an access agreement.  Time Warner filed a complaint with the Texas Public Utility Commission seeking immediate forced access to the property.  Rather than submit to the Commission’s jurisdiction, Texas BOMA and BOMA International filed suit against the Commission seeking to declare the Texas Building Access Statute unconstitutional because it mandates a taking of property without providing just compensation.  The trial court upheld the constitutionality of the statute in May 2002, and on June 5, 2003, the Texas Court of Appeals issued a written opinion that takes away some of the property rights of commercial landowners and holds that, as written (or as lawyers say “facially”), the Texas Building Access Statute is not unconstitutional.1

When your State legislature enacts legislation that authorizes a taking of private property by any licensed telecommunications provider when a tenant requests service, and when the State Public Utility Commission charged with enforcing this law promulgates rules that require a telecommunications company to only pay “reasonable” and “nondiscriminatory” compensation for access, the ground rules by which commercial property owners are forced to challenge the deprivation of use and control of their property is not “a level playing field.”  The BOMA entities lost their appeal at the intermediate level, in part, because the unlevel playing field created by the Texas statutory framework led the court to frame the question on appeal as one of whether a property owner “could prevent tenant choice between telecommunications providers” and “impose difficult and expensive conditions” on access by providers.  Had the issue been framed, as it was in the Massachusetts forced access decision (decided in 2001), as to whether the challenged regulations “authorize telecommunications carriers to use and to obtain a profit from a private landowner’s property” while depriving property owners from “a voluntarily negotiated profit” from their space, the debate might have been more balanced.

The appellate court’s decision contains an unremarkable discussion of case law relating to whether the Texas legislature had the authority to delegate to the Public Utility Commission the authority to determine “reasonable” and “nondiscriminatory” compensation, and whether Texas’ Building Access Statute establishes sufficient standards to guide the Commission in making its determination concerning “reasonable” and “non-discriminatory” compensation.  Given the judicial rule that appellate courts should interpret the language of a statute to uphold its constitutionality, if possible, rather than finding a statute “as written” to be unconstitutional, the court’s conclusion that the statute was not unconstitutional, as written, was predictable.  In the words of the court: “This Court has little doubt that the legislature intended that the policy of competition would impact the Building Owners’ property rights in specific situations; however the legislature designed the Statutes to balance the forces of competition and consumer choice with the rights of property owners to be compensated in the event of a taking.” 

Texas BOMA and BOMA International are appealing the decision to the Texas Supreme Court, but review by the high court is discretionary.  If the Texas Supreme Court decides not to accept review of the appellate decision, the current decision will be a final decision.  A decision by the Texas Supreme Court on BOMA’s petition for review is not expected until September 2003.  If the court accepts review, numerous building industry and telecommunications industry organizations can be expected to file “friend of the Court” briefs, and the case will assume national precedent setting importance.  In the interim, the BOMA entities are pursuing their arguments at the Public Utility Commission level, and may have to go through the process of having the Commission determine what it believes is reasonable and non-discriminatory compensation, and then challenge the statute based on the constitutional inadequacy of the Commission’s determination. 

What can commercial property owners learn from the intermediate appellate court’s decision?

●  Property owners are losing their case in the court of public opinion.  The decision of the Court of Appeals adopts the rhetoric of Time Warner that without the Texas Building Access Statute building owners can “prevent tenant choice,” “demand high fees of the provider,” and impose “difficult and expensive conditions” on tenants and providers.  No voice was heard to argue that successful commercial property owners are in the business of maximizing tenant choice.  The Geocenter project had 10 providers in its building, all of whom had reached voluntary agreements with the property manager.  A building that does not service its tenants’ telecommunications needs is providing below standard property management and loses tenants.  Tenants exercise their choice every day in selecting which buildings to move to or to stay at, and landlords compete for tenants based on building services, including telecommunications services.

●  There needs to be some sense of outrage over the trampling of private property rights by the court.  The court reaches the illogical conclusion that a State public policy of promoting facilities-based competition among telecommunications providers can be accomplished by mandating that commercial buildings provide “serviced” space in their buildings so telecommunications companies can “invest in equipment” to provide services to “a dense customer base.”  The court appears to believe that it is acceptable to advance public policy by having building owners subsidize telecommunications service providers’ profits.  This decision does not advance “consumer choice,” it advances the profits of certain profit based companies that can selectively elect to provide service when and to whom they choose.

●  The determination of what a building owner can charge a telecommunications provider for the occupancy of space is not something that is based on “nondiscriminatory” compensation, it is based on “market based” considerations, including location, building services and tenant mix.  The court’s analysis of the constitutionality of the Texas legislature’s delegation of authority to an administrative agency to determine “just” compensation, and the infirmity of the statutory compensation scheme needs to be examined by the Texas Supreme Court.

Perhaps the final lesson to be learned from this decision is that commercial property owners need to redouble their efforts to upgrade building infrastructure and to be proactive in providing multiple, neutral, facilities-based pathways in their buildings for telecommunications service providers to connect to for service to building tenants.  This Texas case should serve as a wake-up call for building owners to allocate funds for upgrading building infrastructure to support land line and wireless high speed voice and data communications.  The level of cost sharing between the building owner and the provider is something that should be subject to market-based negotiations, but the building owner needs to bring something to the party – other than mere “access”.  The reason building owners serve as an easy lightning rod in the broadband battle, is that buildings are constructed to be occupied for 50 years, and 50 years ago was a different world in the area of information technology.  Building owners need to lobby State legislatures and convince these bodies that the industry can self regulate their technology assets, and thereby avoid the expensive battle that has ensued in Texas.    

*CRE Partners is not responsible for the content, validity, technical accuracy or other claims or information contained in this article.  Feature Articles are often authored by outside sources and do not necessarily reflect the views or opinions of CRE Partners.  Further, publication of articles in the CRE Partners Newsletter and/or web site is not meant to represent, promote, or endorse any company, brand, product or solution.