Cable One, Inc. v. Arizona Department of Revenue
232 Ariz. 275
| Ariz. Ct. App. | 2013Background
- Arizona Department of Revenue centrally assesses telecommunications property under A.R.S. § 42-14401.
- Cable One operates nine Arizona cable systems offering cable, broadband, and VoIP starting in 2006.
- Department found Cable One’s VoIP service constituted telephone service for central assessment for 2010.
- Cable One challenged the decision; tax court ruled in Cable One’s favor, Department appealed.
- Arizona Supreme Court held Cable One is a telecommunications company under § 42-14401 and subject to central assessment, remanding for further proceedings.
- VoIP involves IP packet routing and Level 3 interconnection to convert IP to PSTN formats for external calls.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 42-14401's terms apply to VoIP providers | Cable One: facilities and access terms target PSTN; VoIP not telecom. | Department: statute applies to providers of telecommunications transmission facilities regardless of tech. | Cable One is a telecommunications company under § 42-14401. |
| Whether Cable One provides telecommunications exchange or inter-exchange access | Cable One’s VoIP is IP-based; relies on Level 3 for PSTN interconnection, not local/long-distance service. | Cable One provides local or long-distance access via its facilities and Level 3 for interconnection. | Cable One provides both local and inter-exchange access; qualifies under § 42-14401. |
| Whether communications transmission facilities include VoIP-related infrastructure | Facilities must interface with PSTN; VoIP uses IP within Cable One’s network, not PSTN. | Facilities function to transmit communications, not limited to PSTN; includes IP-based facilities. | Cable One’s headend, CMTS, and network constitute communications transmission facilities. |
| Whether the predominant use affects classification | Primary use is cable television, not VoIP; similarity to non-VoIP cable companies. | Classification focuses on function and product, not predominant use. | Predominant use is not controlling; VoIP service subjects Cable One to central assessment. |
| Whether uniformity or pari materia considerations affect classification | Uniformity concerns may distinguish VoIP subsidiaries from cable companies. | In pari materia analysis with excise taxes not controlling; statutes not aligned. | Statutory intent supports central assessment; not in pari materia with excise provisions. |
Key Cases Cited
- Mayor & City Council of Baltimore v. Vonage America Inc., 544 F.Supp.2d 458 (D.Md.2008) (VoIP provides telecommunications access; essential to service)
- Minn. Pub. Utils. Comm’n v. F.C.C., 483 F.3d 570 (8th Cir.2007) (VoIP regulatory context; distinguishes transmission types)
- United States v. American Tel. & Tel. Co., 552 F. Supp. 131 (D.D.C.1982) (AT&T divestiture background; exchange vs interexchange)
- Citizens Telecommunications Co. of White Mountains v. Ariz. Dep’t of Revenue, 206 Ariz. 33 (App.2003) (uniformity and classification considerations for telecom property)
- Vonage Holdings Corp. v. F.C.C., 489 F.3d 1232 (D.C.Cir.2007) (VoIP providers as telecommunications providers under federal law)
- U.S. West Commc’ns, Inc. v. Ariz. Dep't of Revenue, 193 Ariz. 319 (App.1998) (historical methods of valuing telecom property)
- Citizens Telecommunications Co. of White Mountains v. Ariz. Dep’t of Revenue, 206 Ariz. 33 (App.2003) (Uniform treatment under central assessment)