IN THE SUPREME COURT OF IOWA

No. 13–0925

Filed December 19, 2014

COURTNEY M. KAY-DECKER, Director, Iowa Department of Revenue,

Appellant,

vs.

IOWA STATE BOARD OF TAX REVIEW and CABLE ONE, INC.,

Appellees.

Appeal from the Iowa District Court for Polk County, Michael D. 

Huppert, Judge.

The director of the department of revenue appeals a district court 

ruling affirming a decision of the board of tax review that a company 

providing voice over internet protocol telephone service was not subject 

to central assessment for property tax purposes. JUDGMENT 

REVERSED AND CASE REMANDED WITH INSTRUCTIONS.

Thomas J. Miller, Attorney General, Donald D. Stanley Jr., Special 

Assistant Attorney General, and James D. Miller, Assistant Attorney 

General, for appellant.

Bryan S. Witherwax of Witherwax Law, P.C., West Des Moines, for 

appellee Iowa State Board of Tax Review.
2

Chérie R. Kiser of Cahill Gordon & Reindel, LLP, Washington, D.C., 

and Christopher E. James of Davis, Brown, Koehn, Shors & Roberts, 

P.C., Des Moines, for appellee Cable One, Inc.
3

MANSFIELD, Justice.

This administrative review proceeding requires us to decide 

whether a company providing Voice over Internet Protocol (VoIP) service

on cable wires in Iowa is subject to central assessment as a “telephone 

company operating a line in this state” or, otherwise stated, a company 

“that . . . operates . . . any . . . telephone line.” Iowa Code §§ 433.1, .12

(2007). In making this determination, we consider both the language of 

the statute and how it has been historically interpreted. Based on that 

review, we conclude that wiring installed originally for cable television 

purposes but now also used to provide VoIP service is, indeed, a

“telephone line.” Therefore, the company operating these lines is subject 

to central assessment for property tax purposes as a telephone company. 

We also reject the company’s alternative arguments that the primary use 

test prevents it from being assessed as an operator of telephone lines and 

that federal law preempts state taxation of VoIP providers as telephone 

companies. For these reasons, we reverse the judgment of the district 

court and remand for further proceedings consistent with this opinion.

I. Background Facts and Proceedings.

Cable One, Inc. is an Arizona-based company operating in nineteen 

states, including Iowa. In the Sioux City area, it offers cable television, 

internet access, and VoIP, the subject of the present dispute.

VoIP is a service that enables two-way voice communications over 

a broadband Internet connection. Cable One’s VoIP service is “fixed,”

meaning, as with a traditional landline, the customer must make the call

from a telephone permanently located in his or her residence. This is in 

contrast to “nomadic” VoIP, in which the customer is free to make the 

call from any location, much like a cellular telephone.
4

With both Cable One’s VoIP and traditional landline telephone

service, the customer dials a seven- or ten-digit phone number from his 

or her home telephone and is connected to a person on the receiving end. 

Both VoIP and traditional phone service offer features such as voicemail, 

caller ID, call waiting, call transfer, call blocking, and conference calling. 

Cable One’s VoIP service is “interconnected,” meaning its customers can 

send and receive calls to customers of other telephone companies, not 

just to and from other Cable One subscribers.

The difference between Cable One’s VoIP and traditional phone 

service lies in the manner by which the voice signal is initially

transmitted. With traditional telephone service, the voice call travels 

from the customer’s phone to the telephone company’s central office via a 

closed circuit of copper wire lines. More recently, fiber optic cables have 

been replacing these traditional copper cables. At the central office, the 

company has a switch to connect the caller to the public switched 

telephone network (PSTN) (unless the call is merely going to another 

customer served by the same central office).

Traditional telephone service is provided by a variety of carriers. 

Traditional telephone companies frequently “hand off” calls to other 

providers so they can reach their final destination. Traditional telephone 

service also can involve transmissions over wireless microwave systems, 

in addition to copper wire and fiber optic cable.

With VoIP, Cable One utilizes its combination of fiber and coaxial 

cable, the same system over which its cable television and internet 

services are deployed, to provide the first leg of its telephone service.1 

1Coaxial cable is “a transmission line that consists of a tube of electrically 

conducting material surrounding a central conductor held in place by insulators and 

 
5

Thus, a caller places a call from his or her residence using his or her

preexisting corded or cordless telephone. An embedded multimedia 

terminal adaptor (EMTA) unit then translates the voice communication 

into the data format necessary to transmit the signal over Cable One’s 

network. The call proceeds in data packets along the coaxial cable that 

runs into and out of the customer’s home. It continues on coaxial cable 

until it gets to a “node,” whereupon it travels on fiber optic cable until it 

reaches a “headend,” a station owned by Cable One. From the headend, 

Cable One can transmit the call directly to another Cable One customer 

in the Sioux City area over its hybrid fiber–coaxial network.

However, if the caller is attempting to reach someone who is not a 

Cable One telephone customer in the Sioux City area, the data packets 

are transferred to a third-party company, Level 3, that translates them

into a different format so they can be sent over the PSTN. Thereafter, the 

voice signals proceed over the PSTN in the same manner as other 

telephone calls.

A Cable One customer can also receive a call originating from 

outside Cable One’s Sioux City network. In that case, the system works 

in reverse with the outside caller placing the call with his or her serviceprovider that transmits the call over the PSTN, ending with Level 3 

transmitting the signal to Cable One for conversion and delivery to its

customer via the hybrid fiber-coaxial cable network.

VoIP is complementary to preexisting telephone service because it 

permits companies like Cable One to expand access to the PSTN without 

having to install dedicated copper wire or fiber optic connections. Fixed 

that is used to transmit telegraph, telephone, and television signals.” MerriamWebster’s Collegiate Dictionary 237 (11th ed. 2003).

 
6

VoIP of the type Cable One offers is generally of high quality due to the 

fact its calls are transmitted over physical lines just like traditional 

landline calls. In contrast, wireless providers that transmit signals via 

satellite frequently experience lower call quality than servicers using

wired connections.

In mid-2006, Cable One began offering VoIP service to its 

residential customers in the Sioux City area, including parts of Plymouth

and Woodbury Counties. It provided a brochure to its subscribers 

entitled “Your New Cable ONE Phone Service.” This stated that Cable 

One’s VoIP service would operate in a similar manner to landline 

services, with the same processes for dialing numbers, operating caller 

ID, enabling three-way calling, and receiving voicemails. A new 

subscriber of Cable One’s VoIP service would be able to transfer her or 

his existing home telephone number to the new Cable One service and 

could purchase Cable One’s VoIP without also buying broadband internet

or cable television services.

The Iowa Department of Revenue became aware of Cable One’s 

VoIP operations and, on November 12, 2008, issued a notice of 

assessment based on its authority to tax telephone property under Iowa 

Code chapter 433. See Iowa Code §§ 433.1, .4. The Department 

determined that Cable One should be assessed based on the January 1, 

2008 value of its telephone operating property in the state, which it 

determined to be $671,000. Cable One appealed the notice of 

assessment to the Iowa State Board of Tax Review, claiming it was not a

telephone company subject to taxation under chapter 433 because VoIP 

is not the equivalent of telephone service.

In October of 2009, the Department sent Cable One another notice 

of assessment under chapter 433 for the ensuing tax year. This time it 
7

valued Cable One’s telephone operating property at $830,000 as of 

January 1, 2009. Cable One again appealed the assessment and the 

appeals were combined and transferred to an administrative law judge in 

the Iowa Department of Inspections and Appeals for a contested case 

hearing.

Iowa Code chapter 433 is entitled “Telegraph and Telephone 

Companies Tax.” It reads, in relevant part, as follows:

433.1 Statement required.

Every telegraph and telephone company operating a 

line in this state shall, on or before the first day of May in 

each year, furnish to the director of revenue a statement 

verified by its president or secretary showing:

1. The total number of miles owned, operated, or 

leased within the state, with a separate showing of the 

number leased.

2. The average number of poles per mile, and the 

whole number of poles on its lines in this state.

3. The total number of miles in each separate line or 

division thereof, also the average number of separate wires 

thereon.

. . . .

6. The gross receipts and operating expenses of said 

company for the year ending December 31 next preceding, 

on business originating and terminating in this state.

. . . .

8. The total capital stock of said company.

. . . .

11. All real estate and other property owned by such 

company and subject to local taxation within this state.

12. The specific real estate, together with the 

permanent improvements thereon, owned by such company 

and situated outside this state and taxed as other real estate 

in the state where located . . . .
8

13. All mortgages upon the whole or any part of its 

property, together with the dates and amounts thereof.

14. The total length of the lines of said company.

15. The total length of the lines of said company 

outside this state.

. . . .

433.4 Assessment.

The director of revenue shall on the second Monday in 

July of each year, proceed to find the actual value of the 

property of these companies in this state, taking into 

consideration the information obtained from the statements 

required, and any further information the director can 

obtain, using the same as a means for determining the 

actual cash value of the property of these companies within 

this state. The director shall also take into consideration the 

valuation of all property of these companies, including 

franchises and the use of the property in connection with 

lines outside the state, and making these deductions as may 

be necessary on account of extra value of property outside 

the state as compared with the value of property in the state, 

in order that the actual cash value of the property of the 

company within this state may be ascertained. The 

assessment shall include all property of every kind and 

character whatsoever, real, personal, or mixed, used by the 

companies in the transaction of telegraph and telephone 

business; and the property so included in the assessment 

shall not be taxed in any other manner than as provided in 

this chapter.

. . . .

433.12 Definitions.

. . . .

“Company” as used in this chapter means any person, 

copartnership, association, corporation, or syndicate that 

owns or operates, or is engaged in operating, any telegraph 

or telephone line, whether formed or organized under the 

laws of this state or elsewhere. “Company” includes a city 

that owns or operates a municipal utility providing local 

exchange services pursuant to chapter 476.

Id. ch. 433.
9

Both parties moved for summary judgment, and the ALJ issued a 

proposed decision on June 24, 2011, to enter judgment in Cable One’s 

favor. The ALJ stated,

Cable One does not fit the historical context of a 

“telephone company.” Cable One built its network of cable 

in order to provide cable television services. It is undisputed 

that Cable One’s network of cable lines was not subject to 

chapter 433 prior to offering telephone services in the second 

quarter of 2006. Cable One has been subject to property tax 

and locally assessed since the time it began operation in 

Iowa. Cable One has not built a second system of cable or 

wires to offer telephone services — rather, it is offering 

telephone services on the same cable network it uses to offer 

television services. Cable One has only connected with the 

PSTN by contracting with Level Three. Level Three is a 

telephone company that is subject to chapter 433.

(Footnote omitted.)

The ALJ went on to conclude,

The [D]epartment spent considerable time and effort in 

its brief trying to convince me that Cable One’s phone service 

is not fundamentally different than phone services provided 

by traditional telephone companies. I do not disagree with 

that point, but believe that the point misses the mark. I 

agree that, no matter what technology is used, Cable One 

offers a service by which its customers talk [to] others by 

telephone. Traditional telephone companies have used 

different and enhanced technologies to provide services over 

the years, but the nature of [a] telephone call has not really 

changed. Cable One is similarly offering a telephone service, 

even though its technology is different. Notwithstanding this 

finding, the focus of the statute is whether Cable One is a 

“telephone company,” as that term is used in chapter 433. 

For reasons stated above, I find it is not.

The Department appealed the proposed decision to the Iowa State 

Board of Tax Review. On its review, the Board agreed with the ALJ that 

Cable One was not subject to assessment under chapter 433:

In considering both the Department and Cable One’s 

arguments, the Board analyzed the applicable case law 

provided by both parties. The Board determined that unlike 

the telegraph and telephone cases that had been previously 

litigated, there is such a substantial difference between 
10

traditional telephone and VoIP that Iowa precedent allowing 

for the inclusion of emerging technologies into existing law 

could not be properly applied in this instance. The Board 

concluded that the service provided by Cable One is 

sufficiently distinct from the phone services described in 

§ 433 that it cannot properly be taxed under the existing law 

as written. The Board agrees with Cable One that the 

language of § 433 is too narrowly written to impose a tax on 

their VoIP service.

The Board also stated the primary use test would apply to 

determine the manner of assessment even if Cable One were subject to 

taxation as a telephone company. The Board further declined to find

that federal law preempted taxation of VoIP service.

The Department petitioned for judicial review of the Board’s order. 

After a hearing, the Polk County District Court issued a ruling on May 9, 

2013, affirming the Board’s decision. The court stated,

In this case, the intent of the legislature as to what 

constitutes a telephone company is clear: it requires that 

whatever entity is in question own or operate, or be engaged 

in the operation of, a telephone line. It is undisputed on this 

record that Cable One undertakes none of these required 

activities. The provision of the services in question is not 

through a network of lines, but rather through a cable 

broadband network which is completely independent of the 

PSTN. This distinction is best highlighted by the fact that 

Cable One must contract with a third-party in order to 

connect to the PSTN. Based on a plain reading of §433.12[]

and the undisputed record before this court, Cable One does 

not come within the statutory classification of a “telephone 

company” for purposes of the assessments in question.

. . . .

The Department has repeatedly urged that Cable One 

is subject to taxation as a telephone company because it 

provides a “telephone service.” As the Board concluded, that 

fact is essentially undisputed, but irrelevant. The legislature 

has chosen to classify what a telephone company is not by 

reference to the services it provides, but the infrastructure 

through which those services are provided. Had the 

legislature chosen to use such a service-focused 

methodology in the classification of telephone companies, 

the Department’s argument would most likely have merit. 

Based on the unambiguous wording of chapter 433, 
11

however, the Department’s argument is lacking; any relief 

consistent with its position on assessment as applied to the 

present case should be directed to the legislative rather than 

the judicial branch.

(Citation omitted.)

Having found that chapter 433 did not apply to Cable One, the 

district court declined to rule on the whether the primary use test would 

control the manner of assessment and whether the taxation of VoIP was 

federally preempted.2 The Department timely appealed to this court. We 

retained the case.

II. Standard of Review.

Judicial review of agency decisions is governed by Iowa Code 

section 17A.19. Naumann v. Iowa Prop. Assessment Appeal Bd., 791 

N.W.2d 258, 260 (Iowa 2010). “We will apply the standards of section 

17A.19(10) to determine if we reach the same results as the district 

court.” Renda v. Iowa Civil Rights Comm’n, 784 N.W.2d 8, 10 (Iowa 

2010). We defer to the agency’s interpretation of law when the legislature

has clearly vested that interpretation in the agency’s discretion. Iowa 

Code § 17A.19(11)(c). Otherwise, we do not defer to its view and will 

instead review for correction of errors at law. See id. § 17A.19(11)(b); 

Iowa Network Servs., Inc. v. Iowa Dep’t of Revenue, 784 N.W.2d 772, 775

(Iowa 2010).

We are not aware of any provision of Iowa law granting the Iowa 

Department of Revenue authority to interpret chapter 433. Cf. Iowa 

Code § 422.68(1) (conferring authority on the director of the Department 

to prescribe rules for the administration of chapter 422); Sherwin–

Williams Co. v. Iowa Dep’t of Revenue, 789 N.W.2d 417, 420, 423–24 

2The district court also did not rule on Cable One’s argument that centrally 

assessing its VoIP service would violate the Equal Protection Clauses of the United 

States and Iowa Constitutions. Cable One does not advance this argument on appeal.

 
12

(Iowa 2010) (finding that the Department was not clearly vested with 

authority to interpret the term “manufacturer” as used in Iowa Code 

section 428.20). The Department does not contend it has been vested 

with interpretive authority.3 Accordingly, we will not defer to the 

agency’s interpretation of the relevant statutory terms and will substitute 

our own judgment for that of the Department if we conclude it erred. See 

Sherwin–Williams Co., 789 N.W.2d at 424.

III. Analysis.

A. Applicability of Chapter 433 to Cable One’s VoIP Service. 

We now address Cable One’s claim that it should not be centrally 

assessed under chapter 433 for operation of its VoIP service in the state. 

When engaging in statutory interpretation, we first examine the language 

of the statute and determine whether it is ambiguous. Rolfe State Bank 

v. Gunderson, 794 N.W.2d 561, 564 (Iowa 2011). “If the statute is 

unambiguous, we look no further than the statute’s express language. 

If, however, the statute is ambiguous, we inquire further to determine the 

legislature’s intent in promulgating the statute.” Id. (citations omitted). 

“When the legislature has not defined words of a statute, we look to prior 

decisions of this court and others, similar statutes, dictionary definitions, 

and common usage.” Gardin v. Long Beach Mortg. Co., 661 N.W.2d 193, 

197 (Iowa 2003). “[W]e must read a statute as a whole and give it ‘its 

plain and obvious meaning, a sensible and logical construction.’ ” Id.

(quoting Hamilton v. City of Urbandale, 291 N.W.2d 15, 17 (Iowa 1980)). 

3The Department argues at considerable length that the district court applied 

the improper burden of proof when it did not presume the correctness of the 

Department’s initial assessment. See Iowa Code § 429.2(2)(a) (“The [D]epartment’s 

assessment shall be presumed correct and the burden of proof shall be on the taxpayer 

. . . .”). This argument strikes us as off the mark. Since the underlying issue is one of 

statutory interpretation, which this court renders de novo, the burden of proof is of little 

moment in this case.

 
13

“Generally, we presume words used in a statute have their ordinary and 

commonly understood meaning.” McGill v. Fish, 790 N.W.2d 113, 119 

(Iowa 2010).

Finally, a statute can encompass technologies not in existence at 

the time of its promulgation. See Bruce Transfer Co. v. Johnston, 227 

Iowa 50, 52–53, 287 N.W. 278, 280 (1939) (“[L]egislative enactments in 

general and comprehensive terms, prospective in operation, apply alike 

to all persons, subjects and business within their general purview and 

scope coming into existence subsequent to their passage.” (Internal 

quotation marks omitted.)); accord Kruck v. Needles, 259 Iowa 470, 477, 

144 N.W.2d 296, 301 (1966). For example, in Bruce Transfer Co., we 

were charged with interpreting an 1872 statute that authorized lawsuits 

against, among others, “ ‘any railway corporation, the owner of stages, or 

other line of coaches or cars.’ ” 227 Iowa at 52, 287 N.W. at 279. Noting 

that automobiles did not exist at the time the statute was written, we 

nevertheless interpreted the statute to apply to the trucking operation in 

that case. Id. at 53, 287 N.W. at 280 (“Thus, an automobile may come 

within the provisions of an act relating to vehicles generally, although the 

statute was passed before the invention of automobiles.”). Similarly, in 

Kruck, we interpreted a statute banning tire protuberances to apply to 

safety spike winter tires, even though “tires of this particular type were 

not produced in 1937 when this statute was enacted and the legislature 

. . . may not have had in mind prohibition of their use.” 259 Iowa at 477, 

144 N.W.2d at 301.

We begin with the actual wording of chapter 433. See, e.g., State v. 

Iowa Dist. Ct., 812 N.W.2d 1, 4 (Iowa 2012) (observing that legislative 

intent usually “is determined from the language of the statute”). Section 

433.1 applies to “[e]very . . . telephone company operating a line in this 
14

state.” Iowa Code § 433.1. Section 433.12, while largely reiterating the 

wording of section 433.1, is similarly expansive in tone. See id. § 433.12. 

It makes clear that “ ‘[c]ompany’ . . . means any person, copartnership, 

association, corporation, or syndicate that owns or operates, or is 

engaged in operating, any telegraph or telephone line, whether formed or 

organized under the laws of this state or elsewhere.” Id.

Cable One concedes that it provides telephone service, but 

disputes that it owns or operates a telephone line.4 Yet chapter 433 does

not require that the company operate a specific type of telephone line or 

use any particular technology. Nor does it require that the telephone line 

have been built originally for that purpose. Giving these words their 

ordinary and commonly understood meaning, it would appear that a 

cable or wire used for telephone service is, indeed, a telephone line. See 

McGill, 790 N.W.2d at 119.

This is supported by a dictionary definition of “line.” MerriamWebster’s preferred definition of line in this context is “a wire or pair of 

wires connecting one telegraph or telephone station with another or a 

whole system of such wires.” Merriam-Webster’s Collegiate Dictionary

723 (11th ed. 2003); see also Schaefer v. Putnam, 841 N.W.2d 68, 78 

(Iowa 2013) (noting that we may refer to dictionary definitions when the 

legislature leaves a term undefined).5 Cable One’s connections to its 

telephone service subscribers meet this definition. There is no 

4At oral argument, Cable One’s counsel characterized its connection to its 

residential customers as a “pipe.”

5This definition is similar to one that would have been current around the time 

the legislature enacted the original version of chapter 433. An 1898 edition of Webster’s 

Dictionary included the following definition of “line”: “The wire connecting one 

telegraphic station with another, or the whole of a system of telegraph wires under one 

management and name.” Webster’s International Dictionary of the English Language

855 (unabr. ed. 1898).

 
15

requirement in chapter 433 that the wire be made of a given material or 

assembled in a given way—e.g., traditional telephonic copper wire as 

opposed to coaxial or fiber optic cable. Indeed, traditional telephone 

companies are using fiber optic cable as well.

The Board decision, as we read it, never confronts these points. 

The Board asserts that “the language of § 433 is too narrowly written to 

impose a tax on . . . VoIP service,” but it never explains why.

In contrast, the district court’s judicial review decision does 

articulate a reason why, in the court’s view, Cable One does not own or 

operate telephone lines. According to the district court, Cable One 

provides its service “through a cable broadband network which is 

completely independent of the PSTN. This distinction is best highlighted 

by the fact that Cable One must contract with a third-party in order to 

connect to the PSTN.”

But this observation does not seem to us dispositive. Iowa Code 

sections 433.1 and 433.12 by their terms cover any telephone lines, not 

merely the PSTN. Would a company that provided a closed-circuit

telephone service connecting its customers to each other without using 

the PSTN be exempt from central assessment? We think not. As a 

practical matter, all companies providing common carrier wireline 

telephone service must interconnect with other telephone companies to 

provide that service. The statute does not suggest we should treat a 

traditional cable company that also provides phone service on its 

broadband network any differently from a traditional phone company 

that also provides internet service on its broadband network. Both 

entities are supplying telephone services, plus other services, via lines. 

Both are therefore telephone companies operating lines within the 

meaning of chapter 433.
16

While we are inclined to the view that Iowa Code sections 433.1 

and 433.12 are unambiguous on their face, some older caselaw also 

supports the notion that Cable One is a telephone company operating a 

line. Chapter 433’s predecessor was promulgated in 1878, around the 

time Alexander Graham Bell was developing the telephone. See 1878 

Iowa Acts ch. 59 (reported in Miller’s Revised and Annotated Code of 

Iowa, tit. X, ch. 6 (1880)). The law initially pertained only to “every 

telegraph company operating a line in this state.” Id. Nevertheless, just 

a few years later, as the telephone was coming into use, we interpreted 

the statute to include telephone lines even though it expressly covered 

only telegraph lines at that time. See Iowa Union Tel. Co. v. Bd. of 

Equalization, 67 Iowa 250, 251, 25 N.W. 155, 155–56 (1885). We 

reasoned, “Both the telephone and telegraph are used for distant 

communication by means of wires stretched over different jurisdictions. 

The fundamental principle in each by which communication is secured is 

the same.” Id., 25 N.W. at 155.6

We similarly found a statute authorizing lawsuits against telegraph 

companies to apply to telephone companies. Franklin v. Nw. Tel. Co., 69

Iowa 97, 98–99, 28 N.W. 461, 462 (1886). We deemed telephone 

companies to be included in the statute, “based upon the substantial 

6Following our decision in Iowa Union Telephone, the statute was amended to 

expressly include telephone companies as well. See Iowa Code § 1328 (1897); see also

Report of the Code Commission, 26th G.A., at 49 (Iowa 1895), available at

https://www.legis.iowa.gov/docs/shelves/code/ocr/1896%20code%20commission%20

report.pdf. In 1900, the legislature added what is now section 433.12 defining 

“company.” See 1900 Iowa Acts ch. 42, § 7 (then codified at Iowa Code § 1330-f (Supp. 

1902)). Since then, the legislature has not made any substantive changes to the 

portions of chapter 433 at issue in this case. Compare Iowa Code § 1330-f (Supp. 

1902), with Iowa Code § 433.12 (2007).

 
17

identity of telegraphic and telephonic modes of communication.” Id. at 

99, 28 N.W. at 462.

These cases underscore the importance of functionality. In them, 

we focused on the fact that both the telegraph and the telephone 

achieved distant communication through wires, not on the methods of 

signal transmission.

As with automobiles in Bruce Transfer Co., 227 Iowa at 53, 287 

N.W. at 280, and spiked snow tires in Kruck, 259 Iowa at 477, 144 

N.W.2d at 301, the technology at issue here did not exist when the 

legislature enacted the statute. However, in both cases, we applied the 

language of the statute in a common-sense manner rather than 

assuming the legislature intended to capture only technologies that 

existed when the law was enacted.7

7Additionally, the Iowa attorney general has issued an opinion consistent with a 

broad, purpose-based construction of chapter 433. See Op. Iowa Att’y Gen. No. 71-3-5 

(Mar. 25, 1971), 1971 WL 240716, at *4. The attorney general concluded “the 

transmission distance between microwave relay stations [should] be regarded as a 

telegraph or telephone ‘line’ for the purposes of Chapter 433,” despite the fact no 

physical wires connected one microwave station to another. Id. In reaching this 

conclusion, the attorney general relied on a functional rather than a literal 

interpretation of the statute:

Towers like the one in the instant case make it unnecessary to have a 

row of poles carrying wires from one point to another. They transmit by 

means of electronically induced waves in the air rather than physical 

lines, but the result is the same. . . . Obviously [the term ‘lines’] means 

more than just wires, for it includes poles and supports, etc., or in other 

words, a transmission system.

Id. (quoting Brannan v. Am. Tel. & Tel. Co., 362 S.W.2d 236, 239 (Tenn. 1962)). The 

attorney general concluded, “ ‘Line’ is not the physical wire, but the transmission 

system or line of communication used by the company. As such, any substitutes for 

the wire-and-pole combination first used [are] to be included under the term ‘lines.’ ” 

Id. at *3.

 
18

Cable One and the district court reason that chapter 433 can only 

apply to telephone services operated over traditional telephone lines.8 We 

do not find such a limitation in the statute. Chapter 433 applies to 

“[e]very . . . telephone company operating a line in this state” and defines 

“company” as “any . . . corporation . . . that owns or operates, or is 

engaged in operating, any . . . telephone line.” Iowa Code §§ 433.1, .12

(2007). The foregoing cases support the view that the definition of 

“telephone line” adapts with changing technology, so long as there is a 

line and a comparable service is being provided. Cable One operates a 

transmission system to carry voice signals from one fixed location to 

another over a series of wires; therefore, it operates a telephone line

within the meaning of chapter 433.

The conclusion that Cable One operates a telephone line is further 

bolstered by Cable One’s own marketing material. Cable One’s brochure, 

entitled “Your New Cable ONE Phone Service,” nowhere mentions the 

term “VoIP” but instead portrays Cable One’s service as a standard

telephone operation. The publication discusses features like caller ID, 

three-way calling, and voicemail. It states that “[p]hone service with 

Cable ONE should be similar to other landline services.” It advises

customers that they will still operate their phone by dialing a seven- or 

ten-digit number from a traditional, landline phone console. Thus, for 

the subscriber of Cable One’s VoIP service, there is little discernible 

difference between VoIP and traditional telephone service.

Cable One notes that it contracts with a third party, Level 3, to 

provide transmission over the PSTN. Yet traditional landline telephone 

8But what is traditional? The record indicates that traditional telephone 

companies now employ numerous technologies that did not exist in the nineteenth 

century such as fiber optic cable, digitization, and microwave relay stations.

 
19

companies frequently contract with one another to send and receive 

signals to and from customers of other service-providers. These 

interconnection agreements, like Cable One’s contract with Level 3, 

govern the financial and technical aspects of the relationships between 

companies, but do not affect their status as taxable telephone 

companies.

In a recent thorough and persuasive decision, the Arizona Court of 

Appeals held that Cable One should be centrally assessed for its VoIP 

service in that state, despite paying Level 3 to transmit signals over the 

PSTN. Cable One, Inc. v. Ariz. Dep’t of Revenue, 304 P.3d 1098, 

1099–1100 (Ariz. Ct. App. 2013). The Arizona statute in question 

permits central assessment of telecommunications companies. Id. (citing 

Ariz. Rev. Stat. § 42-14401 (2006)). It defines “telecommunications 

company” to include “any person that owns communications 

transmission facilities and that provides public telephone . . . access for 

compensation to effect two-way communication.” Id. (quoting Ariz. Rev. 

Stat. § 42-14401). Cable One argued there, as it does here, that it did 

not meet the statutory requirements because it contracted with Level 3 

whenever a communication needed to be transmitted over the PSTN. See 

id. at 1100–01. The court rejected this argument, noting the statute 

does not distinguish between a person who provides longdistance service directly to the end user and a person who 

provides long-distance service to the end user through its 

own technology and technology it obtains from a third party.

Id. at 1106. It analogized the situation to a wholesaler–retailer 

relationship and concluded,

Cable One provides its customers with access to the PSTN. 

To assert otherwise . . . “misstates the reality of the 

situation.” 
20

. . . [T]hrough its VoIP service, it provides 

“telecommunications exchange or inter-exchange access,” 

which, using more familiar terms, is what it is advertising to 

the public: “[p]hone service” with “UNLIMITED local & longdistance calling in the continental U.S.” Cable One is, 

therefore, a “telecommunications company” under A.R.S. 

§ 14-14401 and subject to central assessment by the 

Department.

Id. at 1107 (alteration in original) (quoting Mayor of Balt. v. Vonage Am.

Inc., 544 F. Supp. 2d 458, 472 (D. Md. 2008)).

Like the Arizona court, we find that the fact Cable One uses a 

third-party for access to the PSTN does not affect its status as a 

telephone company for property tax purposes. Just as Cable One owns 

“communications transmissions facilities” and provides “public telephone 

. . . access” in Arizona, thereby subjecting itself to central assessment 

there, so too Cable One “operates [a] telephone line” in Iowa, thereby 

subjecting itself to central assessment here. Neither statute requires the 

company to own or operate the entire line.

Other courts have also determined that VoIP providers should be 

treated as telephone or telecommunications companies under their 

respective state taxation schemes. See, e.g., Vonage Am., Inc. v. City of 

Seattle, 216 P.3d 1029, 1033, 1036 (Wash. Ct. App. 2009) (holding 

Vonage was subject to telephone utility tax for its VoIP service and was 

not exempt as an internet provider). The Montana Supreme Court held 

that a cable company providing VoIP service should be centrally assessed 

under a statute allowing taxation of “telecommunications services 

companies.” Bresnan Commc’ns, LLC v. State, 315 P.3d 921, 924 (Mont. 

2013) (quoting Mont. Code Ann. § 15-6-156(1)(d) (2001)). The lower 

court had concluded that the company did not qualify as a 

telecommunications company because it relied on its preexisting cable 

television network to provide, among other things, VoIP service. See id.
21

at 926. The Montana Supreme Court criticized the lower court’s 

emphasis on the “physical attribute of Bresnan’s property.” Id. at 927. 

Instead, the court examined the “use and productivity of Bresnan’s entire 

network” to conclude it provided a telecommunications service. Id. at 

928.

Perhaps the most direct analogue to the present case comes to us 

from the United States District Court for the District of Maryland. Mayor 

of Balt., 544 F. Supp. 2d at 472. The federal court there held that 

Vonage’s VoIP service was subject to the city’s telecommunication tax. 

Id. The Baltimore City Code provision permitted a tax on “each person 

who leases, licenses, or sells a telecommunications line to any 

customer.” Id. at 461 (quoting Baltimore, Md. City Code art. 28, § 25–2). 

Vonage contended that it did not sell telecommunication lines to its 

customers because its VoIP service relied on contracts with third-party 

carriers to transmit calls over the PSTN. Id. at 469. The court rejected 

this argument and focused instead on the nature of the service Vonage 

provided to its customers. See id. at 472. “Although these third-party 

carriers provide the wired connection to Vonage, it is Vonage, not these 

carriers, which provides this connection to Vonage’s customers.” Id. 

“Selling a telecommunication line” in the Baltimore provision and 

“operating . . . [a] telephone line” in chapter 433 are comparable in that 

they both focus on the service being provided rather than the technology 

being used.9 Compare Baltimore, Md. City Code art. 28, § 25–2, with

Iowa Code § 433.12.

9Additionally, Comcast Corporation has apparently conceded that its VoIP 

service is subject to taxation in Oregon. See Comcast Corp. v. Dep’t of Revenue, 20 Or. 

Tax 319, 333–34 (T.C. 2011) (“One corporate member of the Comcast family of 

companies already reports as a centrally assessed taxpayer in respect of its ‘voice over 

internet’ or VOIP services.”), rev’d on other grounds, 337 P.3d 768 (Or. 2014) (en banc). 

 
22

Finally, it should be noted to the extent Cable One’s property is 

centrally assessed, it cannot be taxed twice. “[T]he property so included 

in the assessment shall not be taxed in any other manner than as 

provided in this chapter.” Iowa Code § 433.4.

For the foregoing reasons, we conclude Cable One is a “telephone 

company operating a line in this state” and “operates . . . [a] telephone 

line.” Iowa Code §§ 433.1, .12. Hence, it falls under the purview of 

chapter 433.

B. Primary Use. Cable One argues that even if its VoIP service

qualifies as a telephone line, the Department may not centrally assess 

Cable One because it primarily uses its hybrid fiber–coaxial network to 

provide cable television service, not VoIP.

We believe a primary use test does not apply to chapter 433. First 

and foremost, chapter 433 does not refer to such a test. Its coverage 

extends to any company that operates a “telephone line,” regardless of 

whether the line is used for something else as well. Id. § 433.12. The 

Department is supposed to include in the assessment “all property of 

every kind and character whatsoever . . . used by the companies in the 

transaction of telegraph and telephone business.” Id. § 433.4. This 

language is not qualified by a term such as “primarily.” See id.

Furthermore, long ago, under chapter 433’s predecessor, we 

declined to apply a primary use test to a railroad’s lines that were “used 

in the ordinary manner for the transaction of railroad business” and only 

The Oregon Supreme Court, in reversing the tax court decision with respect to cable 

and internet services, noted that taxation of VoIP service was not at issue on appeal 

because Comcast had already conceded it qualified as a communication service. 

Comcast Corp., 337 P.3d at 770 n.1.

 
23

secondarily for “commercial telegraph business.” Chi., Burlington & 

Quincy R.R. v. Rhein, 135 Iowa 404, 404–05, 112 N.W. 823, 824 (1907).

The Arizona Court of Appeals similarly rejected a primary use test 

in its recent decision involving Cable One, observing, “Predominant or 

primary use is not an element of [the statutes] pertaining to central 

assessment of telecommunications companies . . . .” Cable One, Inc.,

304 P.3d at 1107.

C. Preemption. Finally, Cable One argues that federal law 

prevents the Department from taxing it as a telephone company. It cites 

to a number of FCC decisions and federal statutes and cases governing 

the regulation of VoIP providers and distinguishing them from traditional 

telephone companies. See, e.g., In re Vonage Holdings Corp., 19 FCC

Rcd. 22404, 22404–05 (Nov. 12, 2004) (preempting Minnesota telephone 

regulations of Vonage’s VoIP service because the interstate and intrastate 

elements could not be separated due to the mobility of nomadic VoIP 

callers). But these authorities pertain only to regulation of VoIP, not its

taxation. See id. at 22405 (“We express no opinion here on the 

applicability to Vonage of Minnesota’s general laws . . . , such as laws 

concerning taxation . . . .”).

It is well established that federal regulation of an activity does not 

generally preempt state taxation of companies operating in that area. 

The United States Supreme Court has said, “No general principles of law 

are better settled or more fundamental than that the legislative power of 

every state extends to all property within its borders . . . .” Pullman’s 

Palace Car Co. v. Pennsylvania, 141 U.S. 18, 22, 11 S. Ct. 876, 877, 35 

L. Ed. 613, 616 (1891). In a more recent case, the Supreme Court held 

that a state was not preempted from taxing airline property despite the 

fact interstate air travel was federally regulated. Braniff Airways, Inc. v. 
24

Neb. State Bd. of Equalization & Assessment, 347 U.S. 590, 597, 74 

S. Ct. 757, 762, 98 L. Ed. 967, 975 (1954). The Court said, 

Federal regulation of interstate land and water carriers 

under the commerce power has not been deemed to deny all 

state power to tax the property of such carriers. We 

conclude that existent federal air-carrier regulation does not 

preclude the Nebraska tax challenged here.

Id.; see also U.S. Transmission Sys., Inc. v. Bd. of Assessment Appeals, 

715 P.2d 1249, 1250, 1254–55 (Colo. 1986) (en banc) (distinguishing 

between regulation and taxation and permitting the state assessment 

board to tax a utility’s property despite the fact it was regulated by the 

FCC); Post-Newsweek Cable, Inc. v. Bd. of Review, 497 N.W.2d 810, 816, 

818 (Iowa 1993) (holding that where federal law preempted local 

regulation of cable television rates, the state was nevertheless permitted 

to tax the cable company on its tangible property located in the state).

The Arizona Court of Appeals addressed a similar argument and 

declined to find federal law preempted taxation of VoIP providers:

[C]iting a host of federal statutes and FCC orders pertaining 

to a variety of telecommunications services, including VoIP 

service, and federal case law interpreting or applying these 

statutes, Cable One argues classifying it as a 

telecommunications company . . . is contrary to these 

authorities. We reject this argument. These authorities 

concern regulation, not taxation.

. . . Although Congress and the FCC have imposed 

various regulations on VoIP providers and have preempted a 

variety of efforts by the states to regulate VoIP providers, 

neither Congress nor the FCC has taken any action to 

preempt state taxation of VoIP providers.

Cable One, Inc., 304 P.3d at 1108.

The parties cite no additional authority that would indicate 

Congress has preempted taxation of VoIP providers in the time since the 

Arizona court addressed the issue. We therefore agree with its reasoning
25

and conclude that federal law does not preempt state taxation of VoIP 

providers.

IV. Conclusion.

For the foregoing reasons, we reverse the judgment of the district 

court and remand for further proceedings consistent with this opinion.

JUDGMENT REVERSED AND CASE REMANDED WITH 

INSTRUCTIONS.

All justices concur except Zager, J., who takes no part.