Time Warner Cable Inc. v. Cnty. of L. A.

*461 Time Warner Cable (Time Warner) operates a cable system that uses public rights-of-way in Los Angeles to provide cable television, 1 broadband, and telephone services. Time Warner initially only provided television services. Once changing technologies enabled broadband and telephone services to be delivered over cable rights-of-way, Time Warner and many other cable operators began to provide their customers broadband and telephone services over these same rights-of-way.

*870 Time Warner's right to use the public rights-of-way and to conduct business as a television cable operator are conferred via cable television franchise agreements with numerous local franchising authorities. The right to use the public rights-of-way (the possessory interest) is a taxable interest; the right to do business as a cable operator is not. The fee for these franchises is, by federal law, limited to no more than five percent of revenue generated from the provision of television services only. 2 Federal law also prohibits local franchising authorities from granting exclusive franchises.

The issues before us stem from a dispute between the parties as to how the County of Los Angeles (the County)…

*878 I join in all of the majority opinion except Part D(1) of the Discussion portion, from which I respectfully dissent.

*472 The Constitution directs that all real property be assessed as a percentage of "fair market value." ( Cal. Const., art. XIII, § 1.) For tax purposes, "property" includes a right-of-way granted to a cable service provider by a public entity ( Cox Cable San Diego, Inc. v. County of San Diego (1986) 185 Cal.App.3d 368 , 378, 229 Cal.Rptr. 839 ) but not the right to provide the cable service itself ( Shubat v. Sutter County Assessment Appeals Bd. (1993) 13 Cal.App.4th 794 , 801, 17 Cal.Rptr.2d 1 ; see Rev. & Tax. Code, § 107.7, subd. (d) ).

"Fair market value" means the value a willing buyer would pay to a willing seller in an open market. ( Rev. & Tax. Code, § 110, subd. (a) [" 'fair market value' means the amount of cash or its equivalent that property would bring if exposed for sale in the open market"]; Kaiser Co. v. Reid (1947) 30 Cal.2d 610 , 623, 184 P.2d 879 .) Property is therefore assessed based on the value that a hypothetical buyer would pay for it in the marketplace, "not the taxpayer's peculiar benefits ... unrelated to the market." ( Mola Dev.…