- 66 -
Dial Tone" ruling removed certain regulatory restrictions that
prevented telephone companies from entering that business area.
He opined that, although the time frame could not be well
defined, it could take 5 to 10 years for serious penetration of
the residential market for broadband switch services to occur.
The above expert opinions of Drs. Jackson and Rohlfs and Mr.
Liss, along with the 1989 white paper Kyle authored, reflect
that, during 1987 through 1989, NITCO's rewiring of residences
with fiber optic cable and its purchase of broadband switches,
would only become economically justified following the occurrence
of future commercial, legal, and technological developments that
would permit NITCO to derive substantial additional revenue from
offering new services, such as television services, over fiber
optic lines. NITCO's plans to employ broadband switches could
hardly be considered to be specific and definite during the years
in issue. We conclude that NITCO's future needs to install
broadband switches and the fiber optic cable to support such
switches, were too vague and uncertain to be reasonably
anticipated business needs of NITCO during 1987 through 1989.
Sec. 1.537-1(b)(1), Income Tax Regs.
Similarly, we are not convinced that NITCO, during 1987
through 1989, had any actual plans with respect to SS7/Class
switches, "Airport risk", a billing and collections computer, and
headquarters building expansion. As indicated above, we think
that these purported business needs are mere afterthoughts on
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