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US West Grants to Gallup; and (9) MFS Anaheim. The third-party
customer contracts for these nine conduit installation projects
constitute long-term contracts as defined by section 460(f).
2. IRU Projects
By November 1995, Qwest was in negotiations with WorldCom
Network Services, Inc. (WorldCom), for rights to use a limited
number of fibers in fiberoptic cable installed along particular
routes. On February 26, 1996, Qwest granted WorldCom an IRU in
24 dark fibers over three routes: (1) WorldCom Dallas-Houston;
(2) WorldCom Denver-El Paso; and (3) WorldCom Santa Clara-SLC.
Pursuant to the IRU agreement, Qwest pulled fiber for the three
IRU projects, as described above.
In addition to pulling fiber for WorldCom, Qwest also pulled
fiber for its own potential future use or sale. Instead of
pulling 24-fiber fiberoptic cables, Qwest pulled cables with a
larger number of fibers. While WorldCom had an IRU in 24 of the
fibers, Qwest retained control over the remaining fibers in the
same cable.
The IRU agreement constitutes a long-term contract as
defined by section 460(f). For tax purposes, Qwest’s granting of
the IRUs to WorldCom was treated as a sale of those fibers. The
total contract price for the IRU agreement was $65,196,466.
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