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Using the MCI Denver-El Paso project as an example, Qwest used
the incremental cost allocation method as follows:14
Indirect costs allocated to Qwest’s retained assets
Qwest conduit miles 2,295
Times: incremental cost/mile * $6,500
$14,917,629
Plus: Qwest capitalized interest + 1,072,296
Project costs allocated to Qwest $15,989,925
Indirect costs allocated to customer contracts
Total project costs $39,151,405
Less: project costs (15,989,925)
allocated to Qwest
Project costs
allocated to customer $23,161,480
Divide: customer conduit miles / 761
Incremental cost/mile allocated
to customer $30,422
B. Incremental Cost Allocation Method in the IRU Projects
Qwest also used an incremental cost allocation method to
allocate costs for the IRU projects involving WorldCom. For
these projects, Qwest allocated existing conduit costs, the labor
costs of pulling fiber, and right-of-way costs entirely to the
IRU agreement because these costs did not increase by installing
a cable with more than 24 fibers.15 The cost of new conduit, or
14 We note that these calculations were provided by
petitioners, and there appear to be mathematical errors.
However, because petitioners relied on these calculations, we
have left the errors uncorrected.
15 For the WorldCom Dallas-Houston project, since the fiber
was previously installed for Qwest’s account, Qwest allocated the
existing conduit costs, the costs of pulling fiber through that
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