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D. Economic Reality of Qwest’s Conduit Installation
and Fiber Pulling Projects
Petitioners argue that Qwest’s incremental cost allocation
method is reasonable because it reflected Qwest’s decision-making
process and was based on the economic reality of the
transactions. However, respondent contends that Qwest’s
incremental cost allocation method did not accurately reflect its
business strategy.
1. Respondent’s Characterization of Qwest’s Business
Strategy
Respondent argues that Qwest’s business strategy during the
years in issue was to become a full-service telecommunications
company, and that obtaining third-party contracts was simply a
means of financing the building of a nationwide fiberoptic
network. Respondent cites Qwest’s 1995 five-year plan, which
states: “The primary business focus of [Qwest] is to create a
nationwide, owned, facility based network and utilize it to carry
profitable, revenue traffic.” Respondent asserts that the other
transactions during the years in issue support respondent’s
characterization. Respondent also notes that Qwest offered
telecommunications services during the years in issue.
Respondent’s argument is based in large part on hindsight, as it
looks at the development of Qwest subsequent to the years in
issue, not as Qwest was operating during the years in issue.
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