- 60 -
c. Allocation of Costs Necessary to Complete the
Third-Party Customer Contracts to Those
Contracts
Because certain costs were necessary to complete the third-
party customer contracts, regardless of how many additional
conduits or fiber were installed or pulled, Qwest allocated those
costs to third-party customer contracts. Petitioners argue that
this is consistent with the economic reality of the transactions
because Qwest would not have incurred the costs absent the
customer contract. Respondent recognizes that Qwest had to incur
certain fixed costs regardless of whether one conduit is
installed (or a 24-fiber cable is pulled), or multiple conduits
are installed (or a cable with more than 24 fibers is pulled)
simultaneously. However, respondent argues that a portion of the
fixed costs, such as the costs of digging a trench and the costs
associated with perfecting Qwest’s rights-of-way, should also be
allocated to the retained assets because those costs also benefit
the retained assets. Further, respondent argues that a portion
of cost adjustments based on terrain and budget overruns should
also be allocated to Qwest’s retained assets.
As found above, Qwest would not have installed additional
conduit or pulled additional fiber without first securing the
customer contract. Accordingly, we find that Qwest’s allocation
of those costs to only the customer contract was consistent with
Page: Previous 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 NextLast modified: May 25, 2011