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e. Summary
With regard to the projects in issue, petitioners have shown
that Qwest would not have installed additional conduit or pulled
additional fiber without first securing a customer contract.
Qwest’s allocation of all costs necessary to complete the
customer contract to that contract is consistent with Qwest’s
business strategy. Qwest’s allocation of the incremental costs
to its retained assets reflects the risk involved with and the
incremental cost of installing those assets. For these reasons,
we find that Qwest’s incremental cost allocation method is
consistent with its business strategy because it reflects Qwest’s
decision-making process and the economic reality of the projects
at issue.
3. Expert Testimony
Petitioners’ cost accounting expert, Professor Charles E.
Horngren (Professor Horngren), is the Edmund W. Littlefield
Professor of Accounting, Emeritus, at Stanford University. He
has been a professor for more than 37 years and his cost
accounting treatise, originally published in 1962, is currently
in its 12th edition. In Professor Horngren’s expert opinion,
when costs are allocated consistently with one’s business
strategy, the allocations are reasonable. In his expert report,
Professor Horngren explains:
The basic Qwest idea was to get a customer who
pays enough to justify installing and selling one
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