- 65 -
conduit. Without that customer, investments in
additional retained conduits are too great in amount,
particularly when the potential benefit is so risky. *
* * On the other hand, the incremental expected costs
are sufficiently low to warrant accepting the risks.
In short, the business strategy is buttressed by cost
allocations that encourage prudent risk-taking. * * *
Because its cost allocations harmonized with sound
business strategy, Qwest adopted a reasonable
allocation method.
Professor Horngren’s expert testimony strongly supports the
reasonableness of Qwest’s incremental cost allocation method.
Professor Wright, respondent’s accounting expert, did not
conclude that Qwest’s incremental cost allocation method was
unreasonable.27 As described above, Professor Wright testified
that if the future economic value of the retained property is
uncertain, an incremental cost allocation method may be
appropriate. Because petitioners have established that the value
of Qwest’s retained conduit was uncertain, Professor Wright’s
testimony also supports the reasonableness of Qwest’s incremental
cost allocation method.
4. Conclusion
Because Qwest’s incremental cost allocation method was based
on the economic reality of the projects in issue, consistent with
its decision-making process, and supported by expert testimony,
we find that there was a logic to it and a sound basis and
27 Respondent also introduced the expert report of John C.
Donovan. However, Mr. Donovan’s report focused largely on FCC
regulations that were not applicable to the years in issue. For
this reason, we did not consider his report.
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