426
Opinion of Breyer, J.
the FCC disfavors actual or historic costs, it does not satisfactorily explain why their use would be arbitrary or unreasonable.
—Consider the FCC's decision to prohibit use of an "efficient component pricing rule." See First Report & Order
¶ 708-711, supra, at 15859-15860. Where an incumbent supplies an element to New Entrant B that it otherwise would have provided Old Customer A, that rule, roughly speaking, permits the incumbent to charge a price measured by either (1) the element's market price, if it is sold in the marketplace, or (2), if it is not, the incumbent's actual costs (including the net revenue the incumbent loses from forgoing the sale to Old Customer A). See generally, e. g., W. Baumol & J. Sidak, Toward Competition in Local Telephony 95-97 (1994). This pricing system seeks to assure the incumbent that it will obtain from B the contribution, say, to fixed costs or to overhead, that A had previously made. Many experts prefer such a system. See, e. g., Sidak & Spulber, The Tragedy of the Telecommons: Government Pricing of Unbundled Network Elements Under the Telecommunications Act of 1996, 97 Colum. L. Rev. 1081, 1111-1113, and nn. 75-85 (1997); Kahn & Taylor, The Pricing of Inputs Sold to Competitors: A Comment, 11 Yale J. Reg. 225, 228-230 (1994). The FCC rejected that system, but in doing so it did not claim, nor did its reasoning support the claim, that the use of such a system would be arbitrary or unreasonable. See Sidak & Spulber, supra, at 1095-1098.
—Consider the FCC's decision to forbid the use of what regulators call "Ramsey pricing," see First Report & Order
¶ 696, supra, at 15852-15853. Ramsey pricing is a classical regulatory pricing system that assigns fixed costs in a way that helps maintain services for customers who cannot (or will not) pay higher prices. See generally, e. g., 1 A. Kahn, The Economics of Regulation: Principles and Institutions 137-141 (reprint 1988). Many experts strongly prefer the use of such a system. See, e. g., Sidak & Spulber, supra, at
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