554
Opinion of Breyer, J.
These administrative difficulties seem far greater than any difficulty likely involved in an effort to determine an actual incumbent's actual (past or likely future) costs. See Affidavits of W. Baumol, J. Ordover, & R. Willig, Comments of AT&T Corp., CC Docket 96-98: In the Matter of Implementation of Local Competition Provisions in the Telecommunications Act of 1996, ¶ 25 (May 16, 1996), App. 67 (TELRIC's estimates "do not simply accept the architecture, sizing, technology, or operating decisions" of the incumbents "as bases for calculating" costs). Assumptions are inevitable. And the resulting uncertainties mean a somewhat random sort of rate that can either exacerbate the incentive problems previously mentioned or alleviate those problems by a kind of regulatory coincidence. See ante, at 522 (describing how state commissioners "customarily assig[n] rates based on some predictions from one model and others from its counterpart").
IV
The criticisms described in Part III are serious, potentially severing any rational relation between the Commission's regulations and the statutory provision's basic purposes. State Farm, 463 U. S., at 56. Hence, the Commission's responses are important. Do those responses reduce the force of the criticisms, blunt their edges, or suggest offsetting virtues? I have found six major responses. But none of them is convincing.
First, the FCC points out that rates will include not only a charge reflecting hypothetical "most-efficient-firm" costs but also a depreciation charge—a charge that can reconcile a firm's initial historic investment, say, in equipment, and the equipment's current value, which diminishes over time. See Order ¶ 686 ("[P]roperly designed depreciation schedules should account for expected declines in the value of capital goods"). If, for example, an incumbent's reasonable investment, measured actually and historically, came to $50 million, but FCC experts predict a "most-efficient-
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