Opinion ID: 799751
Heading Depth: 1
Heading Rank: 3

Heading: Interstate v. total-company productivity

Text: 29 MCI argues that in calculating the X-Factor the FCC arbitrarily used the LECs' productivity in all their telecommunications business rather than productivity only in their interstate operations. Again, we disagree. The FCC reasonably concluded that the record before us does not allow us to quantify the extent, if any, to which interstate productivity growth may differ significantly from total company productivity growth, 1997 Order, 12 FCC Rcd at 16,686, p 110, and this determination was enough to justify using the total company data. 30 In the first place, it is not clear that interstate productivity, as opposed to total company productivity, is measurable, or even economically well-defined. This is so because direct productivity measurement requires measurement of inputs, and there is no obviously meaningful way to segregate LEC interstate and intrastate inputs because, as is undisputed, interstate and intrastate services are usually provided over common facilities. 1997 Order, 12 FCC Rcd at 16,685, p 107. The Commission had previously recognized this analytical difficulty, questioning whether it would be possible to develop separate production functions for interstate and intrastate services, id., and it never unambiguously declared the issue resolved. 31 The Commission nonetheless declared itself ready to consider some adjustment if it were shown that inclusion of intrastate data systematically biased the X-Factor estimate downward. 1997 Order, 12 FCC Rcd at 16,686, p 109. AT&T offered claims of faster interstate productivity growth. It based these on an assumption of equal growth rates for interstate and intrastate inputs, but it offered no explanation why that assumption was economically justified, much less one so compelling that it would be error for the FCC to reject it. See AT&T Comments, CC Docket No. 94-1, App. A at 23-30, 72-78; 1997 Order, 12 FCC Rcd at 16,686-87, p 110. 32 MCI argues that in the original 1990 LEC price cap order the Commission inferred faster productivity growth in interstate services from the undisputed fact of faster output increase in that sector. See Price Cap Order, 5 FCC Rcd at 6798, p 92 ([T]he more rapid growth in interstate usage results in higher apparent interstate productivity growth.). This assumption should have continued, it says. But the 1990 method of measuring productivity had not depended on the measurement of inputs at all; the Commission had simply inferred productivity growth from prior trends in rate reductions. 1997 Order, 12 FCC Rcd at 16,648, p 8. Given the shift to direct focus on input changes (a move that no one questions) and the uncertainty over interstate input trends, we do not see why the agency should have been bound to retain the assumption of faster interstate productivity growth. On this record, therefore, we do not find it unreasonable for the agency to have relied on total company productivity despite its theoretical shortcomings.