REVENUE RECOGNITION

Revenue Recognition Policies

Revenue Accounted for in Accordance with ASC

606

, “Revenue from Contracts with Customers” (“ASC

606”

)

At contract inception, the Company assesses the goods and services promised to the customer and identifies the performance obligation for each promise to transfer a good or service that is distinct. The Company considers all obligations whether they are explicitly stated in the contract or are implied by customary business practices.

The Company’s broadband and voice revenue includes service, installation and equipment charges. Managed IT revenues include the sale, configuration and installation of equipment and the subsequent provision of ongoing IT services. The Company enters into contracts with its rural health care customers and is subject to various regulatory requirements associated with the provision of these services. Revenues associated with rural health care customers are recognized based on the amount the Company expects to collect as evidenced in its contract with the customer and the Company’s and customer’s agreement with the Federal Communications Commission (“FCC”) as the relevant service is provided. Regulatory access revenue includes (i) special access, which is primarily access to dedicated circuits sold to wholesale customers, substantially all of which is generated from interstate services; and (ii) cellular access, which is the transport of tariffed local network services between switches for cellular companies based on individually negotiated contracts. Regulatory access revenue is recognized as the service is provided to the customer.

Revenue Accounted for in Accordance with Other Guidance

Deferred revenue capacity liabilities are established for indefeasible rights of use (“IRUs”) on the Company’s network provided to

third

parties and are typically accounted for as operating leases. Regulatory access revenue includes interstate and intrastate switched access, consisting of services based primarily on originating and terminating access minutes from other carriers. High-cost support revenue consists of interstate and intrastate universal support funds and similar revenue streams structured by federal and state regulatory agencies that allow the Company to recover its cost of providing universal service in Alaska.

Disaggregation of Revenue

The following table provides the Company’s revenue disaggregated on the basis of its primary markets, customers, products and services for the

three

-month periods ended

March 31, 2019

and

2018:

	Three Months Ended						Three Months Ended
	March 31, 2019						March 31, 2018
	Accounted for Under ASC 606		Accounted for Under Other Guidance		Total Revenue		Accounted for Under ASC 606		Accounted for Under Other Guidance		Total Revenue
Business and Wholesale Revenue
Business broadband	$	15,208	$	-	$	15,208	$	13,600	$	-	$	13,600
Business voice and other		7,001		-		7,001		6,851		-		6,851
Managed IT services		1,659		-		1,659		1,265		-		1,265
Equipment sales and installations		880		-		880		922		-		922
Wholesale broadband		8,551		-		8,551		8,056		-		8,056
Wholesale voice and other		1,426		-		1,426		1,488		-		1,488
Operating leases and other deferred revenue		-		1,770		1,770		-		1,581		1,581

Total Business and Wholesale Revenue		34,725		1,770		36,495		32,182		1,581		33,763

Consumer Revenue
Broadband		6,468		-		6,468		6,492		-		6,492
Voice and other		2,733		-		2,733		2,877		-		2,877

Total Consumer Revenue		9,201		-		9,201		9,369		-		9,369

Regulatory Revenue
Access (1)		5,116		-		5,116		6,207		-		6,207
Access (2)		-		1,173		1,173		-		1,710		1,710
High-cost support		-		4,924		4,924		-		4,923		4,923

Total Regulatory Revenue		5,116		6,097		11,213		6,207		6,633		12,840

Total Revenue	$	49,042	$	7,867	$	56,909	$	47,758	$	8,214	$	55,972

(

)

Includes customer ordered service and special access.

(

)

Includes carrier of last resort and carrier common line.

Business broadband revenue includes revenue associated with rural health care customers. Consumer voice and other revenue includes revenue associated with the FCC’s Lifeline program.

Timing of Revenue Recognition

Revenue accounted for in accordance with ASC

606

consisted of the following for the

three

-month periods ended

March 31, 2019

and

2018:

	Three Months Ended
	March 31,
	2019		2018

Services transferred over time	$	43,046	$	40,629
Goods transferred at a point in time		880		922
Regulatory access revenue (1)		5,116		6,207
Total revenue	$	49,042	$	47,758

(

)

Includes customer ordered service and special access.

Transaction Price Allocated to Remaining Performance Obligations

The aggregate amount of the transaction price allocated to the remaining performance obligations for contracts with customers that are unsatisfied, or partially unsatisfied, accounted for in accordance with ASC

606

was approximately

$97,680

March

31,2019.

Revenue will be recognized as the Company satisfies the associated performance obligations. For equipment delivery, installation and configuration, and certain managed IT services, which comprise approximately

$1,411

of the total, the performance obligation is currently expected to be satisfied during the next

twelve

months. For business broadband, voice and other managed IT services, which comprise approximately

$96,269

of the total, the performance obligation will be satisfied as the service is provided over the terms of the contracts, which range from

one

ten

years. The Company’s agreements with its consumer customers are typically on a month-to-month basis. Therefore, the Company’s provision of future service to these customers is

not

reflected in the above discussion of future performance obligations.

Contract Assets and Liabilities

The Company incurs certain incremental costs to obtain contracts that it expects to recover. These costs consist primarily of sales commissions and other directly related incentive compensation payments (reported as contract additions in the table below) which are dependent upon, and paid upon, successfully entering into individual customer contracts.

The table below provides a reconciliation of the contract assets associated with contracts with customers accounted for in accordance with ASC

606

for the

three

-month period ended

March 31, 2019.

Contract modifications and cancellations did

not

have a material effect on contract assets in the

three

-month period ended

March 31, 2019.

Contract assets are classified as “Other assets” on the consolidated balance sheet.

Balance at January 1	$	8,052
Contract additions		618
Amortization		(952	)
Balance at March 31	$	7,718

The Company recorded a credit to the provision for uncollectible accounts receivable of

$697

in the

three

-month period ended

March 31, 2019

associated with its contracts with customers. See Note

“

Accounts Receivable

.”

The table below provides a reconciliation of the contract liabilities associated with contracts with customers accounted for in accordance with ASC

606

for the

three

-month period ended

March 31, 2019.

Contract liabilities consist of deferred revenue and are included in “Accounts payable, accrued and other current liabilities” and “Other long-term liabilities, net of current portion.”

Balance at January 1	$	2,766
Contract additions		1,091
Revenue recognized		(255	)
Balance at March 31	$	3,602