Note 2 - Revenue

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

2. REVENUE

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.

Revenue is not recorded for the Company’s provision of free or upgraded service in connection with the COVID-19 pandemic because cash will not be collected, the arrangements do not include an associated transaction price, or the contract with the customer has not been modified, as required under ASC 606.

Beginning late in the first quarter of 2020, in response to the COVID-19 pandemic, the Company offered certain customers free or upgraded service, and suspended service termination and termination fees for late payment. These actions have not had a material impact on the Company’s existing contracts with its customers, the associated contract assets and liabilities and future performance obligations.

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 revenue streams structured by federal 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 and six-month periods ended June 30, 2020 and 2019:

	June 30, 2020						June 30, 2020
	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	$	15,994	$	-	$	15,994	$	31,347	$	-	$	31,347
Business voice and other		6,802		-		6,802		13,659		-		13,659
Managed IT services		1,300		-		1,300		2,527		-		2,527
Equipment sales and installations		1,192		-		1,192		2,606		-		2,606
Wholesale broadband		11,123		-		11,123		21,376		-		21,376
Wholesale voice and other		1,344		-		1,344		2,632		-		2,632
Operating leases and other deferred revenue		-		2,269		2,269		-		4,660		4,660
Total Business and Wholesale Revenue		37,755		2,269		40,024		74,147		4,660		78,807
Consumer Revenue
Broadband		6,796		-		6,796		13,488		-		13,488
Voice and other		2,380		-		2,380		4,829		-		4,829
Total Consumer Revenue		9,176		-		9,176		18,317		-		18,317
Regulatory Revenue
Access (1)		4,572		-		4,572		9,263		-		9,263
Access (2)		-		761		761		-		1,488		1,488
High-cost support		-		4,923		4,923		-		9,847		9,847
Total Regulatory Revenue		4,572		5,684		10,256		9,263		11,335		20,598
Total Revenue	$	51,503	$	7,953	$	59,456	$	101,727	$	15,995	$	117,722

	Three Months Ended						Six Months Ended
	June 30, 2019						June 30, 2019
	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	$	15,378	$	-	$	15,378	$	30,586	$	-	$	30,586
Business voice and other		6,953		-		6,953		13,657		-		13,657
Managed IT services		1,517		-		1,517		3,176		-		3,176
Equipment sales and installations		1,008		-		1,008		1,888		-		1,888
Wholesale broadband		8,720		-		8,720		17,271		-		17,271
Wholesale voice and other		1,392		-		1,392		2,818		-		2,818
Operating leases and other deferred revenue		-		2,070		2,070		-		4,137		4,137
Total Business and Wholesale Revenue		34,968		2,070		37,038		69,396		4,137		73,533
Consumer Revenue
Broadband		6,694		-		6,694		13,162		-		13,162
Voice and other		2,647		-		2,647		5,380		-		5,380
Total Consumer Revenue		9,341		-		9,341		18,542		-		18,542
Regulatory Revenue
Access (1)		4,919		-		4,919		10,035		-		10,035
Access (2)		-		1,174		1,174		-		2,347		2,347
High-cost support		-		4,923		4,923		-		9,847		9,847
Total Regulatory Revenue		4,919		6,097		11,016		10,035		12,194		22,229
Total Revenue	$	49,228	$	8,167	$	57,395	$	97,973	$	16,331	$	114,304

⁽¹⁾ Includes customer ordered service and special access.

⁽²⁾ Includes Essential Network Support (“ENS”).

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 and six-month periods ended June 30, 2020 and 2019:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Services transferred over time	$	45,739	$	43,301	$	89,858	$	86,050
Goods transferred at a point in time		1,192		1,008		2,606		1,888
Regulatory access revenue (1)		4,572		4,919		9,263		10,035
Total revenue	$	51,503	$	49,228	$	101,727	$	97,973

⁽¹⁾ 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 $80,307 at June 30, 2020. 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 $2,244 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 $78,063 of the total, the performance obligation will be satisfied as the service is provided over the terms of the contracts, which range from one to 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 six-month period ended June 30, 2020. Contract modifications did not have a material effect on contract assets in the six-month period ended June 30, 2020. Contract assets are classified as “Other assets” on the consolidated balance sheet.

	2020
Balance at January 1	$	7,242
Contract additions		1,508
Amortization		(1,836	)
Balance at June 30	$	6,914

The Company recorded a credit for uncollectible accounts receivable of $394 in the six-month period ended June 30, 2020 associated with its contracts with customers. See Note 5 “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 six-month period ended June 30, 2020. 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.”

	2020
Balance at January 1	$	3,903
Contract additions		354
Revenue recognized		(789	)
Balance at June 30	$	3,468