Note 2 - Revenue

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

2. REVENUE

Revenue Recognition Policies

Revenue Accounted for in Accordance with Accounting Standards Codification 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 tables provide the Company’s revenue disaggregated on the basis of its primary markets, customers, products and services for the three and nine-month periods ended September 30, 2020 and 2019.

	Three Months Ended						Nine Months Ended
	September 30, 2020						September 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	$	15,789	$	-	$	15,789	$	47,136	$	-	$	47,136
Business voice and other		6,955		-		6,955		20,614		-		20,614
Managed IT services		1,377		-		1,377		3,904		-		3,904
Equipment sales and installations		2,102		-		2,102		4,708		-		4,708
Wholesale broadband		11,105		-		11,105		32,481		-		32,481
Wholesale voice and other		1,342		-		1,342		3,974		-		3,974
Operating leases and other deferred revenue		-		2,228		2,228		-		6,888		6,888
Total Business and Wholesale Revenue		38,670		2,228		40,898		112,817		6,888		119,705
Consumer Revenue
Broadband		6,986		-		6,986		20,474		-		20,474
Voice and other		2,305		-		2,305		7,134		-		7,134
Total Consumer Revenue		9,291		-		9,291		27,608		-		27,608
Regulatory Revenue
Access (1)		4,662		-		4,662		13,925		-		13,925
Access (2)		-		740		740		-		2,228		2,228
High-cost support		-		4,923		4,923		-		14,770		14,770
Total Regulatory Revenue		4,662		5,663		10,325		13,925		16,998		30,923
Total Revenue	$	52,623	$	7,891	$	60,514	$	154,350	$	23,886	$	178,236

	Three Months Ended						Nine Months Ended
	September 30, 2019						September 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	$	15,595	$	-	$	15,595	$	46,181	$	-	$	46,181
Business voice and other		6,889		-		6,889		20,546		-		20,546
Managed IT services		1,789		-		1,789		4,965		-		4,965
Equipment sales and installations		942		-		942		2,830		-		2,830
Wholesale broadband		9,550		-		9,550		26,821		-		26,821
Wholesale voice and other		1,870		-		1,870		4,688		-		4,688
Operating leases and other deferred revenue		-		2,104		2,104		-		6,241		6,241
Total Business and Wholesale Revenue		36,635		2,104		38,739		106,031		6,241		112,272
Consumer Revenue
Broadband		6,718		-		6,718		19,880		-		19,880
Voice and other		2,567		-		2,567		7,947		-		7,947
Total Consumer Revenue		9,285		-		9,285		27,827		-		27,827
Regulatory Revenue
Access (1)		5,005		-		5,005		15,040		-		15,040
Access (2)		-		1,176		1,176		-		3,523		3,523
High-cost support		-		4,923		4,923		-		14,770		14,770
Total Regulatory Revenue		5,005		6,099		11,104		15,040		18,293		33,333
Total Revenue	$	50,925	$	8,203	$	59,128	$	148,898	$	24,534	$	173,432

⁽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 nine-month periods ended September 30, 2020 and 2019.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Services transferred over time	$	45,859	$	44,978	$	135,717	$	131,028
Goods transferred at a point in time		2,102		942		4,708		2,830
Regulatory access revenue (1)		4,662		5,005		13,925		15,040
Total revenue	$	52,623	$	50,925	$	154,350	$	148,898

⁽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 $73,329 at September 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 $2,253 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 $71,076 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 nine-month period ended September 30, 2020. Contract modifications did not have a material effect on contract assets in the nine-month period ended September 30, 2020. Contract assets are classified as “Other assets” on the consolidated balance sheet.

	2020
Balance at January 1	$	7,242
Contract additions		2,141
Amortization		(2,725	)
Balance at September 30	$	6,658

The Company recorded a credit for uncollectible accounts receivable of $955 in the nine-month period ended September 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 nine-month period ended September 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		844
Revenue recognized		(1,227	)
Balance at September 30	$	3,520