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Segment Information

12 Months Ended

Dec. 31, 2019

As described in more detail below, our segments are managed based on the direct costs of providing services to their customers and the associated selling, general and administrative costs (primarily salaries and commissions). Shared costs that were previously reported in segments are managed separately and included in "Operations and Other", in the tables below. We reclassified certain prior period amounts to conform to the current period presentation.

At December 31, 2019, we had the following five reportable segments:


•	International and Global Accounts Management ("IGAM") Segment. Under our IGAM segment, we provide our products and services to approximately 200 global enterprise customers and to enterprises and carriers in three operating regions: Europe Middle East and Africa, Latin America and Asia Pacific;


•	Enterprise Segment. Under our enterprise segment, we provide our products and services to large and regional domestic and global enterprises, as well as public sector, which includes the U.S. Federal government, state and local governments and research and education institutions;


•	Small and Medium Business ("SMB") Segment. Under our SMB segment, we provide our products and services to small and medium businesses directly and through our indirect channel partners; and


•	Wholesale Segment. Under our wholesale segment, we provide our products and services to a wide range of other communication providers across the wireline, wireless, cable, voice and data center sectors. Our wholesale customers range from large global telecom providers to small regional providers; and

•

Consumer Segment. Under our consumer segment, we provide our products and services to residential customers. Additionally, Universal Service Fund ("USF") federal and state support payments, Connect America Fund ("CAF") federal support revenue, and other revenue from leasing and subleasing including prior year rental income associated with the 2017 failed-sale-leaseback are reported in our consumer segment as regulatory revenue.

Product and Service Categories

We categorize our products and services revenue among the following four categories for our International and Global Accounts Management, Enterprise, Small and Medium Business and Wholesale segments:


•	IP and Data Services, which includes primarily VPN data networks, Ethernet, IP, content delivery and other ancillary services;


•	Transport and Infrastructure, which includes wavelengths, dark fiber, private line, colocation and data center services, including cloud, hosting and application management solutions, professional services and other ancillary services;


•	Voice and Collaboration, which includes primarily local and long-distance voice, including wholesale voice, and other ancillary services, as well as VoIP services; and


•	IT and Managed Services, which includes information technology services and managed services, which may be purchased in conjunction with our other network services.

We categorize our products and services revenue among the following four categories for our Consumer segment:


•	Broadband, which includes high-speed, fiber based and lower speed DSL broadband services;


•	Voice, which includes local and long-distance services;


•	Regulatory Revenue, which consists of (i) CAF, USF and other support payments designed to reimburse us for various costs related to certain telecommunications services and (ii) other operating revenue from the leasing and subleasing of space; and


•	Other, which includes retail video services (including our linear and TV services), professional services and other ancillary services.

The following tables summarize our segment results for 2019, 2018 and 2017 based on the segment categorization we were operating under at December 31, 2019.



	Year Ended December 31, 2019
	International and Global Accounts		Enterprise	Small and Medium Business	Wholesale	Consumer	Total Segments	Operations and Other		Total
	(Dollars in millions)
Revenue:
IP and Data Services	$	1,676	2,763	1,184	1,377	—	7,000	—		7,000
Transport and Infrastructure	1,318		1,545	420	1,920	—	5,203	—		5,203
Voice and Collaboration	377		1,567	1,306	771	—	4,021	—		4,021
IT and Managed Services	225		258	46	6	—	535	—		535
Broadband	—		—	—	—	2,876	2,876	—		2,876
Voice	—		—	—	—	1,881	1,881	—		1,881
Regulatory	—		—	—	—	634	634	—		634
Other	—		—	—	—	251	251	—		251
Total Revenue	3,596		6,133	2,956	4,074	5,642	22,401	—		22,401
Expenses:
Cost of services and products	1,044		2,088	606	567	313	4,618	5,459		10,077
Selling, general and administrative	266		555	480	80	415	1,796	1,919		3,715
Less: share-based compensation	—		—	—	—	—	—	(162	)	(162	)
Total expense	1,310		2,643	1,086	647	728	6,414	7,216		13,630
Total adjusted EBITDA	$	2,286	3,490	1,870	3,427	4,914	15,987	(7,216	)	8,771



	Year Ended December 31, 2018
	International and Global Accounts		Enterprise	Small and Medium Business	Wholesale	Consumer	Total Segments	Operations and Other		Total
	(Dollars in millions)
Revenue:
IP and Data Services	$	1,728	2,673	1,178	1,382	—	6,961	—		6,961
Transport and Infrastructure	1,276		1,550	471	2,136	—	5,433	—		5,433
Voice and Collaboration	387		1,607	1,443	872	—	4,309	—		4,309
IT and Managed Services	262		303	52	7	—	624	—		624
Broadband	—		—	—	—	2,822	2,822	—		2,822
Voice	—		—	—	—	2,173	2,173	—		2,173
Regulatory	—		—	—	—	729	729	—		729
Other	—		—	—	—	392	392	—		392
Total Revenue	3,653		6,133	3,144	4,397	6,116	23,443	—		23,443
Expenses:
Cost of services and products	1,056		2,038	614	645	500	4,853	6,009		10,862
Selling, general and administrative	256		573	517	86	511	1,943	2,222		4,165
Less: share-based compensation	—		—	—	—	—	—	(186	)	(186	)
Total expense	1,312		2,611	1,131	731	1,011	6,796	8,045		14,841
Total adjusted EBITDA	$	2,341	3,522	2,013	3,666	5,105	16,647	(8,045	)	8,602



	Year Ended December 31, 2017
	International and Global Accounts		Enterprise	Small and Medium Business	Wholesale	Consumer	Total Segments	Operations and Other		Total
	(Dollars in millions)
Revenue:
IP and Data Services	$	528	1,515	634	916	—	3,593	1		3,594
Transport and Infrastructure	406		1,116	419	1,530	—	3,471	192		3,663
Voice and Collaboration	176		1,245	1,314	569	—	3,304	—		3,304
IT and Managed Services	272		310	51	11	—	644	—		644
Broadband	—		—	—	—	2,698	2,698	—		2,698
Voice	—		—	—	—	2,531	2,531	—		2,531
Regulatory	—		—	—	—	731	731	—		731
Other	—		—	—	—	491	491	—		491
Total Revenue	1,382		4,186	2,418	3,026	6,451	17,463	193		17,656
Expenses:
Cost of services and products	457		1,365	389	413	620	3,244	4,959		8,203
Selling, general and administrative	104		365	448	47	695	1,659	1,849		3,508
Less: share-based compensation	—		—	—	—	—	—	(111	)	(111	)
Total expense	561		1,730	837	460	1,315	4,903	6,697		11,600
Total adjusted EBITDA	$	821	2,456	1,581	2,566	5,136	12,560	(6,504	)	6,056

We recognize revenue in our consolidated statements of operations for certain USF surcharges and transaction taxes that we bill to our customers. Our consolidated statements of operations also reflect the offsetting expense for the amounts we remit to the government agencies. The USF surcharges are assigned to the products and services categories based on the underlying revenue. We also act as a collection agent for certain other USF and transaction taxes that we are required by government agencies to bill our customers, for which we do not record any revenue or expense because we only act as a pass-through agent.

The following table provides the amount of USF surcharges and transaction taxes:



	Years Ended December 31,
	2019		2018	2017
	(Dollars in millions)
USF surcharges and transaction taxes	$	1,002	952	601

Revenue and Expenses

Our segment revenue includes all revenue from our five segments as described in more detail above. Our segment revenue is based upon each customer's classification. We report our segment revenue based upon all services provided to that segment's customers. Our segment expenses include specific cost of service expenses incurred as a direct result of providing services and products to segment customers, along with selling, general and administrative expenses that are directly associated with specific segment customers or activities.

The following items are excluded from our segment results, because they are centrally managed and not monitored by or reported to our CODM by segment:


•	Network expenses not incurred as a direct result of providing services and products to segment customers;


•	centrally managed expenses such as Operations, Finance, Human Resources, Legal, Marketing, Product Management and IT, which are reported as "Operations and Other";


•	depreciation and amortization expense or impairments;


•	interest expense, because we manage our financing on a consolidated basis and have not allocated assets or debt to specific segments;


•	stock-based compensation; and


•	other income and expense items are not monitored as a part of our segment operations.

The following table reconciles total segment adjusted EBITDA to net (loss) income for the years ended December 31, 2019, 2018 and 2017:



	Years Ended December 31,
	2019			2018		2017
	(Dollars in millions)
Total segment adjusted EBITDA	$	15,987		16,647		12,560
Depreciation and amortization	(4,829		)	(5,120	)	(3,936	)
Goodwill impairment	(6,506		)	(2,726	)	—
Other operating expenses	(7,216		)	(8,045	)	(6,504	)
Share-based compensation	(162		)	(186	)	(111	)
Operating (loss) income	(2,726		)	570		2,009
Total other expense, net	(2,040		)	(2,133	)	(1,469	)
(Loss) income before income taxes	(4,766		)	(1,563	)	540
Income tax expense (benefit)	503			170		(849	)
Net (loss) income	$	(5,269	)	(1,733	)	1,389

We do not have any single customer that provides more than 10% of our consolidated total operating revenue.

The assets we hold outside of the U.S. represent less than 10% of our total assets. Revenue from sources outside of the U.S. is responsible for less than 10% of our total operating revenue.