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Revenue Recognition
 6 Months Ended
Jun. 30, 2023
Revenue from Contract with Customer [Abstract]  
Revenue Recognition Revenue Recognition
Product and Service Categories

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

•Grow, which includes products and services that we anticipate will grow, including our dark fiber, Edge Cloud services, IP, managed security, software-defined wide area networks ("SD WAN"), secure access service edge ("SASE"), Unified Communications and Collaboration ("UC&C") and wavelengths services;

•Nurture, which includes our more mature offerings, including ethernet and VPN data networks services;

•Harvest, which includes our legacy services managed for cash flow, including Time Division Multiplexing ("TDM") voice, private line and other legacy services; and

•Other, which includes equipment sales, IT solutions and other services.

We categorize our products and services revenue among the following categories for the Mass Markets segment:

•Fiber Broadband, under which we provide high speed broadband services to residential and small business customers utilizing our fiber-based network infrastructure;

•Other Broadband, under which we provide primarily lower speed broadband services to residential and small business customers utilizing our copper-based network infrastructure; and

•Voice and Other, under which we derive revenues from (i) providing local and long-distance voice services, professional services, and other ancillary services, and (ii) federal broadband and state support programs.

Reconciliation of Total Revenue to Revenue from Contracts with Customers

The following tables provide total revenue by segment, sales channel and product category. They also provide the amount of revenue that is not subject to ASC 606, "Revenue from Contracts with Customers" ("ASC 606"), but is instead governed by other accounting standards. The amounts in the tables below include revenue for the Latin American and ILEC businesses prior to their sales on August 1, 2022 and October 3, 2022, respectively. See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business in our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information on these divestitures.
Three Months Ended June 30, 2023Three Months Ended June 30, 2022
Total Revenue
Adjustments for Non-ASC 606 revenue (1)
Total revenue from Contracts with CustomersTotal Revenue
Adjustments for Non-ASC 606 revenue (1)
Total revenue from Contracts with Customers
(Dollars in millions)
Business Segment by Sales Channel and Product Category
Large Enterprise
Grow$558 (78)480 658 (102)556 
Nurture369 — 369 444 — 444 
Harvest197 — 197 272 — 272 
Other55 (1)54 58 (1)57 
Total Large Enterprise Revenue1,179 (79)1,100 1,432 (103)1,329 
Mid-Market Enterprise
Grow202 (8)194 188 (8)180 
Nurture202 — 202 231 — 231 
Harvest94 (1)93 135 (2)133 
Other9 (1)8 8 — 8 
Total Mid-Market Enterprise Revenue507 (10)497 562 (10)552 
Public Sector
Grow118 (19)99 116 (27)89 
Nurture93 — 93 128 — 128 
Harvest95 — 95 124 (1)123 
Other108 — 108 126 (1)125 
Total Public Sector Revenue414 (19)395 494 (29)465 
Wholesale
Grow260 (62)198 240 (68)172 
Nurture205 (8)197 258 (7)251 
Harvest331 (43)288 405 (56)349 
Other1 — 1 26 — 26 
Total Wholesale Revenue797 (113)684 929 (131)798 
Business Segment by Product Category
Grow1,138 (167)971 1,202 (205)997 
Nurture869 (8)861 1,061 (7)1,054 
Harvest717 (44)673 936 (59)877 
Other173 (2)171 218 (2)216 
Total Business Segment Revenue2,897 (221)2,676 3,417 (273)3,144 
Mass Markets Segment by Product Category
Fiber Broadband157 (4)153 151 (5)146 
Other Broadband355 (32)323 597 (55)542 
Voice and Other252 (9)243 447 (20)427 
Total Mass Markets Revenue764 (45)719 1,195 (80)1,115 
Total Revenue$3,661 (266)3,395 4,612 (353)4,259 
Six Months Ended June 30, 2023Six Months Ended June 30, 2022
Total revenue
Adjustments for non-ASC 606 revenue (1)
Total revenue from contracts with customersTotal revenue
Adjustments for non-ASC 606 revenue (1)
Total revenue from contracts with customers
(Dollars in millions)
Business Segment by Sales Channel and Product Category
Large Enterprise
Grow$1,108 (157)951 1,311 (205)1,106 
Nurture744 — 744 898 — 898 
Harvest404 — 404 548 — 548 
Other117 (2)115 117 (3)114 
Total Large Enterprise Revenue2,373 (159)2,214 2,874 (208)2,666 
Mid-Market Enterprise
Grow398 (15)383 373 (16)357 
Nurture413 — 413 472 — 472 
Harvest194 (2)192 275 (4)271 
Other17 (3)14 15 — 15 
Total Mid-Market Enterprise Revenue1,022 (20)1,002 1,135 (20)1,115 
Public Sector
Grow234 (38)196 231 (54)177 
Nurture199 — 199 259 — 259 
Harvest194 — 194 248 (2)246 
Other217 — 217 235 (1)234 
Total Public Sector Revenue844 (38)806 973 (57)916 
Wholesale
Grow526 (133)393 473 (135)338 
Nurture418 (14)404 525 (14)511 
Harvest664 (87)577 812 (114)698 
Other6 — 6 26 — 26 
Total Wholesale Revenue1,614 (234)1,380 1,836 (263)1,573 
Business Segment by Product Category
Grow2,266 (343)1,923 2,388 (410)1,978 
Nurture1,774 (14)1,760 2,154 (14)2,140 
Harvest1,456 (89)1,367 1,883 (120)1,763 
Other357 (5)352 393 (4)389 
Total Business Segment Revenue5,853 (451)5,402 6,818 (548)6,270 
Mass Markets Segment by Product Category
Fiber Broadband309 (8)301 296 (10)286 
Other Broadband724 (65)659 1,207 (111)1,096 
Voice and Other513 (18)495 967 (99)868 
Total Mass Markets Revenue1,546 (91)1,455 2,470 (220)2,250 
Total Revenue$7,399 (542)6,857 9,288 (768)8,520 
_____________________________________________________________________
(1)Includes regulatory revenue and lease revenue not within the scope of ASC 606.
Operating Lease Income

Lumen Technologies leases various dark fiber, office facilities, colocation facilities, switching facilities, other network sites and service equipment to third parties under operating leases. Lease and sublease income are included in operating revenue in our consolidated statements of operations.

For the three months ended June 30, 2023 and 2022, our gross rental income was $257 million and $334 million, respectively, which represents approximately 7% of our operating revenue for both the three months ended June 30, 2023 and 2022. For the six months ended June 30, 2023 and 2022, our gross rental income was $526 million and $671 million, respectively, which represents approximately 7% of our operating revenue for both the six months ended June 30, 2023 and 2022.

Customer Receivables and Contract Balances

The following table provides balances of customer receivables, contract assets and contract liabilities, net of amounts classified as held for sale, as of June 30, 2023 and December 31, 2022:

June 30, 2023December 31, 2022
 (Dollars in millions)
Customer receivables(1)
$1,425 1,424 
Contract assets(2)
27 34 
Contract liabilities(3)
710 656 
______________________________________________________________________
(1)Reflects gross customer receivables of $1.5 billion at both June 30, 2023 and December 31, 2022, net of allowance for credit losses of $67 million and $73 million, at June 30, 2023 and December 31, 2022, respectively. These amounts exclude customer receivables, net, classified as held for sale of $77 million at June 30, 2023 and $76 million at December 31, 2022 related to the EMEA business.
(2)These amounts exclude contract assets classified as held for sale of $12 million at June 30, 2023 and $16 million at December 31, 2022 related to the EMEA business.
(3)These amounts exclude contract liabilities classified as held for sale of $62 million at June 30, 2023 and $59 million at December 31, 2022 related to the EMEA business.

Contract liabilities are consideration we have received from our customers or billed in advance of providing goods or services promised in the future. We defer recognizing this consideration as revenue until we have satisfied the related performance obligation to the customer. Contract liabilities include recurring services billed one month in advance and installation and maintenance charges that are deferred and recognized over the actual or expected contract term, which typically ranges from one to five years depending on the service. Contract liabilities are included within deferred revenue on our consolidated balance sheets. During the three and six months ended June 30, 2023, we recognized $42 million and $347 million of revenue that was included in contract liabilities of $715 million as of January 1, 2023, including contract liabilities that were classified as held for sale. During the three and six months ended June 30, 2022, we recognized $52 million and $447 million, respectively, of revenue that was included in contract liabilities of $841 million as of January 1, 2022, including contract liabilities that were classified as held for sale.

Performance Obligations

As of June 30, 2023, we expect to recognize approximately $6.9 billion of revenue in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied. As of June 30, 2023, the transaction price related to unsatisfied performance obligations that are expected to be recognized for the remainder of 2023, 2024 and thereafter was $1.6 billion, $2.0 billion and $3.3 billion, respectively.
These amounts exclude (i) the value of unsatisfied performance obligations for contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (for example, uncommitted usage or non-recurring charges associated with professional or technical services to be completed), (ii) contracts that are classified as leasing arrangements or government assistance that are not subject to ASC 606, and (iii) the value of unsatisfied performance obligations for contracts which relate to our EMEA business classified as held for sale.

Contract Costs

The following tables provide changes in our contract acquisition costs and fulfillment costs:

Three Months Ended June 30, 2023Three Months Ended June 30, 2022
Acquisition CostsFulfillment CostsAcquisition CostsFulfillment Costs
(Dollars in millions)(Dollars in millions)
Beginning of period balance(1)(2)
$192 182 215 187 
Costs incurred29 39 41 41 
Amortization(39)(36)(49)(39)
Change in contract costs held for sale1 1 1 (1)
End of period balance(5)(6)
$183 186 208 188 

Six Months Ended June 30, 2023Six Months Ended June 30, 2022
Acquisition CostsFulfillment CostsAcquisition CostsFulfillment Costs
(Dollars in millions)(Dollars in millions)
Beginning of period balance(3)(4)
$202 192 222 186 
Costs incurred65 79 84 81 
Amortization(80)(71)(101)(78)
Change in contract costs held for sale(4)(14)3 (1)
End of period balance(5)(6)
$183 186 208 188 
______________________________________________________________________
(1)Beginning of period balance for the three months ended June 30, 2023 excludes $11 million of acquisition costs and $15 million of fulfillment costs classified as held for sale related to the EMEA business.
(2)Beginning of period balance for the three months ended June 30, 2022 excludes $32 million of both acquisition costs and fulfillment costs classified as held for sale (related to both the Latin American business and the ILEC business, sold in the third and fourth quarters of 2022, respectively).
(3)Beginning of period balance for the six months ended June 30, 2023 excludes $6 million of acquisition costs and no fulfillment costs classified as held for sale related to the EMEA business.
(4)Beginning of period balance for the six months ended June 30, 2022 excludes acquisition costs and fulfillment costs classified as held for sale of $34 million and $32 million, respectively (related to both the Latin American business and the ILEC business, sold in the third and fourth quarters of 2022, respectively).
(5)End of period balance for the three and six months ended June 30, 2023 excludes $10 million of acquisition costs and $14 million of fulfillment costs classified as held for sale related to the EMEA business.
(6)End of period balance for the three and six months ended June 30, 2022 excludes acquisition costs and fulfillment costs classified as held for sale of $31 million and $33 million, respectively (related to both the Latin American business and the ILEC business, sold in the third and fourth quarters of 2022, respectively).

Acquisition costs include commission fees paid to employees as a result of obtaining contracts. Fulfillment costs include third party and internal costs associated with the provision, installation and activation of services to customers, including labor and materials consumed for these activities.
Deferred acquisition and fulfillment costs are amortized based on the transfer of services on a straight-line basis over the average contract life of approximately 36 months for mass markets customers and 33 months for business customers. Amortized fulfillment costs are included in cost of services and products and amortized acquisition costs are included in selling, general and administrative expenses in our consolidated statements of operations. The amount of these deferred costs that are anticipated to be amortized in the next 12 months are included in other current assets on our consolidated balance sheets. The amount of deferred costs expected to be amortized beyond the next twelve months is included in other noncurrent assets on our consolidated balance sheets. Deferred acquisition and fulfillment costs are assessed for impairment on a quarterly basis.