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Revenue Recognition
 9 Months Ended
Sep. 30, 2024
Revenue from Contract with Customer [Abstract]  
Revenue Recognition
Note 3—Revenue Recognition

Product and Service Categories

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

•Grow, which includes existing and emerging products and services in which we are significantly investing, including our conduit, dark fiber, Edge Cloud, IP, managed security, software-defined wide area networks ("SD WAN"), 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, and private line services; and

•Other, which includes equipment sales, managed and professional service 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 EMEA business prior to its sales on November 1, 2023. See Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information on these divestitures.
Three Months Ended September 30, 2024Three Months Ended September 30, 2023
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$436 (73)363 429 (48)381 
Nurture253 — 253 297 — 297 
Harvest106 — 106 131 — 131 
Other44 — 44 57 (3)54 
Total Large Enterprise Revenue839 (73)766 914 (51)863 
Mid-Market Enterprise
Grow211 (6)205 201 (6)195 
Nurture167 — 167 203 — 203 
Harvest83 (1)82 93 (1)92 
Other10 (4)6 9 (1)8 
Total Mid-Market Enterprise Revenue471 (11)460 506 (8)498 
Public Sector
Grow131 (21)110 118 (22)96 
Nurture87 — 87 98 — 98 
Harvest86 (1)85 96 — 96 
Other123 — 123 133 — 133 
Total Public Sector Revenue427 (22)405 445 (22)423 
Wholesale
Grow259 (73)186 256 (61)195 
Nurture183 (6)177 206 (5)201 
Harvest261 (35)226 312 (42)270 
Other3 — 3 2 — 2 
Total Wholesale Revenue706 (114)592 776 (108)668 
International and Other
Grow39 (1)38 127 (29)98 
Nurture39 — 39 70 — 70 
Harvest13 — 13 30 — 30 
Other2 — 2 37 — 37 
Total International and Other93 (1)92 264 (29)235 
Business Segment by Product Category
Grow1,076 (174)902 1,131 (166)965 
Nurture729 (6)723 874 (5)869 
Harvest549 (37)512 662 (43)619 
Other182 (4)178 238 (4)234 
Total Business Segment Revenue2,536 (221)2,315 2,905 (218)2,687 
Mass Markets Segment by Product Category
Fiber Broadband190 (3)187 163 (4)159 
Other Broadband282 (25)257 341 (31)310 
Voice and Other213 (5)208 232 (9)223 
Total Mass Markets Revenue685 (33)652 736 (44)692 
Total Revenue$3,221 (254)2,967 3,641 (262)3,379 
Nine Months Ended September 30, 2024Nine Months Ended September 30, 2023
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$1,287 (183)1,104 1,278 (145)1,133 
Nurture779 — 779 890 — 890 
Harvest337 — 337 403 — 403 
Other131 (1)130 153 (5)148 
Total Large Enterprise Revenue2,534 (184)2,350 2,724 (150)2,574 
Mid-Market Enterprise
Grow628 (19)609 601 (21)580 
Nurture533 — 533 632 — 632 
Harvest248 (3)245 283 (3)280 
Other26 (5)21 27 (4)23 
Total Mid-Market Enterprise Revenue1,435 (27)1,408 1,543 (28)1,515 
Public Sector
Grow383 (62)321 354 (60)294 
Nurture262 — 262 298 — 298 
Harvest272 (3)269 290 — 290 
Other378 — 378 350 — 350 
Total Public Sector Revenue1,295 (65)1,230 1,292 (60)1,232 
Wholesale
Grow783 (211)572 792 (194)598 
Nurture562 (20)542 627 (19)608 
Harvest807 (110)697 974 (129)845 
Other7 — 7 9 — 9 
Total Wholesale Revenue2,159 (341)1,818 2,402 (342)2,060 
International and Other
Grow117 (3)114 384 (89)295 
Nurture121 — 121 214 — 214 
Harvest33 — 33 109 — 109 
Other10 — 10 113 — 113 
Total International and Other281 (3)278 820 (89)731 
Business Segment by Product Category
Grow3,198 (478)2,720 3,409 (509)2,900 
Nurture2,257 (20)2,237 2,661 (19)2,642 
Harvest1,697 (116)1,581 2,059 (132)1,927 
Other552 (6)546 652 (9)643 
Total Business Segment Revenue7,704 (620)7,084 8,781 (669)8,112 
Mass Markets Segment by Product Category
Fiber Broadband541 (10)531 473 (12)461 
Other Broadband895 (80)815 1,065 (96)969 
Voice and Other639 (23)616 721 (27)694 
Total Mass Markets Revenue2,075 (113)1,962 2,259 (135)2,124 
Total Revenue$9,779 (733)9,046 11,040 (804)10,236 
_____________________________________________________________________
(1)Includes regulatory revenue and lease revenue not within the scope of ASC 606.

Operating Lease Revenue

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

For the three months ended September 30, 2024 and 2023, our gross rental revenue was $250 million and $254 million, respectively, which represented approximately 8% and 7%, respectively, of our operating revenue for the three months ended September 30, 2024 and 2023. For the nine months ended September 30, 2024 and 2023, our gross rental revenue was $711 million and $780 million, respectively, which represented approximately 7% of our operating revenue for both the nine months ended September 30, 2024 and 2023.

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 September 30, 2024 and December 31, 2023:

September 30, 2024December 31, 2023
 (Dollars in millions)
Customer receivables, less allowance of $53 and $60
$1,193 1,256 
Contract assets
21 29 
Contract liabilities
741 698 

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 nine months ended September 30, 2024, we recognized $47 million and $390 million, respectively, of revenue that was included in contract liabilities of $698 million as of January 1, 2024. During the three and nine months ended September 30, 2023, we recognized $44 million and $391 million, respectively, 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.

Performance Obligations

As of September 30, 2024, we expect to recognize approximately $6.7 billion of revenue in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied. As of September 30, 2024, the transaction price related to unsatisfied performance obligations that are expected to be recognized for the remainder of 2024, 2025 and thereafter was $934 million, $2.5 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) and (ii) contracts that are classified as leasing arrangements or government assistance that are not subject to ASC 606.
Contract Costs

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

Three Months Ended September 30, 2024Three Months Ended September 30, 2023
Acquisition CostsFulfillment CostsAcquisition CostsFulfillment Costs
(Dollars in millions)(Dollars in millions)
Beginning of period balance(1)
$185 204 183 186 
Costs incurred36 41 31 41 
Amortization(32)(36)(37)(35)
End of period balance(3)
$189 209 177 192 

Nine Months Ended September 30, 2024Nine Months Ended September 30, 2023
Acquisition CostsFulfillment CostsAcquisition CostsFulfillment Costs
(Dollars in millions)(Dollars in millions)
Beginning of period balance(2)
$182 184 202 192 
Costs incurred104 126 96 120 
Amortization(97)(101)(117)(106)
Change in contract costs held for sale— — (4)(14)
End of period balance(3)
$189 209 177 192 
______________________________________________________________________
(1)Beginning of period balance for the three months ended September 30, 2023 excludes $10 million of acquisition costs and $14 million fulfillment costs classified as held for sale related to the EMEA business.
(2)Beginning of period balance for the nine months ended September 30, 2023 excludes $6 million of acquisition costs and no fulfillment costs classified as held for sale related to the EMEA business.
(3)End of period balance for the three and nine months ended September 30, 2023 excludes $10 million of acquisition costs and $14 million of fulfillment costs classified as held for sale related to the EMEA business.

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.

We amortize deferred acquisition and fulfillment costs based on the transfer of services on a straight-line basis over the average contract life of approximately 50 months for mass markets customers and 35 months for business customers. We include amortized fulfillment costs in cost of services and products and amortized acquisition costs in Selling, general and administrative in our consolidated statements of operations. We include the amount of these deferred costs that are anticipated to be amortized in the next twelve months in Other under Current Assets on our consolidated balance sheets. We include the amount of deferred costs expected to be amortized beyond the next twelve months in Other under Deferred Credits and Other Liabilities on our consolidated balance sheets. We assess deferred acquisition and fulfillment costs for impairment on a quarterly basis.