Revenue from Contracts with Customers

The Company earns revenue primarily through the sale of our wireless telecommunications services, wireless equipment, and business, residential, and enterprise cable and wireline services that include video, internet, voice, and data services as follows:



(in thousands)	Wireless			Cable			Wireline			Consolidated
Wireless service	$	89,760		$	—		$	—		$	89,760
Wireless equipment	17,374			—			—			17,374
Business, residential and enterprise	—			29,131			10,691			39,822
Tower	2,896			1,046			5,665			9,607
Other	368			1,534			3,351			5,253
Total revenue	110,398			31,711			19,707			161,816
Internal revenues	(1,239		)	(1,031		)	(7,814		)	(10,084		)
Total operating revenue	$	109,159		$	30,680		$	11,893		$	151,732

Wireless service

The majority of the Company's revenue is earned through providing network access to Sprint under the affiliate agreement, which represents approximately 59% of consolidated revenues. Wireless service revenue is variable based on billed revenues to Sprint’s subscribers in the Company's affiliate area, less applicable fees retained by Sprint. The Company's fee related to Sprint’s postpaid customers is the amount Sprint bills its subscribers that is reduced by customer credits, write-offs of subscriber receivables, and an 8% management and 8.6% service fee retained by Sprint. The Company is also charged for the costs of subsidized handsets sold through Sprint’s national channels as well as commissions paid by Sprint to third-party resellers in the Company's service territory.

The Company's fee related to Sprint’s prepaid customers is the amount Sprint bills its customer less certain charges to acquire and support the customer, based on national averages for Sprint’s prepaid programs. Sprint retains a 6% management fee on prepaid wireless revenues, and costs to provide support to Sprint’s prepaid customers.

The Company considers Sprint, rather than Sprint's subscribers, to be the customer under the new revenue standard and the Company's performance obligation is to provide Sprint a series of continuous network access services. Under Topic 606, the Company's revenues are variable based on the amount Sprint bills its customer each month reduced by the retained management and service fees. The reimbursement to Sprint for the costs of subsidized handsets sold through Sprint’s national channels, as well as commissions paid by Sprint to third-party resellers in our service territory represent consideration payable to a customer that is not in exchange for a distinct service under Topic 606. Therefore, these reimbursements result in increases to our contract asset position that are subsequently recognized as a reduction of revenue over the average subscriber life of approximately two years which is the period the Company expects those payments to result in increased revenues. Historically, under ASC 605 the customer was considered the Sprint subscriber rather than Sprint and as a result, reimbursement payments to Sprint for costs of subsidized handsets and commissions were recorded as operating expenses in the period incurred. During 2017, these costs totaled $63.5 million recorded in cost of goods and services, and $16.9 million recorded in selling, general and administrative costs. On January 1, 2018, upon adoption, the Company recorded a wireless contract asset of approximately $42.8 million. During the three month period ended March 31, 2018, payments that increased the wireless contract asset balance totaled $13.8 and amortization reflected as a reduction of revenue totaled approximately $13.4 million. The wireless contract asset balance as of March 31, 2018 was approximately$43.2 million.

Wireless equipment

The Company owns and operates Sprint-branded retail stores within their geographic territory from which the Company sells equipment, primarily wireless handsets, and service to Sprint subscribers. Equipment is generally purchased from Sprint and resold to subscribers under subsidized plans or under equipment financing plans. The equipment financing plans are operated by Sprint who purchases equipment from the Company and resells the equipment to subscribers under financing plans. Historically, under ASC 605, the Company concluded that the Company was the agent in these equipment financing transactions and recorded revenues net of related handset costs which were approximately $63.8 million in 2017. Under Topic 606 the Company concluded that the Company is the principal in the transaction as the Company controls the inventory prior to sale and accordingly revenues and handset costs are recorded on a gross basis.

Business, residential and enterprise

The Company earns revenue in the cable and wireline segments from business, residential, and enterprise customers where the performance obligations are to provide cable and telephone network services, sell and lease equipment and wiring services, and lease fiber-optic cable strands. The Company's arrangements are generally composed of contracts that are cancellable at the customer’s discretion without penalty at any time. As there are multiple performance obligations in these arrangements, the Company recognizes revenue based on the standalone selling price of each distinct good or service. The Company generally recognized these revenues over time as customers simultaneously receive and consume the benefits of the service, with the exception of equipment sales and home wiring which are recognized as revenue at a point in time when control transfers and when installation is complete, respectively.

Under Topic 606, the Company concluded that installation services do not represent a separate performance obligation. Accordingly, installation fees are allocated to services and are recognized ratably over the longer of the contract term or the period the unrecognized portion of the fee remains material to the contract, typically 10 and 11 months for cable and wireline customers, respectively. Historically, the Company deferred these fees over the estimated customer life of 42 months. Additionally, the Company incurs commission and installation costs related to in-house and third-party vendors that were previously expensed as incurred. Under Topic 606, the Company capitalizes and amortizes these commission and installation costs over the expected benefit period which is approximately 44 months, 72 months, and 46 months, for cable, wireline, and enterprise business, respectively.

Tower / Other

Tower revenues consist primarily of tower space leases accounted for under Topic 840, Leases, and Other revenues include network access-related charges to for service provided to customers across all three operating segments.

The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of the new revenue standard were as follows:



(in thousands)	Balance at December 31, 2017		Adjustments due to Topic 606			Balance at January 1, 2018
Assets
Prepaid expenses and other	$	17,111	$	36,577		$	53,688
Deferred charges and other	13,690		16,107			29,797
Liabilities
Advanced billing and customer deposits	$	21,153	$	(14,302	)	$	6,851
Deferred income taxes	100,879		18,151			119,030
Other long-term liabilities	15,293		(1,200		)	14,093
Retained earnings	297,205		50,035			347,240

In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated income statement and balance sheet was as follows:



	Three Months Ended March 31, 2018
(in thousands)	As Reported		Balances without Adoption of Topic 606		Effect of Change Higher/(Lower)
Operating revenues	$	151,732	$	155,871	$	(4,139	)
Operating expenses:
Cost of services	49,342		49,199		143
Cost of goods sold	15,805		6,118		9,687
Selling, general and administrative	28,750		42,968		(14,218		)



	Three Months Ended March 31, 2018
(in thousands)	As Reported	Balances without Adoption of Topic 606	Effect of Change Higher/(Lower)
Assets
Prepaid expenses and other	64,200	27,086	37,114
Deferred charges and other	33,934	18,115	15,819
Liabilities
Deferred income taxes	115,809	97,591	18,218
Advanced billing and customer deposits	6,919	21,221	(14,302	)
Other long-term liabilities	13,787	14,987	(1,200	)
Retained earnings	352,069	301,852	50,217

Remaining performance obligations and transaction price allocated

On March 31, 2018, the Company had approximately $2.5 million of transaction price allocated to unsatisfied performance obligations, which is exclusive of contracts with original expected duration of one year or less. The Company expects to recognize approximately $0.5 million of this amount as revenue during the remaining three quarters of 2018, $0.5 million in 2019, an additional $0.4 million by 2020, and the balance thereafter.

Contract acquisition costs and costs to fulfill contracts

Capitalized contract costs represent contract fulfillment costs and contract acquisition costs which include commissions and installation costs in our cable and wireline segments. Capitalized contract costs are amortized on a straight line basis over the contract term plus expected renewals. The Company applies the practical expedient to expense contract acquisition costs when incurred if the amortization period would be twelve months or less. The amortization of these costs is included in cost of services, and selling, general and administrative expenses. Amounts capitalized were approximately $9.7 million as of March 31, 2018 of which $4.6 million is presented as prepaid expenses and other and $5.1 million is presented as deferred charges and other assets, net. Amortization recognized during the three-month period ended at March 31, 2018 was approximately $1.3 million. There was no impairment loss in relation to the costs capitalized.