Revenue Recognition

12 Months Ended

Dec. 31, 2020

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

Reconciliation of Total Revenue to Revenue from Contracts with Customers

The following tables provide disaggregation of revenue from contracts with customers based on service offerings for the years ended December 31, 2020, 2019 and 2018. It also shows the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards.

	Year Ended December 31, 2020
	Total Revenue		Adjustments for Non-ASC 606 Revenue(7)	Total Revenue from Contracts with Customers
	(Dollars in millions)
IP and data services (1)	$	524	—	524
Transport and infrastructure (2)	2,604		(297)	2,307
Voice and collaboration (3)	1,517		—	1,517
IT and managed services (4)	2		—	2
Regulatory revenue (5)	179		(179)	—
Affiliate revenue (6)	2,487		(3)	2,484
Total revenue	$	7,313	(479)	6,834
Timing of revenue
Goods and services transferred at a point in time				$	46
Services performed over time				6,788
Total revenue from contracts with customers				$	6,834

	Year Ended December 31, 2019
	Total Revenue		Adjustments for Non-ASC 606 Revenue(7)	Total Revenue from Contracts with Customers
	(Dollars in millions)
IP and data services (1)	$	595	—	595
Transport and infrastructure (2)	2,773		(308)	2,465
Voice and collaboration (3)	1,618		—	1,618
IT and managed services (4)	4		—	4
Regulatory revenue (5)	189		(189)	—
Affiliate revenue (6)	2,873		—	2,873
Total revenue	$	8,052	(497)	7,555
Timing of revenue
Goods and services transferred at a point in time				$	54
Services performed over time				7,501
Total revenue from contracts with customers				$	7,555

	Year Ended December 31, 2018
	Total Revenue		Adjustments for Non-ASC 606 Revenue(7)	Total Revenue from Contracts with Customers
	(Dollars in millions)
IP and data services (1)	$	587	—	587
Transport and infrastructure (2)	2,870		(317)	2,553
Voice and collaboration (3)	1,783		—	1,783
IT and managed services (4)	6		—	6
Regulatory revenue (5)	214		(214)	—
Affiliate revenue (6)	2,935		—	2,935
Total revenue	$	8,395	(531)	7,864
Timing of revenue
Goods and services transferred at a point in time				$	69
Services performed over time				7,795
Total revenue from contracts with customers				$	7,864

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(1)	Includes primarily VPN data networks, Ethernet, IP and other ancillary services
(2)	Includes primarily broadband, private line (including business data services) and other ancillary services.
(3)	Includes local voice, including wholesale voice, and other ancillary services.
(4)	Includes IT services and managed services revenue.
(5)	Includes CAF II and federal and state USF support revenue.
(6)	Includes telecommunications and data services we bill to our affiliates.
(7)	Includes regulatory revenue and lease revenue not within the scope of ASC 606.

Customer Receivables and Contract Balances

The following table provides balances of customer receivables, contract assets and contract liabilities as of December 31, 2020 and December 31, 2019:

	December 31, 2020		December 31, 2019
	(Dollars in millions)
Customer receivables (1)	$	346	430
Contract assets	13		18
Contract liabilities	300		338

(1)Gross customer receivables, including gross affiliate receivables, of $396 million and $462 million, net of allowance for credit losses of $50 million and $32 million, at December 31, 2020 and December 31, 2019, respectively.

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 in our consolidated balance sheet. During the years ended December 31, 2020, December 31, 2019 and December 31, 2018, we recognized $223 million, $273 million and $42 million, respectively, of revenue that was included in contract liabilities as of January 1, 2020, January 1, 2019 and January 1, 2018, respectively.

Performance Obligations

As of December 31, 2020, our estimated revenue expected to be recognized in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied is approximately $173 million. We expect to recognize approximately 99% of this revenue through 2023, with the balance recognized thereafter.

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 that are not subject to ASC 606.

Contract Costs

The following table provides changes in our contract acquisition costs and fulfillment costs:

	Year Ended December 31, 2020
	Acquisition Costs		Fulfillment Costs
	(Dollars in millions)
Beginning of period balance	$	86	64
Costs incurred	49		23
Amortization	(62)		(33)
End of period balance	$	73	54

	Year Ended December 31, 2019
	Acquisition Costs		Fulfillment Costs
	(Dollars in millions)
Beginning of period balance	$	90	57
Costs incurred	60		39
Amortization	(64)		(32)
End of period balance	$	86	64

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 telecommunications 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 30 months for consumer customers and average contract life of 29 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 12 months is included in other non-current assets on our consolidated balance sheets. Deferred acquisition and fulfillment costs are assessed for impairment on an annual basis.Products and Services Revenue

We are an integrated communications company engaged primarily in providing an array of communications services, including local voice, broadband, private line (including business data services), Ethernet, network access, information technology and other ancillary services. We strive to maintain our customer relationships by, among other things, bundling our service offerings to provide our customers with a complete offering of integrated communications services.

We categorize our products, services and revenue among the following six categories:

•IP and Data Services, which include primarily VPN data networks, Ethernet, retail video, IP and other ancillary services;

•Transport and Infrastructure, which include broadband, private line (including business data services) and other ancillary services;

•Voice and Collaboration, which includes primarily local voice, including wholesale voice, and other ancillary services;

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

•Regulatory Revenue, which consist of Universal Service Fund ("USF") and Connect America Fund ("CAF") support payments and other operating revenue. We receive federal support payments from both federal and state USF programs and from the federal CAF program. These support payments are government subsidies designed to reimburse us for various costs related to certain telecommunications services including the costs of deploying, maintaining and operating voice and broadband infrastructure in high-cost rural areas where we are not able to fully recover our costs from our customers; and

•Affiliate Services, which are telecommunication services we provide to our affiliates that we also provide to our external customers. In addition, we provide to our affiliates computer system development and support services, network support and technical services.

From time to time, we may change the categorization of our products and services.

Our operating revenue for our products and services consisted of the following categories for the years ended December 31, 2020, 2019 and 2018:

	Years Ended December 31,
	2020		2019	2018
	(Dollars in millions)
IP and Data Services	$	524	595	587
Transport and Infrastructure	2,604		2,773	2,870
Voice and Collaboration	1,517		1,618	1,783
IT and Managed Services	2		4	6
Regulatory Services	179		189	214
Affiliate Services	2,487		2,873	2,935
Total operating revenue	$	7,313	8,052	8,395

We do not have any single external customer that provides more than 10% of our total consolidated operating revenue. Substantially all of our consolidated revenue comes from customers located in the United States.

Our operations are integrated into and reported as part of the consolidated segment data of Lumen Technologies. Lumen's chief operating decision maker ("CODM") is our CODM, but reviews our financial information on an aggregate basis only in connection with our quarterly and annual reports that we file with the Securities and Exchange Commission. Consequently, we do not provide our discrete financial information to the CODM on a regular basis. As such, we determined that we have one reportable segment.