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Revenue Recognition
 9 Months Ended
Sep. 30, 2022
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:

•Compute and Application Services, which include our Edge Cloud services, IT solutions, Unified Communications and Collaboration ("UC&C"), data center, content delivery network ("CDN") and managed security services;

•IP and Data Services, which include Ethernet, IP, and VPN data networks, including software-defined wide area networks ("SD WAN") based services, Dynamic Connections and Hyper WAN;

•Fiber Infrastructure Services, which include dark fiber, optical services and equipment; and

•Voice and Other, which include Time Division Multiplexing ("TDM") voice, private line and other legacy services.

Since the first quarter of 2022, we have categorized our products and services revenue among the following categories for the Mass Markets segment:

•Fiber Broadband, which includes high speed fiber-based broadband services to residential and small business customers;

•Other Broadband, which primarily includes lower speed copper-based broadband services to residential and small business customers; and

•Voice and Other, which includes revenues from (i) providing local and long-distance services, professional services, and other ancillary services, and (ii) federal broadband and state support payments.

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 the Latin American business revenues prior to it being sold on August 1, 2022.
Three Months Ended September 30, 2022Three Months Ended September 30, 2021
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
International and Global Accounts ("IGAM")
Compute and Application Services$154 (47)107 183 (71)112 
IP and Data Services350 — 350 431 — 431 
Fiber Infrastructure199 (33)166 231 (33)198 
Voice and Other150 — 150 182 — 182 
Total IGAM Revenue853 (80)773 1,027 (104)923 
Large Enterprise
Compute and Application Services148 (16)132 172 (15)157 
IP and Data Services378 — 378 394 — 394 
Fiber Infrastructure117 (11)106 143 (11)132 
Voice and Other201 — 201 233 — 233 
Total Large Enterprise Revenue844 (27)817 942 (26)916 
Mid-Market Enterprise
Compute and Application Services35 (7)28 30 (8)22 
IP and Data Services406 (1)405 421 (1)420 
Fiber Infrastructure49 (2)47 50 (2)48 
Voice and Other128 — 128 147 — 147 
Total Mid-Market Enterprise Revenue618 (10)608 648 (11)637 
Wholesale
Compute and Application Services62 (39)23 46 (39)7 
IP and Data Services283 — 283 297 — 297 
Fiber Infrastructure165 (28)137 154 (30)124 
Voice and Other392 (62)330 394 (63)331 
Total Wholesale Revenue902 (129)773 891 (132)759 
Business Segment by Product Category
Compute and Application Services399 (109)290 431 (133)298 
IP and Data Services1,417 (1)1,416 1,543 (1)1,542 
Fiber Infrastructure530 (74)456 578 (76)502 
Voice and Other871 (62)809 956 (63)893 
Total Business Segment Revenue3,217 (246)2,971 3,508 (273)3,235 
Mass Markets Segment by Product Category
Fiber Broadband160 (4)156 135 — 135 
Other Broadband580 (55)525 619 (56)563 
Voice and Other433 (26)407 625 (143)482 
Total Mass Markets Revenue1,173 (85)1,088 1,379 (199)1,180 
Total Revenue$4,390 (331)4,059 4,887 (472)4,415 
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021
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
International and Global Accounts ("IGAM")
Compute and Application Services$521 (191)330 547 (210)337 
IP and Data Services1,190 — 1,190 1,287 — 1,287 
Fiber Infrastructure642 (102)540 665 (95)570 
Voice and Other495 — 495 559 — 559 
Total IGAM Revenue2,848 (293)2,555 3,058 (305)2,753 
Large Enterprise
Compute and Application Services473 (45)428 515 (45)470 
IP and Data Services1,151 — 1,151 1,192 — 1,192 
Fiber Infrastructure359 (35)324 403 (38)365 
Voice and Other622 — 622 730 — 730 
Total Large Enterprise Revenue2,605 (80)2,525 2,840 (83)2,757 
Mid-Market Enterprise
Compute and Application Services102 (21)81 94 (25)69 
IP and Data Services1,229 (3)1,226 1,291 (4)1,287 
Fiber Infrastructure148 (6)142 156 (6)150 
Voice and Other401 — 401 461 — 461 
Total Mid-Market Enterprise Revenue1,880 (30)1,850 2,002 (35)1,967 
Wholesale
Compute and Application Services183 (118)65 141 (120)21 
IP and Data Services864 — 864 900 — 900 
Fiber Infrastructure480 (84)396 463 (89)374 
Voice and Other1,174 (189)985 1,221 (188)1,033 
Total Wholesale Revenue2,701 (391)2,310 2,725 (397)2,328 
Business Segment by Product Category
Compute and Application Services1,279 (375)904 1,297 (400)897 
IP and Data Services4,434 (3)4,431 4,670 (4)4,666 
Fiber Infrastructure1,629 (227)1,402 1,687 (228)1,459 
Voice and Other2,692 (189)2,503 2,971 (188)2,783 
Total Business Segment Revenue10,034 (794)9,240 10,625 (820)9,805 
Mass Markets Segment by Product Category
Fiber Broadband456 (14)442 387 — 387 
Other Broadband1,786 (166)1,620 1,899 (166)1,733 
Voice and Other1,402 (125)1,277 1,929 (431)1,498 
Total Mass Markets Revenue3,644 (305)3,339 4,215 (597)3,618 
Total Revenue$13,678 (1,099)12,579 14,840 (1,417)13,423 
_____________________________________________________________________
(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 September 30, 2022 and 2021, our gross rental income was $307 million and $329 million, respectively, which represents approximately 7% of our operating revenue for both the three months ended September 30, 2022 and 2021. For the nine months ended September 30, 2022, and 2021, our gross rental income was $978 million and $988 million, respectively, which represents approximately 7% of our operating revenue for both the nine months ended September 30, 2022 and 2021.

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, 2022 and December 31, 2021:

September 30, 2022December 31, 2021
 (Dollars in millions)
Customer receivables(1)
$1,407 1,493 
Contract assets(2)
56 73 
Contract liabilities(3)
714 680 
______________________________________________________________________
(1)Reflects gross customer receivables of $1.5 billion and $1.6 billion, net of allowance for credit losses of $84 million and $102 million, at September 30, 2022 and December 31, 2021, respectively. These amounts exclude customer receivables, net, classified as held for sale of $175 million at September 30, 2022 (related to the ILEC business) and $288 million at December 31, 2021 (related to both the Latin American business and the ILEC business).
(2)These amounts exclude contract assets classified as held for sale of $7 million at September 30, 2022 (related to the ILEC business) and $9 million at December 31, 2021 (related to both the Latin American business and the ILEC business).
(3)These amounts exclude contract liabilities classified as held for sale of $76 million at September 30, 2022 (related to the ILEC business) and $161 million at December 31, 2021 (related to both the Latin American business and the ILEC 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 in our consolidated balance sheets. During the three and nine months ended September 30, 2022, we recognized $47 million and $494 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. During the three and nine months ended September 30, 2021, we recognized $61 million and $544 million, respectively, of revenue that was included in contract liabilities of $950 million as of January 1, 2021.

Performance Obligations

As of September 30, 2022, we expect to recognize approximately $5.9 billion of revenue in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied. We expect to recognize approximately 69% of this revenue through 2024, 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), (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 recently completed divestitures.

Contract Costs

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

Three Months Ended September 30, 2022Three Months Ended September 30, 2021
Acquisition CostsFulfillment CostsAcquisition CostsFulfillment Costs
(Dollars in millions)(Dollars in millions)
Beginning of period balance(1)
$208 188 271 217 
Costs incurred45 38 43 37 
Amortization(49)(35)(51)(37)
Change in contract costs held for sale3 (2)(35)(31)
End of period balance(2)
$207 189 228 186 

Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021
Acquisition CostsFulfillment CostsAcquisition CostsFulfillment Costs
(Dollars in millions)(Dollars in millions)
Beginning of period balance(3)
$222 186 289 216 
Costs incurred129 119 132 112 
Amortization(150)(113)(158)(111)
Change in contract costs held for sale6 (3)(35)(31)
End of period balance(2)
$207 189 228 186 
______________________________________________________________________
(1)Beginning of period balance for the three months ended September 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).
(2)Ending of period balance for the three and nine months ended September 30, 2022 excludes acquisition costs and fulfillment costs classified as held for sale of $28 million and $35 million, respectively, related to the ILEC business. Ending of period balance for the three and nine months ended September 30, 2021 excludes acquisition costs and fulfillment costs classified as held for sale of $35 million and $31 million, respectively (related to both the Latin American business and the ILEC business).
(3)Beginning of period balance for the nine months ended September 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).

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 32 months for mass markets customers and 30 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 non-current assets on our consolidated balance sheets. Deferred acquisition and fulfillment costs are assessed for impairment on a quarterly basis.