XML 21 R10.htm IDEA: XBRL DOCUMENT v3.24.1.u1
Revenue Recognition
 3 Months Ended
Mar. 31, 2024
Revenue from Contract with Customer [Abstract]  
Revenue Recognition Revenue Recognition
We categorize our revenue derived from our operations serving our mass markets customers, primarily within the first three categories listed below, and our revenue derived from our operations servicing our business customers, primarily in the 'Harvest', 'Nurture' and 'Grow' categories listed below:
•Other Broadband, under which we provide primarily lower speed broadband services to residential and small business customers utilizing our copper-based network infrastructure;

•Voice and Other, under which we derive revenues from (i) providing local and long-distance services, professional services, and other ancillary services, (ii) federal broadband and state support payments, and (iii) equipment, IT solutions and other services;

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

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

•Nurture, which includes our more mature offerings, including primarily ethernet;

•Grow, which includes products and services that we anticipate will grow, including dark fiber and wavelengths services; and

•Affiliate Services, which are (i) communications services that we provide to our affiliates and also provide to external customers and (ii) application development and support services and other support services that we provide to our affiliates, as described further in Note 7—Affiliate Transactions.

Reconciliation of Total Revenue to Revenue from Contracts with Customers

The following table provides our total revenue by product and service category as well as 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:
Three Months Ended March 31, 2024Three Months Ended March 31, 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)
Other Broadband$252 (21)231 293 (25)268 
Voice and Other133 (4)129 156 (4)152 
Fiber Broadband99 (3)96 122 (3)119 
Harvest239 (32)207 267 (37)230 
Nurture89 (2)87 105 (2)103 
Grow34 — 34 38 — 38 
Affiliate Services546 (12)534 560 (11)549 
Total revenue$1,392 (74)1,318 1,541 (82)1,459 
____________________________________________________________
(1)Includes regulatory revenue and lease revenue not within the scope of ASC 606.

Operating Lease Revenue

Qwest leases various data transmission capacity, office facilities, switching facilities and other network sites 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 March 31, 2024 and 2023, our gross rental income was $71 million and $80 million, respectively, which represents approximately 5% of our operating revenue for both periods.

Customer Receivables and Contract Balances

The following table provides balances of customer receivables, contract assets and contract liabilities as of March 31, 2024 and December 31, 2023:
March 31, 2024December 31, 2023
 (Dollars in millions)
Customer receivables (1)
$252 210 
Contract assets7 7 
Contract liabilities261 269 
______________________________________________________________________
(1)Reflects gross customer receivables, including gross affiliate receivables, of $285 million and $239 million, net of allowance for credit losses of $33 million and $29 million, at March 31, 2024 and December 31, 2023, respectively.

Contract liabilities consist of 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 months ended March 31, 2024 and 2023, we recognized $135 million and $139 million, respectively, of revenue that was included in contract liabilities of $269 million and $343 million as of January 1, 2024 and January 1, 2023, respectively.
Performance Obligations

As of March 31, 2024, we expect to recognize approximately $1.8 billion of revenue in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied. As of March 31, 2024, the transaction price related to unsatisfied performance obligations that are expected to be recognized for the remainder of 2024, 2025 and thereafter was $649 million, $594 million and $566 million, 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 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 March 31, 2024Three Months Ended March 31, 2023
Acquisition CostsFulfillment CostsAcquisition CostsFulfillment Costs
(Dollars in millions)
Beginning Balance$58 $46 61 $46 
Cost incurred10 10 9 10 
Amortization(11)(9)(12)(10)
Ending Balances$57 47 58 46 

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 communications 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 50 months for mass markets customers and average contract life of 35 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 a quarterly basis.