Products and Services Revenues

9 Months Ended

Sep. 30, 2012

Products and Services Revenues

Products and Services Revenues

(7) Products and Services Revenues

        We are an integrated communications company engaged primarily in providing an array of communications services, including local, network access, private line (including special access), broadband, Ethernet, data, wireless and video 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 and services into the following three categories:

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  Strategic services, which include primarily private line (including special access), broadband, video (including resold satellite video services) and Verizon Wireless services;

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  Legacy services, which include primarily local, integrated services digital network ("ISDN") (which uses regular telephone lines to support voice, video and data applications), switched access and traditional wide area network ("WAN") services (which allows a local communications network to link to networks in remote locations); and

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  Affiliates and other services, which consist primarily of universal service funds ("USF") revenues and surcharges and services we provide to our non-consolidated affiliates. We provide to our affiliates telecommunications services that we also provide to external customers. In addition, we provide to our affiliates computer system development and support services and network support and technical services.

        During the first quarter of 2012, we reclassified certain prior period revenues between the aforementioned three categories to conform to the current period presentation.

        Since the April 1, 2011 closing of CenturyLink's indirect acquisition of us, our operations have been integrated into and reported as part of the segments of CenturyLink. CenturyLink's chief operating decision maker ("CODM") has become 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 SEC. Consequently, we do not provide our discrete financial information to the CODM on a regular basis. As such, we believe we now have one reportable segment and have reclassified our prior period results to conform to our current view.

        Operating revenues for our products and services are summarized below:

	Successor								Predecessor
	Three Months Ended September 30, 2012		Three Months Ended September 30, 2011		Nine Months Ended September 30, 2012		Six Months Ended September 30, 2011		Three Months Ended March 31, 2011
	(Dollars in millions)
Strategic services	$	819		794		2,442		1,585		792
Legacy services		860		928		2,634		1,882		1,003
Affiliates and other services		504		468		1,562		954		473
Total operating revenues	$	2,183		2,190		6,638		4,421		2,268

        Affiliates and other services revenues include revenues from universal service funds which allow us to recover a portion of our costs under federal and state cost recovery mechanisms and certain surcharges to our customers, including billings for our required contributions to several USF programs. These surcharge billings to our customers are reflected in our consolidated statements of operations. Because the amount of these recorded revenues and expenses offset each other, these surcharges do not impact our net income.

        The table below presents the aggregate USF surcharges recognized on a gross basis:

	Successor								Predecessor
	Three Months Ended September 30, 2012		Three Months Ended September 30, 2011		Nine Months Ended September 30, 2012		Six Months Ended September 30, 2011		Three Months Ended March 31, 2011
	(Dollars in millions)
USF and surcharges included in operating revenues and expenses	$	42		39		129		80		43