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Revenue from Contracts with Customers | 12 Months Ended
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Dec. 31, 2019
Revenue from Contract with Customer [Abstract] |
Revenue from Contracts with Customers | Refer to Note 14, Segment Reporting, for a summary of our revenue streams, which are discussed further below. Wireless Segment Revenue Under the terms of our affiliate agreement with Sprint, we are the exclusive provider to build and operate a portion of Sprint’s nationwide wireless network in a contiguous portion of the Mid-Atlantic states and are licensed to use Sprint’s trademark and FCC spectrum licenses in this Sprint Affiliate Area. In return, we receive a substantial portion of Sprint’s net billings to its subscribers in our Sprint Affiliate Area. Our revenue from this agreement is fully variable and thus our economic risks and rewards under this model are very similar to those of any other wireless carrier. Under ASC 606, we concluded that Sprint is our customer, rather than Sprint's subscribers. Our sole performance obligation to Sprint under this arrangement is to provide Sprint a series of continuous network access services. All of our consideration for this performance obligation is variable based upon Sprint’s net billings to its subscribers who either originated in, or otherwise use our network in the Affiliate Area, less the 8% management and 8.6% service fees that are retained by Sprint. Our variable revenue from those subscriber billings is further reduced by customer credits, and write-off of Sprint’s subscriber receivables. In the case of Sprint’s prepaid subscribers, our revenue represents the subscriber’s bill reduced by costs to acquire and support those subscribers, based upon national averages from Sprint’s prepaid programs, and a 6% management fee. We reimburse Sprint for the cost of subsidized handsets that Sprint sells through its national channel in our Sprint Affiliate Area. Similarly, we also reimburse Sprint for commissions that Sprint pays to third-party dealers in our Sprint Affiliate Area. These reimbursements to Sprint represent consideration payable to our customer, and are thus recorded as a contract asset that amortizes against revenue over the estimated life of Sprint’s relationship with its subscribers in our affiliate area, which ranges from 21 to 53 months. Also included within our contract asset is an allowance for variable consideration, which essentially represents our share of Sprint’s allowance for doubtful accounts due from Sprint’s subscribers. Below is a summary of the Wireless segment contract asset:
(in thousands) |  | 2019 |  | 2018
Beginning Balance |  | $ | 65,674 |  |  | $ | 51,103 |
Contract payments |  | 77,371 |  |  | 61,156 |
Contract amortization against revenue |  | (58,382 | ) |  | (46,585 | )
Ending Balance |  | $ | 84,663 |  |  | $ | 65,674 |
The Wireless segment also sells cell phones and other equipment to Sprint, who in-turn immediately re-sells this equipment to their subscriber, generally under Sprint's equipment financing plan. Shentel is the principal in these transactions, as we control and bear the risk of ownership of the inventory prior to sale. Accordingly, our equipment revenue and cost of equipment sold are presented gross. Under our affiliate agreement with Sprint, we have historically earned and recognized monthly revenue of $1.5 million for providing service to Sprint customers who pass through our network area ("travel revenue"). While we continue to provide these services to Sprint, the agreed upon payments were suspended by Sprint on April 30, 2019. Accordingly, we have ceased recognizing revenue for the services provided after that date until a new prospective fee can be agreed. We have triggered the final dispute resolution option with Sprint which we expect will lead to a resolution for travel fee revenue in the second quarter of 2020 Total Wireless revenue resulting from our relationship with Sprint accounted for 70%, 71%, and 72% of our total consolidated revenue for 2019, 2018, and 2017, respectively. Approximately 80% of our accounts receivable were due from Sprint at the end of both 2019 and 2018. Broadband Segment Revenue Our Broadband segment’s largest source of revenue is the provision of unregulated broadband, video and voice services to residential and small and medium business (“SMB”) customers in portions of Virginia, West Virginia, Maryland, and Kentucky, via fiber optic and hybrid fiber coaxial cable. The Broadband segment also provides voice and digital subscriber line (“DSL”) telephone services to customers in Virginia’s Shenandoah County as a regulated Rural Local Exchange Carrier (“RLEC”). These contracts are generally cancellable at the customer’s discretion without penalty at any time. We allocate the total transaction price in these transactions based upon the standalone selling price of each distinct good or service. We generally recognize 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. Installation fees are allocated to services and are recognized ratably over the longer of the contract term or the period in which the unrecognized fee remains material to the contract, typically about one year. The Broadband segment incurs commission and installation costs related to in-house and third-party vendors which are capitalized as contract acquisition and fulfillment costs and recognized in selling, general and administrative expense and cost of services, respectively, on a straight-line basis over the expected weighted average customer life of approximately four years. Below is a summary of Broadband’s capitalized contract acquisition costs:
(in thousands) |  | 2019 |  | 2018
Beginning Balance |  | $ | 10,091 |  |  | $ | 9,841 |
Contract payments |  | 6,518 |  |  | 5,674 |
Contract amortization |  | (5,604 | ) |  | (5,424 | )
Ending Balance |  | $ | 11,005 |  |  | $ | 10,091 |
Our Broadband segment also provides Ethernet and Wavelength fiber optic services to enterprise and wholesale customers under capacity agreements, and the related revenue is recognized over time under ASC 606. The Broadband segment also leases dedicated fiber optic strands to enterprise and wholesale customers as part of “dark fiber” agreements, which are accounted for as operating leases under ASC 842 Leases. Future performance obligations On December 31, 2019, the Company had approximately $3.4 million allocated to unsatisfied performance obligations that will be satisfied at the rate of approximately $0.8 million per year. ASC 606 Adoption Impacts The Company adopted ASC 606 and all related amendments effective January 1, 2018, using the modified retrospective method. The Company recognized the cumulative effect of applying the new revenue recognition standard as an adjustment to the opening balance of retained earnings. The comparative information was not retrospectively modified and the impact of the adoption of ASC 606 on the consolidated statements of comprehensive income was as follows:
|  | Year Ended December, 31 2018
(in thousands) |  | As Reported |  | Balances without Adoption of ASC 606 |  | Effect of Change Higher/(Lower)
Revenue: |  |  |  |  |  |
Service revenue and other |  | $ | 562,456 |  |  | $ | 632,340 |  |  | $ | (69,884 | )
Equipment revenue |  | 68,398 |  |  | 8,298 |  |  | 60,100 |
Operating expenses: |  |  |  |  |  |
Cost of services |  | 194,022 |  |  | 193,860 |  |  | 162 |
Cost of goods sold |  | 63,959 |  |  | 28,377 |  |  | 35,582 |
Selling, general and administrative |  | 113,222 |  |  | 175,753 |  |  | (62,531 | )
|  | As of December 31, 2018
(in thousands) |  | As Reported |  | Balances without Adoption of ASC 606 |  | Effect of Change Higher/(Lower)
Assets |  |  |  |  |  |
Prepaid expenses and other |  | $ | 60,162 |  |  | $ | 22,204 |  |  | $ | 37,958 |
Deferred charges and other assets, net |  | 49,891 |  |  | 12,083 |  |  | 37,808 |
Liabilities |  |  |  |  |  |
Advanced billing and customer deposits |  | 7,919 |  |  | 24,414 |  |  | (16,495 | )
Deferred income taxes |  | 127,453 |  |  | 103,404 |  |  | 24,049 |
Other long-term liabilities |  | 14,364 |  |  | 15,550 |  |  | (1,186 | )
Retained earnings |  | 386,511 |  |  | 319,926 |  |  | 66,585 |

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 + Details
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