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Note 10 - Revenue | 9 Months Ended
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Sep. 30, 2021
Notes to Financial Statements |
Revenue from Contract with Customer [Text Block] | 10. Revenue: Significant accounting policy The Company’s revenues are derived from (a) the provisioning of retail fiber Internet services in our Fiber Internet Services segment, (b) the provisioning of wholesale mobile platform services, professional services and the provisioning of retail mobile services in our Mobile Services segment; and from (c) domain name registration contracts, other domain related value-added services, domain sale contracts, and other advertising revenue in our Domain Services segment. Amounts received in advance of meeting the revenue recognition criteria described below are recorded as deferred revenue. All products are generally sold without the right of return or refund. Revenue is measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Nature of goods and services The following is a description of principal activities – separated by reportable segments – from which the Company generates its revenue. For more detailed information about reportable segments, see Note 13 – Segment Reporting.
| (a) | Fiber Internet Services
The Company generates Fiber Internet Services revenues primarily through the provisioning of fixed high-speed Internet access, Ting Internet, as well as billing solutions to Internet Service Providers (“ISPs”). Fiber Internet services (Ting Internet) contracts provide customers Internet access at their home or business through the installation and use of our fiber optic network. Ting Internet contracts are generally prepaid and grant customers with unlimited bandwidth based on a fixed price per month basis. Because consideration is collected before the service period, revenue is initially deferred and recognized as the Company performs its obligation to provide Internet access. Though the Company does not consider the installation of fixed Internet access to be a distinct performance obligation, the fees related to installation are immaterial and therefore revenue is recognized as billed. Ting Internet access services are primarily contracted through the Ting website, for one month at a time and contain no commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting Internet customers is computed based on the customer’s activation date. In addition, revenues associated with the sale of Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue. In those cases, where payment is not received at the time of sale, revenue is not recognized at contract inception unless the collection of the related accounts receivable is reasonably assured. The Company records costs that reflect expected refunds, rebates and credit card charge-backs as a reduction of revenues at the time of the sale based on historical experiences and current expectations.
| (b) | Mobile Services
The Company generates Mobile Services revenues through the provisioning of mobile services to wholesale and retail customers. Mobile services consist of mobile platform services provided to wholesale customers to whom we also provide other professional services. Mobile services also consist of retail services provided to Ting Mobile customers. Mobile platform services agreements contain both MSE services and professional services. MSE services represent a single promise to provide continuous access (i.e. a stand-ready performance obligation) to the platform and software solutions. As each month of providing access to the platform is substantially the same and the customer simultaneously receives and consumes the benefits as access is provided, the performance obligation is comprised of a series of distinct service periods. Consideration for these arrangements includes both a fixed component and a variable component that varies each month depending on the number of subscribers hosted on the platform. These professional services can include implementation, training, consulting or software development/modification services. Revenues from arrangements to provide professional services are generally distinct from the other promises in the contract(s) and are recognized as the related services are performed. Consideration payable under the professional service arrangements is included with the variable consideration from the mobile platform services, which would represent variable consideration estimated using the most likely amount based on the range of hours expected to be incurred in providing the services. Where consideration for professional services is included in the consideration for mobile platform services, the Company estimates the standalone selling price (“SSP”) for professional services based on observable standalone sales, and applies the residual approach to estimate the SSP for mobile platform services. The total variable consideration is estimated at contract inception (considering any constraints that may apply and updating the estimates as new information becomes available) and the transaction price is allocated to the performance obligations based on the relative SSP basis and recognized over the period to which it relates. Other professional services consist of professional service arrangements that are billed separately on a time-and-materials basis as well as revenues from the Transitional Services Agreement (“TSA”) with DISH Wireless L.L.C. ("DISH"). For professional services billed separately on a time-and-materials basis, revenues are recognized based on the actual hours of services provided. Under the TSA, the Company will provide certain other services such as customer service, marketing and fulfillment services. DISH has the option to terminate services provided under the TSA throughout the term of the agreement, which is for five years effective August 1, 2020. Consideration payable under this arrangement is based on cost plus margin, and revenues are recognized as the services are provided to DISH each month under the ‘as-invoiced’ practical expedient. Retail mobile services (Ting Mobile) wireless usage contracts grant customers access to standard talk, text and data mobile services. Some Ting Mobile contracts are billed based on the actual amount of monthly services utilized by each customer during their billing cycle. Voice minutes, text messages and megabytes of data are each billed separately based on a tiered pricing program. Some contracts are billed a flat rate for unlimited talk and text plus a fixed amount of data. All customers are billed on a postpaid basis. The Company recognizes revenue for Ting Mobile usage based on the actual amount of monthly services utilized by each customer. Ting Mobile services are primarily contracted through the Ting website, for one month at a time and contain no commitment to renew the contract following each customer’s monthly billing cycle. The Company’s billing cycle for all Ting Mobile and Ting Internet customers is computed based on the customer’s activation date. In order to recognize revenue as the Company satisfies its obligations, we compute the amount of revenues earned but not billed from the end of each billing cycle to the end of each reporting period. In addition, revenues associated with the sale of wireless devices and accessories and Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue. In those cases, where payment is not received at the time of sale, revenue is not recognized at contract inception unless the collection of the related accounts receivable is reasonably assured. The Company records costs that reflect expected refunds, rebates and credit card charge-backs as a reduction of revenues at the time of the sale based on historical experiences and current expectations.
| (c) | Domain Services
Domain registration contracts, which can be purchased for terms of one to ten years, provide our resellers and retail registrant customers with the exclusive right to a personalized internet address from which to build an online presence. The Company enters into domain registration contracts in connection with each new, renewed and transferred-in domain registration. At the inception of the contract, the Company charges and collects the registration fee for the entire registration period. Though fees are collected upfront, revenue from domain registrations are recognized rateably over the registration period as domain registration contracts contain a ‘right to access’ license of IP, which is a distinct performance obligation measured over time. The registration period begins once the Company has confirmed that the requested domain name has been appropriately recorded in the registry under contractual performance standards. Domain related value-added services like digital certifications, WHOIS privacy, website hosting and hosted email provide our resellers and retail registrant customers with tools and additional functionality to be used in conjunction with domain registrations. All domain related value-added services are considered distinct performance obligations which transfer the promised service to the customer over the contracted term. Fees charged to customers for domain related value-added services are collected at the inception of the contract, and revenue is recognized on a straight-line basis over the contracted term, consistent with the satisfaction of the performance obligations. The Company is an ICANN accredited registrar. Thus, the Company is the primary obligor with our reseller and retail registrant customers and is responsible for the fulfillment of our registrar services to those parties. As a result, the Company reports revenue in the amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor relationship with their retail customers, establish pricing and retain credit risk to those customers. Accordingly, the Company does not recognize any revenue related to transactions between our reseller customers and their ultimate retail customers. The Company also sells the rights to the Company’s portfolio domains or names acquired through the Company’s domain expiry stream. Revenue generated from sale of domain name contracts, containing a distinct performance obligation to transfer the domain name rights under the Company’s control, is generally recognized once the rights have been transferred and payment has been received in full. Advertising revenue is derived through domain parking monetization, whereby the Company contracts with third-party Internet advertising publishers to direct web traffic from the Company’s domain expiry stream domains and Internet portfolio domains to advertising websites. Compensation from Internet advertising publishers is calculated variably on a cost-per-action basis based on the number of advertising links that have been visited in a given month. Given that the variable consideration is calculated and paid on a monthly basis, no estimation of variable consideration is required. Disaggregation of Revenue The following is a summary of the Company’s revenue earned from each significant revenue stream (Dollar amounts in thousands of U.S. dollars):
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Fiber Internet Services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fiber Internet Services |  | $ | 6,672 |  |  | $ | 4,657 |  |  |  | 17,868 |  |  |  | 13,379 |
Mobile Services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail mobile services |  |  | 2,309 |  |  |  | 7,019 |  |  | $ | 6,872 |  |  | $ | 44,734 |
Mobile platform services |  |  | 3,564 |  |  |  | 376 |  |  |  | 6,370 |  |  |  | 376 |
Other professional services |  |  | 2,619 |  |  |  | 1,457 |  |  |  | 6,536 |  |  |  | 1,457 |
Total Mobile |  |  | 8,492 |  |  |  | 8,852 |  |  |  | 19,778 |  |  |  | 46,567 |
Domain Services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Wholesale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Domain Services |  |  | 47,081 |  |  |  | 47,261 |  |  |  | 141,954 |  |  |  | 139,430 |
Value Added Services |  |  | 4,862 |  |  |  | 4,380 |  |  |  | 15,424 |  |  |  | 13,429 |
Total Wholesale |  |  | 51,943 |  |  |  | 51,641 |  |  |  | 157,378 |  |  |  | 152,859 |
Retail |  |  | 8,786 |  |  |  | 9,161 |  |  |  | 26,837 |  |  |  | 27,613 |
Total Domain Services |  |  | 60,729 |  |  |  | 60,802 |  |  |  | 184,215 |  |  |  | 180,472 |
|  | $ | 75,893 |  |  | $ | 74,311 |  |  | $ | 221,861 |  |  | $ | 240,418 |
During the three and nine months ended September 30, 2021 and the three and nine months ended September 30, 2020 no customer accounted for more than 10% of total revenue. At September 30, 2021, one customer represented 48% of accounts receivables. The following is a summary of the Company’s cost of revenue from each significant revenue stream (Dollar amounts in thousands of U.S. dollars):
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Fiber Internet Services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fiber Internet Services |  | $ | 3,653 |  |  | $ | 1,682 |  |  | $ | 9,314 |  |  | $ | 5,063 |
Mobile Services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail mobile services |  |  | 1,701 |  |  |  | 3,440 |  |  |  | 4,242 |  |  |  | 21,957 |
Mobile platform services |  |  | 120 |  |  |  | - |  |  |  | 271 |  |  |  | - |
Other professional services |  |  | 1,813 |  |  |  | 1,267 |  |  |  | 5,219 |  |  |  | 1,267 |
Total Mobile |  |  | 3,634 |  |  |  | 4,707 |  |  |  | 9,732 |  |  |  | 23,224 |
Domain Services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Wholesale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Domain Services |  |  | 37,109 |  |  |  | 36,812 |  |  |  | 110,593 |  |  |  | 109,635 |
Value Added Services |  |  | 688 |  |  |  | 689 |  |  |  | 1,867 |  |  |  | 2,178 |
Total Wholesale |  |  | 37,797 |  |  |  | 37,501 |  |  |  | 112,460 |  |  |  | 111,813 |
Retail |  |  | 4,456 |  |  |  | 4,440 |  |  |  | 13,354 |  |  |  | 13,208 |
Total Domain Services |  |  | 42,253 |  |  |  | 41,941 |  |  |  | 125,814 |  |  |  | 125,021 |
Network Expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Network, other costs |  |  | 3,445 |  |  |  | 2,612 |  |  |  | 10,295 |  |  |  | 7,513 |
Network, depreciation and amortization costs |  |  | 4,643 |  |  |  | 3,315 |  |  |  | 12,688 |  |  |  | 9,902 |
Network, impairment |  |  | 241 |  |  |  | 113 |  |  |  | 302 |  |  |  | 1,638 |
Total Network Expenses |  |  | 8,329 |  |  |  | 6,040 |  |  |  | 23,285 |  |  |  | 19,053 |
|  | $ | 57,869 |  |  | $ | 54,370 |  |  | $ | 168,145 |  |  | $ | 172,361 |
Contract Balances The following tables provide information about contract assets and contract liabilities (deferred revenue) from contracts with customers. The Company accounts for contract assets and liabilities on a contract-by-contract basis, with each contract presented as either a net contract asset or a net contract liability accordingly. Some of the Company’s long-term contracts with customers are billed in advance of service, such as domain contracts and some professional service contracts. Consideration received from customers related to performance obligations which have not yet been satisfied are contract liabilities and recorded as deferred revenues. Deferred revenue primarily relates to the portion of the transaction price received in advance related to the unexpired term of domain name registrations and other domain related value-added services, on both a wholesale and retail basis, net of external commissions. Significant changes in deferred revenue for the nine months ended September 30, 2021 were as follows (Dollar amounts in thousands of U.S. dollars): Deferred revenue:
|  | September 30, 2021 |
Balance, beginning of period |  | $ | 152,245 |
Deferred revenue |  |  | 176,441 |
Recognized revenue |  |  | (176,699 | )
Balance, end of period |  | $ | 151,987 |
The Company receives consideration for long-term mobile platform service contracts, which we collect variably each month depending on the number of subscribers hosted on the platform (subject to certain minimums) as well as through certain fixed platform fees and credits. Contract assets are recorded for services delivered under long-term mobile platform services contracts, to the extent that the services delivered exceed the services which have been billed to the customer at the reporting date. Contract assets are transferred to receivables when the rights to consideration become unconditional. All contract assets transfer to receivables within three months of when they are recognized. Contract assets:
|  | September 30, 2021 |
Balance, beginning of period |  | $ | - |
Consideration recognized as revenue |  |  | 2,783 |
Transferred to receivables |  |  | - |
Balance, end of period |  | $ | 2,783 |
Remaining Performance Obligations: For retail mobile and internet access services, where the performance obligation is part of contracts that have an original expected duration of one year or less (typically one month), the Company has elected to apply a practical expedient to not disclose revenues expected to be recognized in the future related performance obligations that are unsatisfied (or partially unsatisfied). Although domain registration contracts are deferred over the lives of the individual contracts, which can range from one to ten years, approximately 80 percent of our deferred revenue balance related to domain contracts is expected to be recognized within the next twelve months. Deferred revenue related to Exact hosting contracts is also deferred over the lives of the individual contracts, which are expected to be fully recognized within the next twelve months. Professional service revenue related to mobile platform services may be deferred over the period not exceeding the term of the contract.

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