Qwest Corp. 6.75% NT 57 (CTDD) 10-Q 5 Nov 20 2020 Q3 Quarterly report Financial data

Cover

Cover - shares	9 Months Ended
	Sep. 30, 2020	Nov. 05, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
Document Transition Report	false
Entity File Number	001-03040
Entity Registrant Name	QWEST CORPORATION
Entity Incorporation, State or Country Code	CO
Entity Tax Identification Number	84-0273800
Entity Address, Address Line One	100 CenturyLink Drive,
Entity Address, City or Town	Monroe,
Entity Address, State or Province	LA
Entity Address, Postal Zip Code	71203
City Area Code	318
Local Phone Number	388-9000
Entity Information [Line Items]
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		1
Entity Central Index Key	0000068622
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false
6.125% Notes Due 2053
Entity Information [Line Items]
Title of 12(b) Security	6.125% Notes Due 2053
Trading Symbol(s)	CTY
Security Exchange Name	NYSE
7.00% Notes Due 2056
Entity Information [Line Items]
Title of 12(b) Security	7.00% Notes Due 2056
Trading Symbol(s)	CTAA
Security Exchange Name	NYSE
6.5% Notes Due 2056
Entity Information [Line Items]
Title of 12(b) Security	6.5% Notes Due 2056
Trading Symbol(s)	CTBB
Security Exchange Name	NYSE
6.75% Notes Due 2057
Entity Information [Line Items]
Title of 12(b) Security	6.75% Notes Due 2057
Trading Symbol(s)	CTDD
Security Exchange Name	NYSE

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
OPERATING REVENUE
Total operating revenue	$ 1,801	$ 2,011	$ 5,518	$ 6,069
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization)	528	602	1,491	1,749
Selling, general and administrative	128	131	410	445
Operating expenses - affiliates	198	186	557	600
Depreciation and amortization	330	344	985	1,017
Total operating expenses	1,184	1,263	3,443	3,811
OPERATING INCOME	617	748	2,075	2,258
OTHER (EXPENSE) INCOME
Interest expense	(69)	(95)	(219)	(286)
Interest expense - affiliates, net	(18)	(15)	(50)	(46)
Other (expense) income, net	(18)	5	(31)	19
Total other expense, net	(105)	(105)	(300)	(313)
INCOME BEFORE INCOME TAXES	512	643	1,775	1,945
Income tax expense	133	166	463	504
NET INCOME	379	477	1,312	1,441
Non-affiliate services
OPERATING REVENUE
Total operating revenue	1,200	1,310	3,642	3,926
Affiliate services
OPERATING REVENUE
Total operating revenue	$ 601	$ 701	$ 1,876	$ 2,143

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
CURRENT ASSETS
Cash and cash equivalents	$ 6	$ 2
Accounts receivable, less allowance of $48 and $39	402	514
Advances to affiliates	0	1,842
Other	133	128
Total current assets	541	2,486
Property, plant and equipment, net of accumulated depreciation of $8,168 and $7,746	8,321	8,170
GOODWILL AND OTHER ASSETS
Goodwill	9,360	9,360
Other intangible assets, net	454	779
Other, net	178	204
Total goodwill and other assets	9,992	10,343
TOTAL ASSETS	18,854	20,999
CURRENT LIABILITIES
Current maturities of long-term debt	1	1,105
Accounts payable	293	403
Note payable - affiliate	1,130	1,069
Accrued expenses and other liabilities
Salaries and benefits	164	276
Income and other taxes	129	94
Other	196	261
Current portion of deferred revenue	185	201
Total current liabilities	2,098	3,409
LONG-TERM DEBT	4,126	4,846
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes, net	1,178	1,198
Affiliate obligations, net	655	717
Other	720	712
Total deferred credits and other liabilities	2,553	2,627
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDER'S EQUITY
Common stock - one share without par value, owned by Qwest Services Corporation	10,050	10,050
Retained earnings	27	67
Total stockholder's equity	10,077	10,117
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$ 18,854	$ 20,999

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Accounts receivable, allowance	$ 48	$ 39
PP&E, accumulated depreciation	$ 8,168	$ 7,746
Common stock, share issued (in shares)	1	1
Common stock, share outstanding (in shares)	1	1

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
OPERATING ACTIVITIES
Net income	$ 1,312	$ 1,441
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	985	1,017
Deferred income taxes	(30)	(96)
Provision for uncollectible accounts	45	36
Accrued interest on affiliate note	61	61
Net loss on early retirement of debt	36	0
Changes in current assets and liabilities:
Accounts receivable	70	5
Accounts payable	(34)	(14)
Accrued income and other taxes	12	13
Other current assets and liabilities, net	(193)	(88)
Other current assets and liabilities - affiliates, net	(17)	(14)
Changes in other noncurrent assets and liabilities, net	45	6
Changes in affiliate obligations, net	(54)	(67)
Other, net	13	17
Net cash provided by operating activities	2,251	2,317
INVESTING ACTIVITIES
Capital expenditures	(885)	(777)
Changes in advances to affiliates	1,842
Payments for Advance to Affiliate		(456)
Proceeds from sale of property, plant and equipment and other assets	2	24
Net cash provided by (used in) investing activities	959	(1,209)
FINANCING ACTIVITIES
Payments of long-term debt	(1,860)	(10)
Dividends paid	(1,350)	(1,100)
Changes in advances from affiliates	4	0
Net cash used in financing activities	(3,206)	(1,110)
Net increase (decrease) in cash, cash equivalents and restricted cash	4	(2)
Cash, cash equivalents and restricted cash at beginning of period	4	7
Cash, cash equivalents and restricted cash at end of period	8	5
Supplemental cash flow information:
Income taxes paid, net	(473)	(584)
Interest paid (net of capitalized interest of $24 and $19)	(232)	(281)
Cash, cash equivalents and restricted cash:
Total	$ 8	$ 5

CONSOLIDATED STATEMENTS OF CA_2

CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Statement of Cash Flows [Abstract]
Interest paid, capitalized interest	$ 24	$ 19

CONSOLIDATED STATEMENTS OF STOC

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY - USD ($) $ in Millions	Total	COMMON STOCK	RETAINED EARNINGS (ACCUMULATED DEFICIT)	RETAINED EARNINGS (ACCUMULATED DEFICIT)Cumulative Effect, Period of Adoption, Adjustment
Balance at beginning of period at Dec. 31, 2018		$ 10,050	$ (182)	$ 22
Increase (Decrease) in Stockholder's Equity
Net income	$ 1,441		1,441
Dividends declared to Qwest Services Corporation	(1,100)		(1,100)
Balance at end of period at Sep. 30, 2019	10,231	10,050	181
Balance at beginning of period at Dec. 31, 2018		10,050	(182)	22
Balance at end of period at Dec. 31, 2019	$ 10,117	10,050	67	3
Increase (Decrease) in Stockholder's Equity
Accounting Standards Update [Extensible List]	us-gaap:AccountingStandardsUpdate201613Member
Balance at beginning of period at Jun. 30, 2019		10,050	104
Increase (Decrease) in Stockholder's Equity
Net income	$ 477		477
Dividends declared to Qwest Services Corporation			(400)
Balance at end of period at Sep. 30, 2019	10,231	10,050	181
Balance at beginning of period at Dec. 31, 2019	$ 10,117	10,050	67	3
Balance at end of period at Jan. 01, 2020				3
Increase (Decrease) in Stockholder's Equity
Accounting Standards Update [Extensible List]	us-gaap:AccountingStandardsUpdate201613Member
Balance at beginning of period at Dec. 31, 2019	$ 10,117	10,050	67	$ 3
Increase (Decrease) in Stockholder's Equity
Net income	1,312		1,312
Dividends declared to Qwest Services Corporation	(1,400)		(1,350)
Other			(5)
Balance at end of period at Sep. 30, 2020	10,077	10,050	27
Balance at beginning of period at Jun. 30, 2020		10,050	73
Increase (Decrease) in Stockholder's Equity
Net income	379		379
Dividends declared to Qwest Services Corporation			(425)
Balance at end of period at Sep. 30, 2020	$ 10,077	$ 10,050	$ 27

CONSOLIDATED STATEMENTS OF ST_2

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (parenthetical) $ in Millions	Jan. 01, 2020USD ($)
Accounting Standards Update [Extensible List]	us-gaap:AccountingStandardsUpdate201613Member
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Cumulative effect of new accounting principle in period of adoption, tax	$ 1

Background

Background	9 Months Ended
	Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Background	Background General We are an integrated communications company engaged primarily in providing a broad array of communications services to our residential and business customers. Our specific products and services are detailed in Note 7—Products and Services Revenue of this report. We generate the majority of our total consolidated operating revenue from services provided in the 14-state region of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. We refer to this region as our local service area. Basis of Presentation Our consolidated balance sheet as of December 31, 2019, which was derived from our audited consolidated financial statements, and our unaudited interim consolidated financial statements provided herein have been prepared in accordance with the instructions for Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to rules and regulations of the SEC; however, in our opinion, the disclosures made are adequate to make the information presented not misleading. We believe that these consolidated financial statements include all normal recurring adjustments necessary to fairly present the results for the interim periods. The consolidated results of operations and cash flows for the first nine months of the year are not necessarily indicative of the consolidated results of operations and cash flows that might be expected for the entire year. These consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019. The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. Transactions with our non-consolidated affiliates (referred to herein as affiliates) have not been eliminated. We reclassified certain prior period amounts to conform to the current period presentation, including the categorization of our revenue and expenses for the nine months ended September 30, 2020 and 2019. Operating lease assets are included in Other, net under goodwill and other assets on our consolidated balance sheets. Current operating lease liabilities are included in Other under accrued expenses and other liabilities on our consolidated balance sheets. Noncurrent operating lease liabilities are included in Other under deferred credits and other liabilities on our consolidated balance sheets. Segments Our operations are integrated into and reported as part of Lumen Technologies. Lumen's chief operating decision maker ("CODM") is 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 have one reportable segment. Summary of Significant Accounting Policies The significant accounting policy below is in addition to the significant accounting policies described in Note 1—Background and Summary of Significant Accounting Policies to the consolidated financial statements and accompanying notes in Part II Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2019. Change in Accounting Policy During the first quarter of 2020, we elected to change the presentation for taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, including federal and certain state Universal Service Fund ("USF") regulatory fees, to present all such taxes on a net basis in our statement of operations. Prior to the first quarter of 2020, we assessed whether we were the primary obligor or principal taxpayer for the taxes assessed in each jurisdiction where we do business. The previous policy resulted in presenting such USF fees on a gross basis within operating revenue and cost of services and products, and all other significant taxes on a net basis. We applied this change in accounting policy retrospectively during the first quarter of 2020. As a result, we have decreased both operating revenue and cost of services and products by $28 million and $28 million for the three months ended September 30, 2020 and 2019, respectively, and $75 million and $76 million for the nine months ended September 30, 2020 and 2019, respectively. The change had no impact on operating income or net income in our consolidated statements of operations. Refer to our Form 8-K filing dated May 7, 2020 for further information. We changed our policy to present such taxes on the net basis and believe the new policy is preferable because of the historical and potential future regulatory rate changes outside of our control resulting in significant variability in tax and fee revenue that are not indicative of our operating performance. We believe that net presentation provides the most useful and transparent financial information and improves comparability and consistency of financial results. Operating Lease Income Qwest leases various data transmission capacity, office facilities, switching facilities and other network sites 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, 2020 and 2019, our gross rental income was $77 million and $79 million, respectively, which represents approximately 4% of our operating revenue for the three months ended September 30, 2020 and 2019. For the nine months ended September 30, 2020 and 2019, our gross rental income was $234 million and $242 million, respectively, which represents approximately 4% of our operating revenue for the nine months ended September 30, 2020 and 2019. Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, " Measurement of Credit Losses on Financial Instruments ". The primary impact of ASU 2016-13 for us is a change in the model for the recognition of credit losses related to our financial instruments from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires us to estimate the total credit losses expected on the portfolio of financial instruments. We adopted ASU 2016-13 Recently Issued Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740 ). ASU 2019-12 removes certain exceptions for investments, intra-period allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. ASU 2019-12 will become effective for us in the first quarter of fiscal 2021 and early adoption is permitted. We do not believe the adoption will have a significant impact on our consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting , designed to ease the burden of accounting for contract modifications related to the global market-wide reference rate transition period. Subject to certain criteria, ASU 2020-04 provides qualifying entities the option to apply expedients and exceptions to contract modifications and hedging accounting relationships made until December 31, 2022. We are evaluating ASU 2020-04's applicability to relevant transactions referencing the London Inter-bank Offering Rate ("LIBOR") or another reference rate expected to be discontinued and the resulting impact on our consolidated financial statements.

Goodwill, Customer Relationship

Goodwill, Customer Relationships and Other Intangible Assets	9 Months Ended
	Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill, Customer Relationships and Other Intangible Assets	Goodwill, Customer Relationships and Other Intangible Assets Goodwill, customer relationships and other intangible assets consisted of the following: September 30, 2020 December 31, 2019 (Dollars in millions) Goodwill $ 9,360 9,360 Customer relationships, less accumulated amortization of $5,520 and $5,231 $ 179 468 Other intangible assets, less accumulated amortization of $1,813 and $1,780 275 311 Total other intangible assets, net $ 454 779 Substantially, all of our goodwill was derived from Lumen's acquisition of us where the purchase price exceeded the fair value of the net assets acquired. We assess our goodwill for impairment annually, or, under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment. We are required to write-down the value of goodwill in periods in which the carrying value of equity exceeds the estimated fair value of equity, limited to the amount of goodwill. Our annual impairment assessment date for goodwill is October 31, at which date we assess goodwill at our reporting unit. In reviewing the criteria for reporting units, we have determined that we are one reporting unit. Because Lumen's low stock price was a trigger for impairment testing, we estimated the fair value of our operations using only the market approach in the quarter ended March 31, 2019. Applying this approach, we utilized company comparisons and analyst reports within the telecommunications industry, which have historically supported a range of fair values of annualized revenue and EBITDA multiples between 2.1x and 4.9x and 4.9x and 9.8x, respectively. We selected a revenue and EBITDA multiple within this range. As of March 31, 2019, based on our assessments performed as described above, we concluded that our goodwill was not impaired as of that date. The market multiples approach that we used in the quarter ended March 31, 2019 incorporated significant estimates and assumptions related to the forecasted results for the remainder of the year, including revenues, expenses, and the achievement of certain cost synergies. In developing the market multiple, we also considered observed trends of our industry participants. Our assessment included many qualitative factors that required significant judgment. Alternative interpretations of these factors could have resulted in different conclusions regarding the size of our impairments. During 2020, we observed a decline in Lumen's stock price as a result of events occurring after the end of 2019, including the COVID-19 pandemic. We evaluated whether such events would indicate the fair value of our reporting unit was below its carrying value. We believe these events have impacted the global economy more directly than us and, when considered with other factors, we have concluded it is not more likely than not that the fair value of our reporting unit was less than its carrying value for the period ended September 30, 2020. In light of the negative impacts of COVID-19 on the global economy, we will continue to evaluate the general economic trends which could have an impact on our assessment of whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount. Future changes could cause our reporting unit fair value to be less than its carrying value, resulting in potential impairments of our goodwill which could have a material effect on our results of operations and financial condition. The extent of the impact, if any, will depend on future developments including the length and severity of the pandemic and its long-term impacts on the overall economy. As of September 30, 2020, the gross carrying amount of goodwill, customer relationships and other intangible assets was $17.1 billion. The total amortization expense for intangible assets for the three months ended September 30, 2020 and 2019 totaled $120 million and $133 million, respectively, and for the nine months ended September 30, 2020 and 2019 totaled $365 million and $404 million, respectively. We estimate that total amortization expense for intangible assets for the years ending December 31, 2020 through 2024 will be as follows: (Dollars in millions) 2020 (remaining three months) $ 114 2021 163 2022 58 2023 46 2024 34

Revenue Recognition

Revenue Recognition	9 Months Ended
	Sep. 30, 2020
Revenue from Contract with Customer [Abstract]
Revenue Recognition	Revenue Recognition Reconciliation of Total Revenue to Revenue from Contracts with Customers The following table provides 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 September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (Dollars in millions) Total revenue $ 1,801 2,011 5,518 6,069 Adjustments for non-ASC 606 revenue (1) (118) (123) (360) (375) Total revenue from contracts with customers $ 1,683 1,888 5,158 5,694 ______________________________________________________________________ (1) Includes regulatory revenue and lease revenue not within the scope of ASC 606. Customer Receivables and Contract Balances The following table provides balances of customer receivables, contract assets and contract liabilities as of September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 (Dollars in millions) Customer receivables (1) $ 378 430 Contract assets 13 18 Contract liabilities 297 338 ______________________________________________________________________ (1) Gross customer receivables of $418 million and $462 million, net of allowance for doubtful accounts of $40 million and $32 million, at September 30, 2020 and December 31, 2019, 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 ranges from one Performance Obligations As of September 30, 2020, our estimated revenue expected to be recognized in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied is approximately $161 million. We expect to recognize approximately 96% of this revenue through 2022, 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), and (ii) contracts that are classified as leasing arrangements that are not subject to ASC 606 . Contract Costs The following table provides changes in our contract acquisition costs and fulfillment costs: Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Acquisition Costs Fulfillment Costs Acquisition Costs Fulfillment Costs (Dollars in millions) Beginning of period balance $ 81 59 87 60 Costs incurred 12 6 15 10 Amortization (15) (8) (15) (8) End of period balance $ 78 57 87 62 Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019 Acquisition Costs Fulfillment Costs Acquisition Costs Fulfillment Costs (Dollars in millions) Beginning of period balance $ 86 64 90 57 Costs incurred 39 18 44 29 Amortization (47) (25) (47) (24) End of period balance $ 78 57 87 62 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 customer life of 30 months for consumer customers and average contract life of 29 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 twelve 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 an annual basis. We are an integrated communications company engaged primarily in providing an array of communications services, including local voice, broadband, private line (including business data services), Ethernet, network access, information technology and other ancillary 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, services and revenue among the following six categories: • IP and Data Services , which include primarily VPN data networks, Ethernet, IP and other ancillary services; • Transport and Infrastructure , which include broadband, private line (including business data services) and other ancillary services; • Voice and Collaboration , which includes primarily local voice, including wholesale voice, and other ancillary services; • IT and Managed Services, which include information technology services and managed services, which may be purchased in conjunction with our other network services; • Regulatory Revenue, which consist of Connect America Fund ("CAF") support payments and other operating revenue. We receive federal support payments from the federal CAF program. These support payments are government subsidies designed to reimburse us for various costs related to certain telecommunications services including the costs of deploying, maintaining and operating voice and broadband infrastructure in high-cost rural areas where we are not able to fully recover our costs from our customers; and • Affiliate Services, which are telecommunication services that we also provide to external customers. In addition, we provide to our affiliates computer system development and support services, network support and technical services. From time to time, we may change the categorization of our products and services. Our operating revenue for our products and services consisted of the following categories: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (Dollars in millions) IP and Data Services $ 130 161 397 446 Transport and Infrastructure 649 703 1,957 2,100 Voice and Collaboration 376 397 1,151 1,234 IT and Managed Services 1 1 2 3 Regulatory Revenue 44 48 135 143 Affiliate Services 601 701 1,876 2,143 Total operating revenue $ 1,801 2,011 5,518 6,069

Credit Losses on Financial Inst

Credit Losses on Financial Instruments	9 Months Ended
	Sep. 30, 2020
Credit Loss [Abstract]
Credit Losses on Financial Instruments	Credit Losses on Financial Instruments In accordance with ASC 326, "Financial Instruments - Credit Losses" ("ASC 326") we aggregate financial assets with similar risk characteristics to align our expected credit losses with the credit quality or deterioration over the life of such assets. We monitor certain risk characteristics within our aggregated financial assets and revise their composition accordingly, to the extent internal and external risk factors change each reporting period. Financial assets that do not share risk characteristics with other financial assets are evaluated separately. Our financial assets measured at amortized cost primarily consist of accounts receivable. In developing our accounts receivable portfolio, we pooled certain assets with similar credit risk characteristics based on the nature of our customers, their industry, policies used to grant credit terms and their historical and expected credit loss patterns. Prior to the adoption of the new credit loss standard, the allowance for doubtful accounts receivable reflected our best estimate of probable losses inherent in our receivable portfolio determined based on historical experience, specific allowances for known troubled accounts, and other currently available evidence. We implemented the new standard effective January 1, 2020, using a loss rate method to estimate our allowance for credit losses. Our determination of the current expected credit loss rate begins with our use of historical loss experience as a percentage of accounts receivable. We measure our historical loss period based on the average days to recognize accounts receivable as credit losses. When asset specific characteristics and current conditions change from those in the historical period, due to changes in our credit and collections strategy, certain classes of aged balances, or credit loss and recovery policies, we perform a qualitative and quantitative assessment to update our current loss rate, which as noted below has increased due to an increase in historic loss experience and weakening economic forecasts. We use regression analysis to develop an expected loss rate using historical experience and economic data over a forecast period. We measure our forecast period based on the average days to collect payment on billed accounts receivable. The historical, current, and expected credit loss rates are combined and applied to period end accounts receivable, which results in our allowance for credit losses. If there is a deterioration of a customer's financial condition or if future default rates in general differ from currently anticipated default rates (including changes caused by COVID-19), we may need to adjust the allowance for credit losses, which would affect earnings in the period that adjustments are made. The assessment of the correlation between historical observed default rates, current conditions and forecasted economic conditions requires judgment. Alternative interpretations of these factors could have resulted in different conclusions regarding the allowance for credit losses. The amount of credit loss is sensitive to changes in circumstances and forecasted economic conditions. Our historical credit loss experience, current conditions and forecast of economic conditions may also not be representative of the customers' actual default experience in the future. The following table presents the activity of our allowance for credit losses by accounts receivable portfolio: Business Consumer Total (Dollars in millions) Beginning balance at January 1, 2020 (1) $ 17 18 35 Provision for expected losses 23 22 45 Write-offs charged against the allowance (16) (22) (38) Recoveries collected 3 3 6 Ending balance at September 30, 2020 $ 27 21 48 ______________________________________________________________________ (1) The beginning balance includes the cumulative effect of the adoption of new credit loss standard. For the nine months ended September 30, 2020, we increased our allowance for credit losses for our business and consumer accounts receivable portfolio due to an increase in historical and expected loss experience, which we believe were predominantly attributable to the COVID-19 induced economic slowdown. We believe that decreased write-offs (net of recoveries) driven by COVID-19 regulations and programs have further contributed to an increase in our allowance for credit losses.

Long-Term Debt and Note Payable

Long-Term Debt and Note Payable - Affiliate	9 Months Ended
	Sep. 30, 2020
Debt Disclosure [Abstract]
Long-Term Debt and Note Payable - Affiliate	Long-Term Debt and Note Payable - Affiliate The following chart reflects (i) the consolidated long-term debt of Qwest Corporation and its subsidiaries, including finance lease and other obligations, unamortized premiums, net, unamortized debt issuance costs and (ii) note payable - affiliate: Interest Rates (1) Maturities (1) September 30, 2020 December 31, 2019 (Dollars in millions) Senior notes 6.125% - 7.750% 2021 - 2057 $ 4,105 5,956 Term loan (2) LIBOR + 2.00% 2025 100 100 Finance lease and other obligations Various Various 5 10 Unamortized premiums, net 5 — Unamortized debt issuance costs (88) (115) Total long-term debt 4,127 5,951 Less current maturities (1) (1,105) Long-term debt, excluding current maturities $ 4,126 4,846 Note payable - affiliate 4.974% 2022 $ 1,130 1,069 _______________________________________________________________________________ (1) As of September 30, 2020. (2) Qwest Corporation's Term Loan had an interest rate of 2.150% as of September 30, 2020 and 3.800% as of December 31, 2019. Long-Term Debt Maturities Set forth below is the aggregate principal amount of our long-term debt as of September 30, 2020 (excluding unamortized premiums and discounts and unamortized debt issuance costs and excluding note payable-affiliate) maturing during the following years: (Dollars in millions) 2020 (remaining three months) $ — 2021 951 2022 1 2023 1 2024 1 2025 and thereafter 3,256 Total long-term debt $ 4,210 Redemption of Senior Notes On September 16, 2020, Qwest Corporation partially redeemed $250 million aggregate principal amount of its outstanding 6.625% Notes due 2055 (the "6.625% Notes"). On August 7, 2020, Qwest Corporation completed the redemption of the remaining $300 million aggregate principal amount of its outstanding 6.875% Notes due 2054 (the "6.875% Notes"). On June 29, 2020, Qwest Corporation partially redeemed $200 million aggregate principal amount of its outstanding 6.875% Notes. On January 15, 2020, Qwest Corporation fully redeemed all $850 million aggregate principal amount of its outstanding 6.875% senior notes due 2033 and all $250 million aggregate principal amount of its outstanding 7.125% senior notes due 2043. Through the nine months ended September 30, 2020, redemptions of senior notes resulted in a loss of $36 million. Note Payable - Affiliate Qwest Corporation is currently indebted to an affiliate of our ultimate parent company, CenturyLink, Inc., under a revolving promissory note that provides Qwest Corporation with a funding commitment of up to $965 million in aggregate principal amount (the "Intercompany Note"). The outstanding principal balance owed by Qwest Corporation under the Intercompany Note and the accrued interest thereon is due and payable on demand, but if no demand is made, then on June 30, 2022. Interest is accrued on the outstanding principal balance during the respective interest period using a weighted average per annum interest rate on the consolidated outstanding debt of CenturyLink, Inc. and its subsidiaries. As of September 30, 2020, the Intercompany Note had an outstanding balance of $1.13 billion and bore interest at a weighted-average interest rate of 4.974%. As of September 30, 2020 and December 31, 2019, the Intercompany Note is reflected on our consolidated balance sheets as a current liability under "Note payable - affiliate". In accordance with the terms of the Intercompany Note, interest shall be assessed on June 30th and December 31st (an "Interest Period"). Any assessed interest for an Interest Period that remains unpaid on the last day of the subsequent Interest Period is to be capitalized on such date and is to begin accruing interest. Through September 30, 2020, $165 million of such interest has been capitalized since entering into the Intercompany Note. As of September 30, 2020, $14 million of accrued interest is reflected in other current liabilities on our consolidated balance sheet. Compliance As of September 30, 2020, we believe we were in compliance with the financial covenants contained in our material debt agreements in all material respects. Other For additional information on our long-term debt and credit facilities, see Note 5—Long-Term Debt and Revolving Promissory Note to our consolidated financial statements in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2019. Subsequent Events On October 23, 2020, Qwest Corporation borrowed $215 million under a variable-rate term loan with CoBank ACB and used the resulting net proceeds to pay off its previous $100 million term loan with CoBank ACB. Additionally, on October 26, 2020, Qwest Corporation used the remaining net proceeds to partially facilitate the redemption of the remaining $160 million aggregate principal amount of its outstanding 6.625% Notes, as described below. The new term loan will mature on October 23, 2027, and has terms substantially similar to those contained in the prior term loan with CoBank ACB. On October 26, 2020, Qwest Corporation redeemed the remaining $160 million aggregate principal amount of its outstanding 6.625% Notes. Following this redemption, there were no bonds outstanding for the 6.625% Notes.

Fair Value Disclosure

Fair Value Disclosure	9 Months Ended
	Sep. 30, 2020
Fair Value Disclosures [Abstract]
Fair Value Disclosure	Fair Value Disclosure Our financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, advances to affiliates, accounts payable, note payable-affiliate and long-term debt, excluding finance lease and other obligations. Due to their short-term nature, the carrying amounts of our cash and cash equivalents, restricted cash, accounts receivable, advances to affiliates, accounts payable and note payable-affiliate approximate their fair values. The three input levels in the hierarchy of fair value measurements are defined by the Fair Value Measurement and Disclosure framework generally as follows: Input Level Description of Input Level 1 Observable inputs such as quoted market prices in active markets. Level 2 Inputs other than quoted prices in active markets that are either directly or indirectly observable. Level 3 Unobservable inputs in which little or no market data exists. The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding finance lease and other obligations, as well as the input level used to determine the fair values indicated below: September 30, 2020 December 31, 2019 Input Carrying Fair Carrying Fair (Dollars in millions) Liabilities—Long-term debt (excluding finance lease and other obligations) 2 $ 4,122 4,329 5,941 6,258

Products and Services Revenue

Products and Services Revenue	9 Months Ended
	Sep. 30, 2020
Revenue from Contract with Customer [Abstract]
Products and Services Revenue	Revenue Recognition Reconciliation of Total Revenue to Revenue from Contracts with Customers The following table provides 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 September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (Dollars in millions) Total revenue $ 1,801 2,011 5,518 6,069 Adjustments for non-ASC 606 revenue (1) (118) (123) (360) (375) Total revenue from contracts with customers $ 1,683 1,888 5,158 5,694 ______________________________________________________________________ (1) Includes regulatory revenue and lease revenue not within the scope of ASC 606. Customer Receivables and Contract Balances The following table provides balances of customer receivables, contract assets and contract liabilities as of September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 (Dollars in millions) Customer receivables (1) $ 378 430 Contract assets 13 18 Contract liabilities 297 338 ______________________________________________________________________ (1) Gross customer receivables of $418 million and $462 million, net of allowance for doubtful accounts of $40 million and $32 million, at September 30, 2020 and December 31, 2019, 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 ranges from one Performance Obligations As of September 30, 2020, our estimated revenue expected to be recognized in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied is approximately $161 million. We expect to recognize approximately 96% of this revenue through 2022, 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), and (ii) contracts that are classified as leasing arrangements that are not subject to ASC 606 . Contract Costs The following table provides changes in our contract acquisition costs and fulfillment costs: Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Acquisition Costs Fulfillment Costs Acquisition Costs Fulfillment Costs (Dollars in millions) Beginning of period balance $ 81 59 87 60 Costs incurred 12 6 15 10 Amortization (15) (8) (15) (8) End of period balance $ 78 57 87 62 Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019 Acquisition Costs Fulfillment Costs Acquisition Costs Fulfillment Costs (Dollars in millions) Beginning of period balance $ 86 64 90 57 Costs incurred 39 18 44 29 Amortization (47) (25) (47) (24) End of period balance $ 78 57 87 62 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 customer life of 30 months for consumer customers and average contract life of 29 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 twelve 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 an annual basis. We are an integrated communications company engaged primarily in providing an array of communications services, including local voice, broadband, private line (including business data services), Ethernet, network access, information technology and other ancillary 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, services and revenue among the following six categories: • IP and Data Services , which include primarily VPN data networks, Ethernet, IP and other ancillary services; • Transport and Infrastructure , which include broadband, private line (including business data services) and other ancillary services; • Voice and Collaboration , which includes primarily local voice, including wholesale voice, and other ancillary services; • IT and Managed Services, which include information technology services and managed services, which may be purchased in conjunction with our other network services; • Regulatory Revenue, which consist of Connect America Fund ("CAF") support payments and other operating revenue. We receive federal support payments from the federal CAF program. These support payments are government subsidies designed to reimburse us for various costs related to certain telecommunications services including the costs of deploying, maintaining and operating voice and broadband infrastructure in high-cost rural areas where we are not able to fully recover our costs from our customers; and • Affiliate Services, which are telecommunication services that we also provide to external customers. In addition, we provide to our affiliates computer system development and support services, network support and technical services. From time to time, we may change the categorization of our products and services. Our operating revenue for our products and services consisted of the following categories: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (Dollars in millions) IP and Data Services $ 130 161 397 446 Transport and Infrastructure 649 703 1,957 2,100 Voice and Collaboration 376 397 1,151 1,234 IT and Managed Services 1 1 2 3 Regulatory Revenue 44 48 135 143 Affiliate Services 601 701 1,876 2,143 Total operating revenue $ 1,801 2,011 5,518 6,069

Commitments, Contingencies and

Commitments, Contingencies and Other Items	9 Months Ended
	Sep. 30, 2020
Commitments and Contingencies Disclosure [Abstract]
Commitments, Contingencies and Other Items	Commitments, Contingencies and Other Items We are subject to various claims, legal proceedings and other contingent liabilities, including the matters described below, which individually or in the aggregate could materially affect our financial condition, future results of operations or cash flows. As a matter of course, we are prepared to both litigate these matters to judgment as needed, as well as to evaluate and consider reasonable settlement opportunities. Irrespective of its merits, litigation may be both lengthy and disruptive to our operations and could cause significant expenditure and diversion of management attention. We review our litigation accrual liabilities on a quarterly basis, but in accordance with applicable accounting guidelines only establish accrual liabilities when losses are deemed probable and reasonably estimable and only revise previously-established accrual liabilities when warranted by changes in circumstances, in each case based on then-available information. As such, as of any given date we could have exposure to losses under proceedings as to which no liability has been accrued or as to which the accrued liability is inadequate. Amounts accrued for our litigation and non-income tax contingencies at September 30, 2020, aggregated to approximately $22 million and are included in “Other” current liabilities and “Other Liabilities” in our consolidated balance sheet as of such date. The establishment of an accrual does not mean that actual funds have been set aside to satisfy a given contingency. Thus, the resolution of a particular contingency for the amount accrued could have no effect on our results of operations but nonetheless could have an adverse effect on our cash flows. Principal Proceedings Billing Practices Suits In June 2017, a former employee of Lumen Technologies filed an employment lawsuit against Lumen Technologies claiming that she was wrongfully terminated for alleging that Lumen Technologies charged some of its retail customers for products and services they did not authorize. Starting shortly thereafter and continuing since then, and based in part on the allegations made by the former employee, several legal proceedings have been filed. In June 2017, McLeod v. CenturyLink, a consumer class action, was filed against Lumen Technologies in the U.S. District Court for the Central District of California alleging that it charged some of its retail customers for products and services they did not authorize. Other complaints asserting similar claims have been filed in other federal and state courts, as well. The lawsuits assert claims including fraud, unfair competition, and unjust enrichment. Also, in June 2017, Craig. v. CenturyLink, Inc., et al., a securities investor class action, was filed in U.S. District Court for the Southern District of New York, alleging that it failed to disclose material information regarding improper sales practices, and asserting federal securities law claims. A number of other cases asserting similar claims have also been filed. Beginning June 2017, Lumen Technologies received several shareholder derivative demands addressing related topics. In August 2017, Lumen's Board of Directors formed a special litigation committee of outside directors to address the allegations of impropriety contained in the shareholder derivative demands. In April 2018, the special litigation committee concluded its review of the derivative demands and declined to take further action. Since then, derivative cases were filed in Louisiana state court in the Fourth Judicial District Court for the Parish of Ouachita and in federal court in Louisiana and Minnesota. These cases have been brought on behalf of Lumen Technologies against certain current and former officers and directors of the Company and seek damages for alleged breaches of fiduciary duties. The consumer class actions, the securities investor class actions, and the federal derivative actions have been transferred to the U.S. District Court for the District of Minnesota for coordinated and consolidated pretrial proceedings as In Re: CenturyLink Sales Practices and Securities Litigation. Subject to confirmatory discovery and court approval, Lumen Technologies agreed to settle the consumer class actions for payments of $15.5 million to compensate class members and of up to $3.5 million for administrative costs. In the second quarter of 2019, Lumen Technologies accrued for these obligations, and a portion of the administrative costs has been expended in 2020. Certain class members may elect to opt out of the class settlement and pursue the resolution of their individual claims against us on these issues through various dispute resolution processes, including individual arbitration. One law firm asserts it has opt out requests from approximately 12,000 class members. To the extent that a substantial number of class members, meet the contractual requirements to arbitrate, elect to opt out of the settlement (or otherwise successfully exclude their individual claims), and actually pursue arbitrations, Lumen Technologies and we could incur a material amount of filing and other arbitrations fees in relation to the administration of those claims. In July 2017, the Minnesota state attorney general filed State of Minnesota v. CenturyTel Broadband Services LLC, et al. in the Anoka County Minnesota District Court, alleging claims of fraud and deceptive trade practices relating to improper consumer sales practices. Lumen Technologies has engaged in discussions regarding potential resolutions of these claims with a number of state attorneys general, and has entered into agreements settling the Minnesota suit and certain of the consumer practices claims asserted by state attorneys general. While Lumen Technologies does not agree with allegations raised in these matters, it has been willing to consider reasonable settlements where appropriate. Other Proceedings, Disputes and Contingencies From time to time, we are involved in other proceedings incidental to our business, including patent infringement allegations, administrative hearings of state public utility commissions relating primarily to our rates or services, actions relating to employee claims, various tax issues, environmental law issues, grievance hearings before labor regulatory agencies and miscellaneous third-party tort actions. We are currently defending several patent infringement lawsuits asserted against us by non-practicing entities, many of which are seeking substantial recoveries. These cases have progressed to various stages and one or more may go to trial during 2020 if they are not otherwise resolved. Where applicable, we are seeking full or partial indemnification from our vendors and suppliers. As with all litigation, we are vigorously defending these actions and, as a matter of course, are prepared to litigate these matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities. We are subject to various federal, state and local environmental protection and health and safety laws. From time to time, we are subject to judicial and administrative proceedings brought by various governmental authorities under these laws. Several such proceedings are currently pending, but none is reasonably expected to exceed $100,000 in fines and penalties. The outcome of these other proceedings described under this heading is not predictable. However, based on current circumstances, we do not believe that the ultimate resolution of these other proceedings, after considering available defenses and any insurance coverage or indemnification rights, will have a material adverse effect on us.

Dividends

Dividends	9 Months Ended
	Sep. 30, 2020
Dividends [Abstract]
Dividends	Dividends From time to time we may declare and pay dividends to our direct parent company, QSC, sometimes in excess of our earnings to the extent permitted by applicable law. Our debt covenants do not currently limit the amount of dividends we can pay to QSC. During the nine months ended September 30, 2020 and 2019, we declared and paid dividends to QSC of $1.4 billion and $1.1 billion, respectively. Dividends paid are reflected on our consolidated statements of cash flows as financing activities.

Other Financial Information

Other Financial Information	9 Months Ended
	Sep. 30, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Other Financial Information	Other Financial Information Other Current Assets The following table presents details of other currents assets reflected in our consolidated balance sheets: September 30, 2020 December 31, 2019 (Dollars in millions) Prepaid expenses $ 49 41 Contract acquisition costs 49 50 Contract fulfillment costs 28 28 Other 7 9 Total other current assets $ 133 128

Labor Union Contracts

Labor Union Contracts	9 Months Ended
	Sep. 30, 2020
Risks and Uncertainties [Abstract]
Labor Union Contracts	Labor Union Contracts As of September 30, 2020, approximately 45% of our employees were represented by the Communication Workers of America ("CWA") or the International Brotherhood of Electrical Workers ("IBEW"). During the third quarter of 2019, we reached new agreements with each of the CWA and IBEW, which represented all of the above noted represented employees. Therefore, there are no collective bargaining agreements that are scheduled to expire over the 12 month period ending September 30, 2021. We believe relations with our employees continue to be generally good.

Background (Policies)

Background (Policies)	9 Months Ended
	Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Consolidation	The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. Transactions with our non-consolidated affiliates (referred to herein as affiliates) have not been eliminated.
Segments	Our operations are integrated into and reported as part of Lumen Technologies. Lumen's chief operating decision maker ("CODM") is 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.
Operating lease income	Qwest leases various data transmission capacity, office facilities, switching facilities and other network sites to third parties under operating leases. Lease and sublease income are included in operating revenue in our consolidated statements of operations.
Recent accounting pronouncements	In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, " Measurement of Credit Losses on Financial Instruments ". The primary impact of ASU 2016-13 for us is a change in the model for the recognition of credit losses related to our financial instruments from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires us to estimate the total credit losses expected on the portfolio of financial instruments. ASU 2016-13 In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740 ). ASU 2019-12 removes certain exceptions for investments, intra-period allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. ASU 2019-12 will become effective for us in the first quarter of fiscal 2021 and early adoption is permitted. We do not believe the adoption will have a significant impact on our consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting , designed to ease the burden of accounting for contract modifications related to the global market-wide reference rate transition period. Subject to certain criteria, ASU 2020-04 provides qualifying entities the option to apply expedients and exceptions to contract modifications and hedging accounting relationships made until December 31, 2022. We are evaluating ASU 2020-04's applicability to relevant transactions referencing the London Inter-bank Offering Rate ("LIBOR") or another reference rate expected to be discontinued and the resulting impact on our consolidated financial statements.
Goodwill and intangible assets, goodwill	We assess our goodwill for impairment annually, or, under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment. We are required to write-down the value of goodwill in periods in which the carrying value of equity exceeds the estimated fair value of equity, limited to the amount of goodwill. Our annual impairment assessment date for goodwill is October 31, at which date we assess goodwill at our reporting unit.
Credit losses on financial instruments	In accordance with ASC 326, "Financial Instruments - Credit Losses" ("ASC 326") we aggregate financial assets with similar risk characteristics to align our expected credit losses with the credit quality or deterioration over the life of such assets. We monitor certain risk characteristics within our aggregated financial assets and revise their composition accordingly, to the extent internal and external risk factors change each reporting period. Financial assets that do not share risk characteristics with other financial assets are evaluated separately. Our financial assets measured at amortized cost primarily consist of accounts receivable. In developing our accounts receivable portfolio, we pooled certain assets with similar credit risk characteristics based on the nature of our customers, their industry, policies used to grant credit terms and their historical and expected credit loss patterns.

Goodwill, Customer Relationsh_2

Goodwill, Customer Relationships and Other Intangible Assets (Tables)	9 Months Ended
	Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Schedule of Intangible Assets and Goodwill	Goodwill, customer relationships and other intangible assets consisted of the following: September 30, 2020 December 31, 2019 (Dollars in millions) Goodwill $ 9,360 9,360 Customer relationships, less accumulated amortization of $5,520 and $5,231 $ 179 468 Other intangible assets, less accumulated amortization of $1,813 and $1,780 275 311 Total other intangible assets, net $ 454 779
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense	We estimate that total amortization expense for intangible assets for the years ending December 31, 2020 through 2024 will be as follows: (Dollars in millions) 2020 (remaining three months) $ 114 2021 163 2022 58 2023 46 2024 34

Revenue Recognition (Tables)

Revenue Recognition (Tables)	9 Months Ended
	Sep. 30, 2020
Revenue from Contract with Customer [Abstract]
Schedule of Revenue	The following table provides 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 September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (Dollars in millions) Total revenue $ 1,801 2,011 5,518 6,069 Adjustments for non-ASC 606 revenue (1) (118) (123) (360) (375) Total revenue from contracts with customers $ 1,683 1,888 5,158 5,694 ______________________________________________________________________ (1) Includes regulatory revenue and lease revenue not within the scope of ASC 606.
Contract with customer, asset and liability	The following table provides balances of customer receivables, contract assets and contract liabilities as of September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 (Dollars in millions) Customer receivables (1) $ 378 430 Contract assets 13 18 Contract liabilities 297 338 ______________________________________________________________________ (1) Gross customer receivables of $418 million and $462 million, net of allowance for doubtful accounts of $40 million and $32 million, at September 30, 2020 and December 31, 2019, respectively.
Capitalized contract cost	The following table provides changes in our contract acquisition costs and fulfillment costs: Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Acquisition Costs Fulfillment Costs Acquisition Costs Fulfillment Costs (Dollars in millions) Beginning of period balance $ 81 59 87 60 Costs incurred 12 6 15 10 Amortization (15) (8) (15) (8) End of period balance $ 78 57 87 62 Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019 Acquisition Costs Fulfillment Costs Acquisition Costs Fulfillment Costs (Dollars in millions) Beginning of period balance $ 86 64 90 57 Costs incurred 39 18 44 29 Amortization (47) (25) (47) (24) End of period balance $ 78 57 87 62

Credit Losses on Financial In_2

Credit Losses on Financial Instruments (Tables)	9 Months Ended
	Sep. 30, 2020
Credit Loss [Abstract]
Financing Receivable, Allowance for Credit Loss	The following table presents the activity of our allowance for credit losses by accounts receivable portfolio: Business Consumer Total (Dollars in millions) Beginning balance at January 1, 2020 (1) $ 17 18 35 Provision for expected losses 23 22 45 Write-offs charged against the allowance (16) (22) (38) Recoveries collected 3 3 6 Ending balance at September 30, 2020 $ 27 21 48 ______________________________________________________________________ (1) The beginning balance includes the cumulative effect of the adoption of new credit loss standard.

Long-Term Debt and Note Payab_2

Long-Term Debt and Note Payable - Affiliate (Tables)	9 Months Ended
	Sep. 30, 2020
Debt Disclosure [Abstract]
Schedule of long-term debt	The following chart reflects (i) the consolidated long-term debt of Qwest Corporation and its subsidiaries, including finance lease and other obligations, unamortized premiums, net, unamortized debt issuance costs and (ii) note payable - affiliate: Interest Rates (1) Maturities (1) September 30, 2020 December 31, 2019 (Dollars in millions) Senior notes 6.125% - 7.750% 2021 - 2057 $ 4,105 5,956 Term loan (2) LIBOR + 2.00% 2025 100 100 Finance lease and other obligations Various Various 5 10 Unamortized premiums, net 5 — Unamortized debt issuance costs (88) (115) Total long-term debt 4,127 5,951 Less current maturities (1) (1,105) Long-term debt, excluding current maturities $ 4,126 4,846 Note payable - affiliate 4.974% 2022 $ 1,130 1,069 _______________________________________________________________________________ (1) As of September 30, 2020. (2) Qwest Corporation's Term Loan had an interest rate of 2.150% as of September 30, 2020 and 3.800% as of December 31, 2019.
Schedule of maturities of long-term debt	Set forth below is the aggregate principal amount of our long-term debt as of September 30, 2020 (excluding unamortized premiums and discounts and unamortized debt issuance costs and excluding note payable-affiliate) maturing during the following years: (Dollars in millions) 2020 (remaining three months) $ — 2021 951 2022 1 2023 1 2024 1 2025 and thereafter 3,256 Total long-term debt $ 4,210

Fair Value Disclosure (Tables)

Fair Value Disclosure (Tables)	9 Months Ended
	Sep. 30, 2020
Fair Value Disclosures [Abstract]
Schedule of carrying amounts and estimated fair values of long-term debt, excluding capital lease obligations, and input level to determine fair values	The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding finance lease and other obligations, as well as the input level used to determine the fair values indicated below: September 30, 2020 December 31, 2019 Input Carrying Fair Carrying Fair (Dollars in millions) Liabilities—Long-term debt (excluding finance lease and other obligations) 2 $ 4,122 4,329 5,941 6,258

Products and Services Revenue (

Products and Services Revenue (Tables)	9 Months Ended
	Sep. 30, 2020
Revenue from Contract with Customer [Abstract]
Disaggregation of revenue	Our operating revenue for our products and services consisted of the following categories: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (Dollars in millions) IP and Data Services $ 130 161 397 446 Transport and Infrastructure 649 703 1,957 2,100 Voice and Collaboration 376 397 1,151 1,234 IT and Managed Services 1 1 2 3 Regulatory Revenue 44 48 135 143 Affiliate Services 601 701 1,876 2,143 Total operating revenue $ 1,801 2,011 5,518 6,069

Other Financial Information (Ta

Other Financial Information (Tables)	9 Months Ended
	Sep. 30, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Schedule of components other current assets	The following table presents details of other currents assets reflected in our consolidated balance sheets: September 30, 2020 December 31, 2019 (Dollars in millions) Prepaid expenses $ 49 41 Contract acquisition costs 49 50 Contract fulfillment costs 28 28 Other 7 9 Total other current assets $ 133 128

Background (Details)

Background (Details) $ in Millions	Jan. 01, 2020USD ($)	Sep. 30, 2020USD ($)state	Sep. 30, 2019USD ($)	Sep. 30, 2020USD ($)segmentstate	Sep. 30, 2019USD ($)	Dec. 31, 2019USD ($)	Dec. 31, 2018USD ($)	Jun. 30, 2020USD ($)	Jun. 30, 2019USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of states in which entity operates | state		14		14
Number of reportable segments | segment				1
Operating revenues		$ 1,801	$ 2,011	$ 5,518	$ 6,069
Cost of services and products (exclusive of depreciation and amortization)		528	602	1,491	1,749
Lease income		$ 77	79	$ 234	242
Percent of operating revenue		4.00%		4.00%
Accounting Standards Update [Extensible List]	us-gaap:AccountingStandardsUpdate201613Member					us-gaap:AccountingStandardsUpdate201613Member	us-gaap:AccountingStandardsUpdate201602Member
Cumulative adjustment		$ 10,077	10,231	$ 10,077	10,231	$ 10,117
RETAINED EARNINGS (ACCUMULATED DEFICIT)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative adjustment		27	181	27	181	67	$ (182)	$ 73	$ 104
RETAINED EARNINGS (ACCUMULATED DEFICIT) | Cumulative Effect, Period of Adoption, Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative adjustment	$ 3					$ 3	$ 22
Change in Accounting Principle, Universal Service Fund
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating revenues		28	28	75	76
Cost of services and products (exclusive of depreciation and amortization)		$ 28	$ 28	$ 75	$ 76

Goodwill, Customer Relationsh_3

Goodwill, Customer Relationships and Other Intangible Assets - Schedule of Goodwill (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Finite-Lived Intangible Assets [Line Items]
Goodwill	$ 9,360	$ 9,360
Finite-lived intangible assets, net	454	779
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, net	179	468
Accumulated amortization	5,520	5,231
Other Intangible Assets
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, net	275	311
Accumulated amortization	$ 1,813	$ 1,780

Goodwill, Customer Relationsh_4

Goodwill, Customer Relationships and Other Intangible Assets - Additional Information (Details) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020USD ($)	Sep. 30, 2019USD ($)	Sep. 30, 2020USD ($)reporting_unit	Sep. 30, 2019USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Number of reporting units | reporting_unit			1
Intangible assets, gross (including goodwill)	$ 17,100		$ 17,100
Amortization of intangible assets	$ 120	$ 133	$ 365	$ 404

Goodwill, Customer Relationsh_5

Goodwill, Customer Relationships and Other Intangible Assets - Schedule of Future Amortization Expense (Details) $ in Millions	Sep. 30, 2020USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2020 (remaining three months)	$ 114
2021	163
2022	58
2023	46
2024	$ 34

Revenue Recognition - Reconcili

Revenue Recognition - Reconciliation of Total Revenue (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenue from Contract with Customer [Abstract]
Total revenue	$ 1,801	$ 2,011	$ 5,518	$ 6,069
Adjustments for non-ASC 606 revenue	(118)	(123)	(360)	(375)
Total revenue from contracts with customers	$ 1,683	$ 1,888	$ 5,158	$ 5,694

Revenue Recognition - Customer

Revenue Recognition - Customer Receivables and Contract Balances (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Revenue from Contract with Customer [Abstract]
Customer receivables	$ 378	$ 430
Contract assets	13	18
Contract liabilities	297	338
Accounts receivable, gross	418	462
Allowance for doubtful accounts	$ 40	$ 32

Revenue Recognition - Additiona

Revenue Recognition - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue recognized	$ 13	$ 4	$ 210	$ 269
Consumer Customers
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Length of customer life			30 months
Business Customer
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Length of customer life			29 months
Minimum
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Contract term			1 year
Maximum
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Contract term			5 years

Revenue Recognition - Additio_2

Revenue Recognition - Additional Information, Performance Obligation (Details) $ in Millions	Sep. 30, 2020USD ($)
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 161
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-10-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, percentage	96.00%
Expected timing of satisfaction, period	2 years 3 months

Revenue Recognition - Capitaliz

Revenue Recognition - Capitalized Contract Costs (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Acquisition Costs
Capitalized Contract Cost
Beginning of period balance	$ 81	$ 87	$ 86	$ 90
Costs incurred	12	15	39	44
Amortization	(15)	(15)	(47)	(47)
End of period balance	78	87	78	87
Fulfillment Costs
Capitalized Contract Cost
Beginning of period balance	59	60	64	57
Costs incurred	6	10	18	29
Amortization	(8)	(8)	(25)	(24)
End of period balance	$ 57	$ 62	$ 57	$ 62

Credit Losses on Financial In_3

Credit Losses on Financial Instruments (Details) $ in Millions	9 Months Ended
	Sep. 30, 2020USD ($)
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance at January 1, 2020	$ 35
Provision for expected losses	45
Write-offs charged against the allowance	(38)
Recoveries collected	6
Ending balance at September 30, 2020	48
Business
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance at January 1, 2020	17
Provision for expected losses	23
Write-offs charged against the allowance	(16)
Recoveries collected	3
Ending balance at September 30, 2020	27
Consumer
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance at January 1, 2020	18
Provision for expected losses	22
Write-offs charged against the allowance	(22)
Recoveries collected	3
Ending balance at September 30, 2020	$ 21

Long-Term Debt and Note Payab_3

Long-Term Debt and Note Payable - Affiliate - Schedule of Long Term Debt (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Long-term debt
Unamortized premiums, net	$ 5	$ 0
Unamortized debt issuance costs	(88)	(115)
Total long-term debt	4,127	5,951
Less current maturities	(1)	(1,105)
Long-term debt, excluding current maturities	4,126	4,846
Note payable - affiliate	1,130	1,069
Senior notes
Long-term debt
Long-term debt, gross	$ 4,105	5,956
Senior notes | Minimum
Long-term debt
Stated interest rate	6.125%
Senior notes | Maximum
Long-term debt
Stated interest rate	7.75%
Term loan
Long-term debt
Long-term debt, gross	$ 100	$ 100
Weighted average interest rate	2.15%	3.80%
Term loan | London Interbank Offered Rate (LIBOR)
Long-term debt
Basis spread on variable rate	2.00%
Finance lease and other obligations
Long-term debt
Long-term debt, gross	$ 5	$ 10
Note payable - affiliate | Affiliated entity
Long-term debt
Note payable - affiliate	$ 1,130	$ 1,069
Weighted average interest rate	4.974%

Long-Term Debt and Note Payab_4

Long-Term Debt and Note Payable - Affiliate - Schedule of Debt Maturity (Details) $ in Millions	Sep. 30, 2020USD ($)
Debt Disclosure [Abstract]
2020 (remaining three months)	$ 0
2021	951
2022	1
2023	1
2024	1
2025 and thereafter	3,256
Total long-term debt	$ 4,210

Long-Term Debt and Note Payab_5

Long-Term Debt and Note Payable - Affiliate - Additional Information (Details) - USD ($)	Oct. 23, 2020	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Oct. 26, 2020	Sep. 16, 2020	Aug. 07, 2020	Jun. 29, 2020	Jan. 15, 2020	Dec. 31, 2019	Sep. 30, 2017
Long-term debt
Net loss on early retirement of debt		$ 36,000,000	$ 0
Note payable - affiliate		1,130,000,000		$ 1,130,000,000						$ 1,069,000,000
Repayments of term loan		1,860,000,000	$ 10,000,000
Senior notes
Long-term debt
Net loss on early retirement of debt		36,000,000
Note payable - affiliate | Affiliated entity
Long-term debt
Note payable - affiliate		$ 1,130,000,000		$ 1,130,000,000						$ 1,069,000,000
Weighted average interest rate		4.974%		4.974%
Note payable - affiliate | Affiliated entity | Qwest Corporation
Long-term debt
Note payable - affiliate funding commitment											$ 965,000,000
Note payable - affiliate		$ 1,130,000,000		$ 1,130,000,000
Weighted average interest rate		4.974%		4.974%
Interest costs capitalized				$ 165,000,000
Accrued interest		$ 14,000,000		$ 14,000,000
Term loan | Subsequent Event
Long-term debt
Proceeds from term loan	$ 215,000,000
Repayments of term loan	$ 100,000,000
6.625% Notes Due 2055 | Senior notes
Long-term debt
Repurchased face amount						$ 250,000,000
Stated interest rate						6.625%
6.625% Notes Due 2055 | Senior notes | Subsequent Event
Long-term debt
Repurchased face amount					$ 160,000,000
Stated interest rate					6.625%
Debt instrument, face amount					$ 0
6.875% Notes Due 2054 | Senior notes
Long-term debt
Repurchased face amount							$ 300,000,000	$ 200,000,000
Stated interest rate							6.875%	6.875%
6.875% Notes Due 2033 | Senior notes
Long-term debt
Repurchased face amount									$ 850,000,000
Stated interest rate									6.875%
7.125% Notes Due 2043 | Senior notes
Long-term debt
Repurchased face amount									$ 250,000,000
Stated interest rate									7.125%

Fair Value Disclosure (Details)

Fair Value Disclosure (Details) - Fair value measurements, nonrecurring - Fair value inputs, Level 2 - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Carrying Amount
Liabilities
Liabilities—Long-term debt (excluding finance lease and other obligations)	$ 4,122	$ 5,941
Fair Value
Liabilities
Liabilities—Long-term debt (excluding finance lease and other obligations)	$ 4,329	$ 6,258

Products and Services Revenue -

Products and Services Revenue - Additional Information (Details)	9 Months Ended
	Sep. 30, 2020category
Revenue from Contract with Customer [Abstract]
Number of categories of products and services	6

Products and Services Revenue_2

Products and Services Revenue - Operating Revenues for Products and Services (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Disaggregation of Revenue [Line Items]
Operating revenues	$ 1,801	$ 2,011	$ 5,518	$ 6,069
IP and Data Services
Disaggregation of Revenue [Line Items]
Operating revenues	130	161	397	446
Transport and Infrastructure
Disaggregation of Revenue [Line Items]
Operating revenues	649	703	1,957	2,100
Voice and Collaboration
Disaggregation of Revenue [Line Items]
Operating revenues	376	397	1,151	1,234
IT and Managed Services
Disaggregation of Revenue [Line Items]
Operating revenues	1	1	2	3
Regulatory Revenue
Disaggregation of Revenue [Line Items]
Operating revenues	44	48	135	143
Affiliate services
Disaggregation of Revenue [Line Items]
Operating revenues	$ 601	$ 701	$ 1,876	$ 2,143

Commitments, Contingencies an_2

Commitments, Contingencies and Other Items (Details) plaintiff in Thousands	9 Months Ended
	Sep. 30, 2020USD ($)plaintiff
Loss Contingencies [Line Items]
Estimate of possible loss	$ 22,000,000
Unfavorable Regulatory Action
Loss Contingencies [Line Items]
Estimate of possible loss	100,000
U.S. District Court for the District of Minnesota
Loss Contingencies [Line Items]
Amount awarded to other party	15,500,000
Litigation settlement, expense	$ 3,500,000
Number of plaintiffs (approximately) | plaintiff	12

Dividends (Details)

Dividends (Details) - USD ($) $ in Billions	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Dividends [Abstract]
Dividends declared and paid to Qwest Services Corporation	$ 1.4	$ 1.1

Other Financial Information (De

Other Financial Information (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Prepaid Expense and Other Assets, Current [Abstract]
Prepaid expenses	$ 49	$ 41
Contract acquisition costs	49	50
Contract fulfillment costs	28	28
Other	7	9
Total other current assets	$ 133	$ 128

Labor Union Contracts (Details)

Labor Union Contracts (Details)	9 Months Ended
	Sep. 30, 2020
Unionized employees concentration risk | Total number of employees
Concentration Risk [Line Items]
Concentration risk percentage	45.00%

Uncategorized Items - ctl-20200

Label	Element	Value
Restricted Cash, Noncurrent	us-gaap_RestrictedCashNoncurrent	$ 2,000,000
Restricted Cash, Noncurrent	us-gaap_RestrictedCashNoncurrent	$ 2,000,000