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What changed in QWEST CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of QWEST CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+313 added−323 removedSource: 10-K (2025-02-20) vs 10-K (2024-02-22)

Top changes in QWEST CORP's 2024 10-K

313 paragraphs added · 323 removed · 245 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

51 edited+6 added−4 removed42 unchanged
Biggest changeOperations For the reasons noted in Note 1—Background and Summary of Significant Accounting Policies to our consolidated financial statements in Item 8 of Part II of this report, we believe we have one reportable segment. 6 Products and Services While most of our customized customer interactions involve multiple integrated technologies and services, we organize our products and services according to the core technologies that drive them.
Biggest changeThe summary financial information appearing above should be read in conjunction with, and is qualified by reference to, our consolidated financial statements and notes thereto in Item 8 of Part II of this report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of this report. 6 Operations For the reasons noted in Note 1—Background and Summary of Significant Accounting Policies to our consolidated financial statements in Item 8 of Part II of this report, we believe we have one reportable segment.
Private line service offers a high-speed, secure solution for frequent transmission of large amounts of data between sites, including wireless backhaul transmissions; Affiliate Services • Affiliate Services. We provide our affiliates certain telecommunication services that we also provide to external customers. Please see our products and services listed above for further description of these services.
Private line service offers a high-speed, secure solution for frequent transmission of large amounts of data between sites, including wireless backhaul transmissions; • Affiliate Services. We provide our affiliates certain telecommunication services that we also provide to external customers. Please see our products and services listed above for further description of these services.
Additional information about competitive pressures is located under the heading "Risk Factors—Business Risks" in Item 1A of Part I of this report. 9 Sales and Marketing Our enterprise sales and marketing approach focuses on solving complex customer problems with advanced technology and network solutions, striving to make core networks services compatible with digital tools.
Additional information about competitive pressures is located under the heading "Risk Factors—Business Risks" in Item 1A of Part I of this report. Sales and Marketing Our enterprise sales and marketing approach focuses on solving complex customer problems with advanced technology and network solutions, striving to make core networks services compatible with digital tools.
We offer our business customers a complete portfolio of traditional Time Division Multiplexing ("TDM") voice services including Primary Rate Interface ("PRI") service, local inbound service, switched one-plus, toll free, long distance and international services; and ◦ Private Line. We deliver private line services, a direct circuit or channel specifically dedicated for connecting two or more organizational sites.
We offer our Business customers a complete portfolio of traditional Time Division Multiplexing voice services including Primary Rate Interface ("PRI") service, local inbound service, switched one-plus, toll free, long distance and international services; and ◦ Private Line. We deliver private line services, a direct circuit or channel specifically dedicated for connecting two or more organizational sites.
The ultimate outcome of any remaining examinations is unknown, but could result in a liability to us in excess of our reserve accruals established for these matters. In early 2020, the FCC created the Rural Digital Opportunity Fund (the "RDOF"), which is a federal support program designed to fund broadband deployment in rural America.
The ultimate outcome of any remaining examinations is unknown, but could result in a liability to us in excess of our accruals established for these matters. In early 2020, the FCC created the Rural Digital Opportunity Fund ("RDOF"), which is a federal support program designed to fund broadband deployment in rural America.
Our specific products and services are detailed below under the heading "Operations - Products and Services." 5 Our ultimate parent company, Lumen Technologies, Inc., has cash management arrangements or loan arrangements with a majority of its subsidiaries that include lines of credit, affiliate obligations, capital contributions and dividends.
Our specific products and services are detailed below under the heading "Operations - Products and Services." Our ultimate parent company, Lumen Technologies, Inc., has cash management arrangements or loan arrangements with a majority of its subsidiaries that include lines of credit, affiliate obligations, capital contributions and dividends.
Although either we or Lumen own most of our network, we lease a substantial portion of our core fiber network from several other communication companies under arrangements that will periodically need to be renewed or replaced to support our current network operations.
Although either we or Lumen own most of our network, we lease a substantial portion of our fiber network from several other communication companies under arrangements that will periodically need to be renewed or replaced to support our current network operations.
We report our revenue derived from our operations serving our mass markets customers, primarily within the 'Other Broadband', 'Voice and Other' and 'Fiber Broadband' categories and our revenue derived from our operations servicing our business customers, primarily in the 'Harvest', 'Nurture' and 'Grow' categories.
We report our revenue derived from our operations serving our Mass Markets customers, primarily within the 'Other Broadband', 'Voice and Other' and 'Fiber Broadband' categories and our revenue derived from our operations servicing our Business customers, primarily within the 'Harvest', 'Nurture' and 'Grow' categories.
For the first phase of this program, RDOF Phase I, the FCC ultimately awarded $6.4 billion in support payments to be paid in equal monthly installments over 10 years.
For the first phase of this program, RDOF Phase I, the FCC awarded $6.4 billion in support payments to be paid in equal monthly installments over 10 years.
For additional information regarding our systems, network assets, network risks, capital expenditure requirements and reliance upon third parties, see "Risk Factors," in Item 1A of Part I of this report. Competition We compete in a dynamic and highly competitive market in which demand for high-speed, secure data services continues to grow.
For additional information regarding risks relating to our systems, network assets, network operations, capital expenditure requirements and reliance upon third parties, see "Risk Factors," in Item 1A of Part I of this report. Competition We compete in a dynamic and highly competitive market in which demand for high-speed, secure data services continues to grow.
Under this project, we propose over the next several years to construct additional fiber optic infrastructure to enable us to provide Quantum Fiber broadband services to several million additional urban and suburban locations in our ILEC markets.
Under this project, we plan to construct additional fiber optic infrastructure over the next years to enable us to provide Quantum Fiber broadband services to several million additional urban and suburban locations in our ILEC markets.
Data privacy regulations are complex and vary across jurisdictions. We must comply with various jurisdictional data privacy regulations, adopted by various jurisdictions in certain of our domestic markets. Domestically, the number of state privacy laws continues to increase. The application, interpretation and enforcement of these laws are often uncertain, and may be interpreted and applied inconsistently from jurisdiction to jurisdiction.
We must comply with various jurisdictional data privacy regulations, adopted by various jurisdictions in certain of our domestic markets. Domestically, the number of state privacy laws continues to increase. The application, interpretation and enforcement of these laws are often uncertain, and may be interpreted and applied inconsistently from jurisdiction to jurisdiction.
To meet these demands and remain competitive, we are continuing to invest in network capacity, security, reliability, flexibility and design innovations, including through our Quantum Fiber buildout initiative.
To meet these demands and remain competitive, we are continuing to invest in network capacity, security, reliability, flexibility and design innovations, including through our Quantum Fiber buildout initiatives.
You should be aware that we have not independently verified data from industry or other third-party sources and cannot guarantee its accuracy or completeness. 14
You should be aware that we have not independently verified data from industry or other third-party sources and cannot guarantee its accuracy or completeness. 13
Such regulations are enacted by municipalities, counties, state, federal, or other regional governmental bodies, and can vary widely from jurisdiction to jurisdiction as a result. Such regulations may also require us to pay substantial fees. Seasonality Overall, our business is not materially impacted by seasonality.
Such regulations are enacted by municipalities, counties, state, federal, or other regional governmental bodies, and can vary widely from jurisdiction to jurisdiction as a result. Such regulations may also require us to pay substantial fees or impact network buildout initiatives. Seasonality Overall, our business is not materially impacted by seasonality.
See "Risk Factors— Business Risks" in Item 1A of Part I of this report and Note 16—Labor Union Contracts to our consolidated financial statements in Item 8 of Part II of this report for a discussion of risks relating to our labor relations and for additional information on the timing of certain contract expirations. 13 Additional Information For further information on regulatory, technological and competitive factors that could impact our revenue, see "Regulation" and "Competition" above under this Item 1 and "Risk Factors" under Item 1A below.
See "Risk Factors— Business Risks" in Item 1A of Part I of this report and Note 16—Labor Union Contracts to our consolidated financial statements in Item 8 of Part II of this report for a discussion of risks relating to our labor relations and for additional information on the timing of certain contract expirations. 12 Additional Information For further information on regulatory, technological and competitive factors that could impact our revenue, see "Risk Factors" under Item 1A below.
Unless otherwise indicated, information contained in this report and other documents filed by us under the federal securities laws concerning our views and expectations regarding the technology or communications industries are based on estimates made by us using data from industry sources and making assumptions based on our industry knowledge and experience.
Unless otherwise indicated, information contained in this report and other documents filed by us under the federal securities laws concerning our views and expectations regarding industry conditions are based on estimates made by us using data from industry sources and making assumptions based on our industry knowledge and experience.
Federal officials have proposed changes to current programs and laws that could impact us, including proposals designed to increase broadband access, increase competition among broadband providers, lower broadband costs and re-adopt "net neutrality" rules similar to those adopted under the a prior administration. In late 2021, the U.S.
Federal officials have proposed changes to current programs and laws that could impact us, including proposals designed to increase broadband access, increase competition among broadband providers, lower broadband costs and re-adopt "net neutrality" rules similar to those adopted by a few states. In late 2021, the U.S.
Financial Highlights The following table summarizes the results of our consolidated operations: Years Ended December 31, 2023 (1) 2022 2021 (Dollars in millions) Operating revenue $ 5,915 6,449 6,951 Operating expenses 6,110 3,694 3,843 Operating income $ (195) 2,755 3,108 Net (loss) income $ (831) 1,919 2,107 _______________________________________________________________________________ (1) During 2023 we recorded non-cash, non-tax-deductible goodwill impairment charge of $2.4 billion.
Financial Highlights The following table summarizes the results of our consolidated operations: Years Ended December 31, 2024 2023 (1) 2022 (Dollars in millions) Operating revenue $ 5,508 5,915 6,449 Operating expenses 3,457 6,110 3,694 Operating income (loss) $ 2,051 (195) 2,755 Net income (loss) $ 1,487 (831) 1,919 _______________________________________________________________________________ (1) During 2023 we recorded non-cash, non-tax-deductible goodwill impairment charge of $2.4 billion.
At December 31, 2023, we reported our revenue derived from our operations serving our mass markets customers, primarily within the first three categories listed below, and our revenue derived from our operations servicing our business customers, primarily in the 'Harvest', 'Nurture' and 'Grow' categories listed below: • Other Broadband , under which we provide primarily lower speed broadband services to residential and small business customers utilizing our copper-based network infrastructure; • Voice and Other, under which we derive revenues from (i) providing local and long-distance voice services, professional services, and other ancillary services, and (ii) federal broadband and state support programs; • Fiber Broadband , under which we provide high speed broadband services to residential and small business customers utilizing our fiber-based network infrastructure; • Grow, which includes products and services that we anticipate will grow, primarily including: ◦ Optical Services .
At December 31, 2024, we reported our revenue derived from our operations serving our Mass Markets customers, primarily within the first three categories listed below, and our revenue derived from our operations servicing our Business customers, primarily in the 'Harvest', 'Nurture' and 'Grow' categories listed below: • Other Broadband , under which we provide primarily lower speed broadband services to residential and small business customers utilizing our copper-based network infrastructure; • Voice and Other, under which we derive revenues from (i) providing local and long-distance services, professional services, and other ancillary services, (ii) federal broadband and state support payments, and (iii) equipment, IT solutions and other services; • Fiber Broadband , under which we provide high speed broadband services to residential and small business customers utilizing our fiber-based network infrastructure; • Grow, which includes products and services in which we are significantly investing, primarily including: ◦ Optical Services .
We compete to provide services to business customers based on a variety of factors, including the comprehensiveness and reliability of our network, our data transmission speeds, price, the latency of our available network services, the scope of our integrated offerings, the reach and peering capacity of our IP network, and customer service.
We compete to provide services to Business customers based on a variety of factors, including the comprehensiveness and reliability of our network, our data transmission speeds, price, the latency of our available network services, the scope of our integrated offerings, the reach and peering capacity of our IP network, digital ordering capabilities, ease of access and use, billing simplicity and customer service.
State regulatory commissions generally continue to (i) set the rates that telecommunications companies charge each other for exchanging traffic, (ii) administer support programs designed to subsidize the provision of services to high-cost rural areas, (iii) regulate the purchase and sale of ILECs, (iv) require ILECs to provide service under publicly-filed tariffs setting forth the terms, conditions and prices of regulated services, (v) limit ILECs' ability to borrow and pledge their assets, (vi) regulate transactions between ILECs and their affiliates and (vii) impose various other service standards.
State regulatory commissions generally continue to (i) set the rates that telecommunications companies charge each other for exchanging traffic, (ii) exercise some control over the rates telecommunications companies charge their customers for regulated services, (iii) require ILECs to provide voice service throughout their territories, particularly in areas where alternative voice service is not available, (iv) administer support programs designed to subsidize the provision of services to high-cost rural areas, (v) regulate the purchase and sale of ILECs, (vi) require ILECs to provide service under publicly-filed tariffs setting forth the terms, conditions and prices of regulated services, (vii) limit ILECs' ability to borrow and pledge their assets, (viii) regulate transactions between ILECs and their affiliates and (ix) impose various other service standards.
The amount and timing of these costs are subject to the weather patterns of any given year, but have generally been highest during the third quarter and have been related to damage from severe storms, including hurricanes, tropical storms and tornadoes in our markets along the Atlantic and Gulf of Mexico coastlines.
The amount and timing of these costs are subject to the weather patterns of any given year, but have generally been highest during the third quarter and have been related to damage from severe storms, including hurricanes, tropical storms and tornadoes.
Depending on the applicable market and services, competition can be intense, especially if competitors in the market have network assets better suited to customer needs, faster transmission speeds or lower prices, or, in certain markets, are incumbent communications providers that have a longer history of providing service in the market.
Depending on the applicable market and services, competition can be intense, especially if competitors in the market have network assets better suited to customer needs, offer faster transmission speeds, charge lower prices, or have a longer history of providing service in the market.
The ultimate impact of these pending judicial matters and calls for additional regulation are currently unknown to us, although the imposition of heightened regulation of our Internet operations could potentially hamper our ability to operate our data networks efficiently, restrict our ability to implement network management practices necessary to ensure quality service, increase the cost of operating, maintaining and upgrading our network and otherwise negatively impact our current operations. 12 State Regulation of Domestic Operations Historically ILECs, including ours, have been regulated as “common carriers,” and state regulatory commissions have generally exercised jurisdiction over intrastate voice telecommunications services and their associated facilities.
Any imposition of heightened regulation of our Internet operations could potentially hamper our ability to operate our data networks efficiently, restrict our ability to implement network management practices necessary to ensure quality service, increase the cost of operating, maintaining and upgrading our network, and otherwise negatively impact our current operations. 11 State Regulation of Domestic Operations Historically ILECs, including ours, have been regulated as “common carriers,” and state regulatory commissions have generally exercised jurisdiction over intrastate voice telecommunications services and their associated facilities.
The following table summarizes certain selected financial information from our consolidated balance sheets: As of December 31, 2023 2022 (Dollars in millions) Total assets $ 16,337 18,956 Total long-term debt (1) 2,157 2,157 Total stockholder's equity 10,756 13,567 _______________________________________________________________________________ (1) Total long-term debt does not include note payable-affiliate.
The following table summarizes certain selected financial information from our consolidated balance sheets: As of December 31, 2024 2023 (Dollars in millions) Total assets $ 17,362 16,337 Total long-term debt (1) 1,927 2,157 Total stockholder's equity 12,243 10,756 _______________________________________________________________________________ (1) Total long-term debt does not include note payable-affiliate.
Other potential sources of competition include non-carrier systems that are capable of bypassing our local networks, either partially or completely, through various means. Developments in software have permitted new competitors to offer affordable networking products that historically required more expensive hardware investment.
Other potential sources of competition include non-carrier systems that are capable of bypassing our local networks, either partially or completely, through various means. Developments in software have permitted new competitors to offer affordable networking products that historically required more expensive hardware investment. We anticipate that all these trends will continue to decrease use of our voice network.
Congress enacted legislation that appropriated $65 billion to improve broadband affordability and access, primarily through federally funded state grants. As of the date of this report, various state and federal agencies are continuing to take steps to make this funding available to eligible applicants, including us.
Congress enacted legislation that appropriated $65 billion to improve broadband affordability and access, primarily through federally funded state grants. As of the date of this report, various state and federal agencies are continuing to take steps to make this funding available to eligible applicants. We believe that the release of this funding could increase competition for broadband customers.
As a critical infrastructure provider, we are a constant target of cyber-attacks from a wide range of intruders, including advanced persistent threat actors. From time to time in the ordinary course of our business we experience security incidents and disruption in our services. We develop and maintain systems and programs designed to protect against cyber-attacks and network outages.
As a critical infrastructure provider, we and our customers are a constant target of cyber-attacks from a wide range of intruders, including advanced persistent threat actors. From time to time in the ordinary course of our business we experience security incidents and disruption in our services.
Our share of this CAF II funding was approximately $145 million annually. In connection with the CAF II funding, we were required to meet certain specified infrastructure buildout requirements in 13 states by the end of 2021, which required substantial capital expenditures.
In connection with the CAF II funding, we were required to meet certain specified infrastructure buildout requirements in 13 states by the end of 2021, which required substantial capital expenditures.
Additionally, the Telecommunications Act of 1996 obligates incumbent local telephone carriers ("ILECs"), including those operated by use, to permit competitors to interconnect their facilities to the ILEC’s network and to take various other steps that are designed to promote competition, including obligations to (i) negotiate interconnection agreements in good faith, (ii) provide nondiscriminatory “unbundled” access to specific portions of the ILEC’s network and (iii) permit competitors to physically or virtually collocate their plant on the ILEC’s property.
We continue to operate various incumbent local telephone carriers ("ILECs"), which are obligated under federal law to permit competitors to interconnect their facilities to the ILEC’s network and to take various other steps that are designed to promote competition, including obligations to (i) negotiate interconnection agreements in good faith, (ii) provide nondiscriminatory “unbundled” access to specific portions of the ILEC’s network and (iii) permit competitors to physically or virtually collocate their plant on the ILEC’s property.
The development, maintenance and operation of these systems and programs is costly and requires ongoing monitoring and updating as technologies change and efforts to bypass security measures become more sophisticated and evolve rapidly.
We develop and maintain systems and programs designed to protect against cyber-attacks and network outages. The development, maintenance and operation of these systems and programs is costly and requires ongoing monitoring and updating as technologies change and efforts to bypass security measures become more sophisticated and evolve rapidly.
Employees At December 31, 2023, we had approximately 11,400 employees, of which approximately 43% are members of either the Communications Workers of America ("CWA") or the International Brotherhood of Electrical Workers ("IBEW").
Employees At December 31, 2024, we had approximately 10,500 employees, of which approximately 42% are members of either the Communications Workers of America ("CWA") or the International Brotherhood of Electrical Workers ("IBEW").
From time to time we may declare and pay dividends to QSC, our direct parent, using cash owed to us under these advances, which has the net effect of reducing the amount of these advances. We report the balance of these transfers on our consolidated balance sheet as advances to affiliates.
From time to time we may declare and pay dividends to Qwest Services Corporation ("QSC"), our direct parent, using cash owed to us under these advances, which has the net effect of reducing the amount of these advances.
For information on various litigation risks associated with owning and using intellectual property rights, see “Risk Factors—Business Risks” in Item 1A of Part I of this report, and Note 14—Commitments, Contingencies and Other Items to our consolidated financial statements in Item 8 of Part II of this report. 10 Regulation of Our Business Our domestic operations are regulated by the Federal Communications Commission (the “FCC”), by various state regulatory commissions and occasionally by local agencies.
For information on various litigation risks associated with owning and using intellectual property rights, see “Risk Factors—Business Risks” in Item 1A of Part I of this report, and Note 14—Commitments, Contingencies and Other Items to our consolidated financial statements in Item 8 of Part II of this report.
The following description discusses some of the major regulations that affect our operations, but various others could have a substantial impact on us. For additional information, see "Risk Factors" in item 1A of Part I of this report.
Changes in the composition and leadership of these agencies are often difficult to predict, which makes future planning more difficult. The following description discusses some of the major regulations that affect our operations, but various others could have a substantial impact on us. For additional information, see "Risk Factors" in item 1A of Part I of this report.
Broadband Regulation In February 2015, the FCC adopted an order regulating broadband internet access services ("BIAS") as a Title II utility service under the Communications Act of 1934. In December 2017, the FCC voted to repeal the classification of BIAS as a Title II utility service and to preempt states from imposing substantial regulations on broadband services.
Broadband Regulation In February 2015, the FCC adopted an order regulating broadband internet access services (“BIAS”) as a common carrier service under Title II of the Communications Act of 1934. In December 2017, the FCC voted to repeal this order.
As a result of the above-described regulatory and technological developments, we also face competition from competitive local exchange carriers, or CLECs, particularly in densely populated areas. CLECs provide competing services through (i) reselling an ILEC's local services, (ii) using an ILEC's unbundled network elements (iii) operating their own facilities or (iv) a combination thereof.
Consequently, our ILECs face competition from competitive local exchange carriers ("CLECs"), which typically provide competing services through (i) reselling an ILEC's local services, (ii) using an ILEC's unbundled network elements, (iii) operating their own facilities or (iv) a combination thereof.
In connection with filing this report, our chief executive officer and chief financial officer made the certifications regarding our financial disclosures required under the Sarbanes-Oxley Act of 2002, and its related regulations.
(i) in the "Investor Relations" section of our website ( ir.lumen.com ) under the heading "FINANCIALS" and subheading "SEC Filings" or (ii) on the SEC's website at www.sec.gov. In connection with filing this report, our chief executive officer and chief financial officer made the certifications regarding our financial disclosures required under the Sarbanes-Oxley Act of 2002, and its related regulations.
You may obtain free electronic copies of annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K filed by us or our ultimate controlling stockholder Lumen Technologies, Inc., and all amendments to those reports, in the "Investor Relations" section of our website ( ir.lumen.com ) under the heading "FINANCIALS" and subheading "SEC Filings." These reports are also available on the SEC's website at www.sec.gov.
You may obtain free electronic copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K filed by us or our ultimate controlling stockholder Lumen Technologies, Inc.
State agencies also regulate certain aspects of non-ILEC communications businesses, including administering the payment of federal subsidies to support broadband infrastructure construction. Data Privacy Laws and Regulations Various foreign, federal and state laws govern our storage, maintenance and use of customer data, including a wide range of consumer protection, data protection, privacy, intellectual property and similar laws.
Data Privacy Laws and Regulations Various foreign, federal and state laws govern our storage, maintenance and use of customer data, including a wide range of consumer protection, data protection, privacy, intellectual property and similar laws. Data privacy regulations are complex and vary across jurisdictions.
In most states, switched and business data services and interconnection services are subject to price regulation, although the extent of regulation varies by type of service and geographic region. In addition, Voice-Over-Internet Protocol services are regulated by state regulators, but more lightly than ILEC services.
In most states, switched and business data services and interconnection services are subject to price regulation, although the extent of regulation varies by type of service and geographic region. State agencies also regulate certain aspects of non-ILEC communications businesses, including determining carrier's eligibility to receive universal service fund support.
Changes in the composition and leadership of the FCC, state regulatory commissions and other agencies that regulate our business could have significant impacts on our revenue, expenses, competitive position and prospects. Changes in the composition and leadership of these agencies are often difficult to predict, which makes future planning more difficult.
For information on the risks associated with the regulations discussed below, see “Risk Factors—Legal and Regulatory Risks” in Item 1A of Part I of this report. Changes in the composition and leadership of the FCC, state regulatory commissions and other agencies that regulate our business could have significant impacts on our revenue, expenses, competitive position and prospects.
Many of the FCC’s regulations adopted in recent years remain subject to judicial review and additional rule-makings, thus increasing the difficulty of determining the ultimate impact of these changes on us and our competitors. 11 Universal Service Between 2015 and 2021, Lumen received approximately $500 million annually through CAF II, a program that ended on December 31, 2021.
Many of the FCC’s regulations adopted in recent years remain subject to judicial review and additional rule-makings, thus increasing the difficulty of determining the ultimate impact of these changes on us and our competitors. 10 Universal Service For several years, the federal government has instituted various funding programs to facilitate greater access to broadband services, including those noted below.
ITEM 1. BUSINESS Business Overview and Purpose We are a facilities-based technology and communications company that provides a broad array of integrated communications products and services to our business and mass markets customers.
ITEM 1. BUSINESS Business Overview and Purpose We are a networking company with the goal of connecting people, data, and applications quickly, securely and effortlessly. We are unleashing the world's digital potential by providing a broad array of integrated products and services to our domestic and global Business customers and our domestic Mass Markets customers.
Research, Development & Intellectual Property Due to the dynamic nature of our industry, we prioritize investing in developing new products, improving existing products, and licensing third party intellectual property rights to anticipate and meet our customers’ evolving needs, which give us the freedom to operate our business without the risk of interruption from the holder of the patented technology.
Our approach includes marketing our products and services primarily through direct sales representatives, inbound call centers, telemarketing and third parties, including retailers, satellite television providers, door to door sales agents and digital marketing firms. 9 Research, Development & Intellectual Property Due to the dynamic nature of our industry, we prioritize investing in developing new products, improving existing products, and licensing third party intellectual property rights to anticipate and meet our customers’ evolving needs.
Similarly, our sales and marketing approach to our mass market customers emphasizes customer-oriented sales, marketing and service with a local presence. Our approach includes marketing our products and services primarily through direct sales representatives, inbound call centers, telemarketing and third parties, including retailers, satellite television providers, door to door sales agents and digital marketing firms.
Similarly, our sales and marketing approach to our Mass Market customers emphasizes customer-oriented sales, marketing and service with a local presence.
We were incorporated under the laws of the State of Colorado in 1911. Our principal executive offices are located at 100 CenturyLink Drive, Monroe, Louisiana 71203 and our telephone number is (318) 388-9000. For a discussion of certain risks applicable to our business, see “Risk Factors” in Item 1A of Part I of this report.
We report the balance of these transfers on our consolidated balance sheet as advances to affiliates. 5 We were incorporated under the laws of the State of Colorado in 1911. Our principal executive offices are located at 931 14th Street, Denver, Colorado 80202 and our telephone number is (318) 388-9000.
Opponents of this change appealed this action in federal court. Several states have also opposed the change and have proposed, implemented or enacted laws or orders focused on state-specific Internet service regulation. In October 2019, the federal court upheld the FCC’s classification decision but vacated a part of its preemption ruling.
In May 2024, the FCC adopted a new order regulating BIAS as a Title II utility service, but a federal appeals court vacated this order in January 2025. Several states have proposed, implemented or enacted laws or orders focused on state-specific Internet service regulation.
Various courts are considering or have ruled upon the issue of the enforceability of state broadband regulation, and additional litigation and appeals are expected with respect to this issue. In addition, members of the current administration and various consumer interest groups have advocated in favor of reclassifying BIAS as a Title II utility service.
In addition, certain members of Congress and various consumer interest groups have advocated in favor of classifying BIAS as a Title II utility service. These developments make it difficult to predict the future degree of regulation of BIAS.
Generally, we must obtain and maintain operating licenses from these bodies in most areas where we offer regulated services. For information on the risks associated with the regulations discussed below, see “Risk Factors—Legal and Regulatory Risks” in Item 1A of Part I of this report.
Regulation of Our Business Our domestic operations are regulated by the Federal Communications Commission (the “FCC”), by various state regulatory commissions and occasionally by local agencies. Generally, we must obtain and maintain operating licenses from these bodies in most areas where we offer regulated services.
Removed
Competition from large communications providers, systems integrators, hyperscalers and others have increased pricing pressures with respect to several key products and services that we offer to our enterprise and wholesale business customers.
Added
For a discussion of certain risks applicable to our business, see “Risk Factors” in Item 1A of Part I of this report.
Removed
In particular, several hyperscalers have recently built their own data transmission facilities, which has reduced demand for our network services. 8 Competition to provide broadband services to our mass markets customers remains high.
Added
Products and Services While most of our customized customer interactions involve multiple integrated technologies and services, we organize our products and services according to the core technologies that drive them.
Removed
We anticipate that all these trends will continue to place downward pressures on the use of our voice network.
Added
We continue to experience pricing pressure for several of our products and services due to a wide array of large communications companies and systems integrators providing high-speed fiber services to enterprise and wholesale business customers and other companies that market slower-speed non-fiber services typically at lower prices to more price-sensitive customers. 8 Competition to provide broadband services to our Mass Markets customers remains high.
Removed
Although it remains premature to speculate on the ultimate impact of this legislation on us, we anticipate that the release of this funding would increase competition for broadband customers in newly-served areas.
Added
Between 2015 and 2021, Lumen received approximately $500 million annually through Phase II of the FCC's Connect America Fund ("CAF II"), a broadband support program that ended on December 31, 2021. Our share of this CAF II funding was approximately $145 million annually.
Added
In the third quarter of 2024, we relinquished rights to develop certain RDOF census blocks in four states, which resulted in (i) a reduction of our anticipated RDOF Phase I support payments and (ii) an expectation of payment to the federal government. These impacts are expected to be immaterial.
Added
In mid-2024, a federal appellate court rule that the FCC's universal service funding system, which for several years levied fees against us and other telecommunication companies, was unlawful. Due to pending judicial and legislative proceedings, it is unclear how this development may ultimately impact us.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

98 edited+31 added−43 removed54 unchanged
Biggest changeCyber-attacks could (i) disrupt the proper functioning of our networks and systems, which could in turn disrupt the operations of our customers, (ii) result in the destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive, classified or otherwise valuable information of ours, our employees, our customers or our customers’ end users, (iii) require us to notify customers, regulatory agencies or the public of data incidents, (iv) damage our reputation or result in a loss of business, (v) require us to provide credits for future service to our customers or to offer expensive incentives to retain customers, (vi) subject us to claims by our customers or regulators for damages, fines, penalties, license or permit revocations or other remedies, (vii) result in the loss of industry certifications or (viii) require significant management attention or financial resources to remedy the resulting damages or to change our systems.
Biggest changeVarious other factors could intensify these risks, including, (i) our maintenance of information in digital form stored on servers connected to the Internet, (ii) our use of open- and software-defined networks, (iii) the challenges of operating and maintaining our complex network composed of legacy and acquired properties, which is more difficult to safeguard than newer fully-integrated networks, (iv) growth in the size and sophistication of our customers and their service requirements, (v) increased use of our network due to greater demand for data services, (vi) the large number of our employees working from remote locations, and (vii) as further discussed below, the difficulty of defending against increasingly sophisticated attacks. 16 Cyber-attacks could (i) disrupt the proper functioning of our networks and systems, which could in turn disrupt the operations of our customers, (ii) result in the destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive, classified or otherwise valuable information of ours, our employees, our customers or our customers’ end users, (iii) require us to notify customers, regulatory agencies or the public of data incidents, (iv) damage our reputation or result in a loss of business, (v) require us to provide credits for future service to our customers or to offer expensive incentives to retain customers, (vi) subject us to claims by our customers or regulators for damages, fines, penalties, license or permit revocations or other remedies, (vii) result in the loss of industry certifications or (viii) require significant management attention or financial resources to remedy the resulting damages or to change our systems.
Our significant levels of debt and related debt service obligations could adversely affect us in several respects, including: • requiring us to dedicate a substantial portion of our cash flow from operations to the payment of interest and principal on our debt, thereby reducing the funds available to us for other purposes, including acquisitions, capital expenditures, strategic initiatives and dividends to our direct parent company; • hindering our ability to capitalize on business opportunities and to plan for or react to changing market, industry, competitive or economic conditions; • making us more vulnerable to economic or industry downturns, including interest rate increases (especially with respect to our variable rate debt); • placing us at a competitive disadvantage compared to less leveraged companies; • adversely impacting other parties’ perception of Lumen, including but not limited to existing or potential customers, vendors, employees or creditors; • making it more difficult or expensive for us to obtain any necessary future financing or refinancing, including the risk that this could force us to sell assets or take other less desirable actions to raise capital; and • increasing the risk that we may not meet the financial or non-financial covenants contained in our debt agreements or timely make all required debt payments, either of which could result in the acceleration of some or all of our outstanding indebtedness.
Our significant levels of debt and related debt service obligations could adversely affect us in several respects, including: • requiring us to dedicate a substantial portion of our cash flow from operations to the payment of interest and principal on our debt, thereby reducing the funds available to us for other purposes, including acquisitions, capital expenditures, strategic initiatives and dividends to our direct parent company; • hindering our ability to capitalize on business opportunities and to plan for or react to changing market, industry, competitive or economic conditions; • making us more vulnerable to economic or industry downturns, including interest rate increases (especially with respect to our variable rate debt); • placing us at a competitive disadvantage compared to less leveraged companies; • adversely impacting other parties’ perception of Lumen, including but not limited to existing or potential customers, vendors, employees, creditors or investors; • making it more difficult or expensive for us to obtain any necessary future financing or refinancing, including the risk that this could force us to sell assets or take other less desirable actions to raise capital; and • increasing the risk that we may not meet the covenants contained in our debt agreements or timely make all required debt payments, either of which could result in the acceleration of some or all of our outstanding indebtedness.
We may not be able to create the global digital experience expected by customers. Our customers expect us to create and maintain a global digital experience, including: (i) automation and simplification of our offerings, and (ii) digital self-service access to our products, services and customer support.
We may not be able to create the global digital experience expected by customers. Our customers expect us to create and maintain a global digital platform, including: (i) automation and simplification of our offerings and (ii) digital self-service access to our products, services and customer support.
Lumen’s costs of maintaining our pension and healthcare plans, and the future funding requirements for these plans, are affected by several factors, including investment returns on funds held by our applicable plan trusts; changes in prevailing interest rates and discount rates or other factors used to calculate the funding status of our plans; increases in healthcare costs generally or claims submitted under our healthcare plans specifically; the longevity and payment elections of our plan participants; changes in plan benefits; and the impact of the continuing implementation, modification or potential repeal of current federal healthcare and pension funding laws and regulations promulgated thereunder.
Lumen’s costs of maintaining our pension and healthcare plans, and the future funding requirements for these plans, are affected by several factors, including investment returns on funds held by our applicable plan trusts; changes in prevailing interest rates and discount rates or other factors used to calculate the funding status of our plans; increases in healthcare costs generally or claims submitted under our healthcare plans specifically; the longevity and payment elections of our plan participants; changes in plan benefits; and the impact of the continuing implementation and modification of current federal healthcare and pension funding laws and regulations promulgated thereunder.
The Company's use of AI may give rise to risks related to harmful content, inaccurate output, bias, intellectual property infringement or misappropriation, defamation, privacy incidents, and cybersecurity vulnerabilities, among others. The United States, the European Union and other governmental bodies have taken initial steps to regulate AI, which could ultimately increase AI’s legal risks or decrease its usefulness.
Our use of AI may give rise to risks related to harmful content, inaccurate output, bias, intellectual property infringement or misappropriation, defamation, privacy incidents, and cybersecurity vulnerabilities, among others. The United States, the European Union and other governmental bodies have taken initial steps to regulate AI, which could ultimately increase AI’s legal risks or decrease its usefulness.
The debt and financing arrangements of Level 3 Financing contain substantially similar limitations that restrict their operations on a standalone basis as a separate restricted group.
The debt and financing arrangements of Level 3 Financing, Inc. contain substantially similar limitations that restrict their operations on a standalone basis as a separate restricted group.
Any failure to make appropriate capital expenditures could adversely impact our financial performance or prospects. We will also continue to need substantial amounts of cash to meet our fixed commitments and other business objectives, including without limitation funding our debt repayments, operating costs, maintenance expenses, debt repayments, tax obligations, periodic pension contributions and other benefits payments.
Any failure to make appropriate capital expenditures could adversely impact our financial performance or prospects. We will also continue to need substantial amounts of cash to meet our fixed commitments and other business objectives, including without limitation funding our debt repayments, interest expense, operating costs, maintenance expenses, debt repayments, tax obligations, periodic pension contributions and other benefits payments.
Any of these occurrences could result in lost revenues from business interruption, damage to our reputation and reduced profits. Climate change may increase the frequency or severity of natural disasters and other extreme weather events in the future, which would increase our exposure to the above-cited risks and could disrupt our supply chain from our key suppliers and vendors.
Any of these occurrences could result in lost revenues from business interruption, damage to our reputation and reduced profits. Climate changes may increase the frequency or severity of natural disasters and other extreme weather events in the future, which would increase our exposure to the above-cited risks and could disrupt our supply chain from our key suppliers and vendors.
The remainder of the debt of Level 3 Financing is not secured by any of its assets, but is guaranteed on an unsecured basis by certain of its affiliates. As of the date of this annual report, substantial amounts of debt are also owed by two direct or indirect subsidiaries of Qwest Communications International Inc., including us.
The remainder of the debt of Level 3 Financing, Inc. is not secured by any of its assets, but is guaranteed on an unsecured basis by certain of its affiliates. As of the date of this annual report, substantial amounts of debt are also owed by two direct or indirect subsidiaries of Qwest Communications International Inc.
In addition, most of our more recent product and service offerings generate lower profit margins and may have shorter lifespans than our traditional communication services, and some can be expected to experience slowing or no growth in the future. Some of our new product offerings have reduced or displaced our sale of older product offerings.
In addition, most of our more recent product and service offerings generate lower profit margins and may have shorter lifespans than our traditional communication services, and some can be expected to experience slowing or no growth in the future. Some of our new product offerings have reduced or displaced our sale of older higher-margin product offerings.
Increased costs under these plans could reduce Lumen’s profitability and increase its funding commitments to its pension plans, which in turn could affect our liquidity. See Note 9—Employee Benefits for additional information regarding the funded status of Lumen's pension plans and Lumen's other post-retirement benefit plans.
Increased costs under these plans could reduce Lumen’s profitability and increase its funding commitments to its pension plans, which in turn could affect our liquidity. See Note 10—Employee Benefits for additional information regarding the funded status of Lumen's pension plans and Lumen's other post-retirement benefit plans.
Responding to these actions can be costly and time-consuming and may disrupt Lumen’s and our operations and divert the attention of our board and management. These adverse impacts could be intensified if activist shareholders advocate actions that are not supported by other shareholders, Lumen’s board or management.
Responding to these actions can be costly and time-consuming and may disrupt Lumen’s and our operations and divert the attention of its Board of Directors and our management. These adverse impacts could be intensified if activist shareholders advocate actions that are not supported by other shareholders, Lumen’s Board or management.
Some of our current and potential competitors: (i) offer products or services that are substitutes for our traditional wireline services, including wireless broadband, wireless voice and non-voice communication services, (ii) offer a more comprehensive range of communications products and services, (iii) operate systems that enable them to provision services easier and faster, (iv) have greater financial, provisioning, technical, engineering, research, development, marketing, customer relations or other resources, (v) conduct operations or raise capital at a lower cost, (vi) are subject to less regulation, (vii) have stronger brand names, (viii) have deeper or more long-standing relationships with key customers, or (ix) have larger operations than ours, any of which may enable them to compete more successfully for customers, strategic partners and acquisitions.
Some of our current and potential competitors: (i) offer products or services that are substitutes for our traditional wireline services, including wireless broadband, wireless voice and non-voice communication services, (ii) offer a more comprehensive range of communications products and services, (iii) operate systems that are newer, more integrated or more advanced, which enable them to provision services faster and more efficiently, (iv) have greater financial, provisioning, technical, engineering, research, development, marketing, customer relations or other resources, (v) conduct operations or raise capital at a lower cost, (vi) are subject to less regulation, (vii) have stronger brand names, (viii) have deeper or more long-standing relationships with key customers, or (ix) have larger operations than ours, any of which may enable them to compete more successfully for customers, strategic partners and acquisitions.
We maintain (i) disclosure controls and procedures designed to provide reasonable assurances regarding the accuracy and completeness of our SEC reports and (ii) internal control over financial reporting designed to provide reasonable assurance regarding the reliability and compliance with U.S. generally accepted accounting principles ("GAAP") of our financial statements. We cannot assure you these measures will be effective.
We maintain (i) disclosure controls and procedures designed to provide reasonable assurances regarding the accuracy and completeness of our SEC reports and (ii) internal control over financial reporting designed to provide reasonable assurance regarding the reliability of our financial statements and their compliance with U.S. generally accepted accounting principles (“GAAP”). We cannot assure you these measures will be effective.
If we are unsuccessful in protecting or enforcing our intellectual property rights, our business, competitive position, results of operations and financial condition could be adversely affected. 22 Issues related to the development and use of artificial intelligence (AI) could give rise to legal or regulatory actions, damage our reputation or otherwise materially harm our business.
If we are unsuccessful in protecting or enforcing our intellectual property rights, our business, competitive position, results of operations and financial condition could be adversely affected. Issues related to our use of artificial intelligence (AI) could give rise to legal or regulatory actions, damage our reputation or otherwise materially harm our business.
To do so, we must timely and successfully complete the digital transformation of our operations that is currently underway. Effective digital transformation is a complex, dynamic process requiring efficient allocation and prioritization of resources, simplification of our product portfolio, faster product deployments, retirement of obsolete systems, migration of data and corresponding workforce and system development.
To do so, we must timely and successfully complete the digital transformation of our operations that is currently underway. Effective digital transformation is a complex, dynamic process requiring efficient allocation and prioritization of resources, simplification of our product portfolio, faster product deployments, retirement of obsolete systems, migration of data, and corresponding transformations of our workforce and systems.
For these reasons, you are urged to review the risk factor disclosures contained in Item 1A of Lumen’s Annual Report on Form 10-K for the year ended December 31, 2023. 20 We face other business risks.
For these reasons, you are urged to review the risk factor disclosures contained in Item 1A of Lumen’s Annual Report on Form 10-K for the year ended December 31, 2024. We face other business risks.
Our ability to obtain additional financing could also depend on prevailing market conditions, which could be adversely affected by (i) general market conditions, such as disruptions in domestic or overseas sovereign or corporate debt markets, geo-political instabilities, trade restrictions, pandemics, contractions or limited growth in the economy or other similar adverse economic developments in the U.S. or abroad, and (ii) specific conditions in the communications industry.
Our ability to obtain additional financing could also depend on prevailing market conditions, which could be adversely affected by (i) general market conditions, such as disruptions in domestic or overseas sovereign or corporate debt markets, geo-political instabilities, trade restrictions, pandemics, weak economic conditions or other similar adverse economic developments in the U.S. or abroad, and (ii) specific conditions in the communications industry.
If we are not in compliance with FCC measures by the end of the CAF II and RDOF programs, we could incur substantial penalties or forfeitures, including but not limited to being suspended or disbarred from future governmental programs or contracts for a significant period of time, which could have a material adverse impact on our financial condition.
For example, if we are not in compliance with FCC measures by the end of the CAF II or RDOF programs, we could incur substantial penalties or forfeitures, including but not limited to being suspended or disbarred from future governmental programs or contracts, which could have a material adverse impact on our financial condition.
As of December 31, 2023, we had $2.2 billion of outstanding consolidated unsecured indebtedness (excluding finance lease obligations, unamortized discounts, net and unamortized debt issuance costs, and note payable-affiliate).
As of December 31, 2024, we had $2.0 billion of outstanding consolidated unsecured indebtedness (excluding finance lease obligations, unamortized discounts, net and unamortized debt issuance costs, and note payable-affiliate).
We could also be materially affected if currently pending proposals to increase the regulation of internet service providers or to further strengthen data privacy laws are implemented.
We could also be materially affected if proposals to increase the regulation of internet service providers or to further strengthen data privacy laws are enacted or implemented.
While we disclaim liability for third-party content in most of our service contracts, as a private network provider we potentially could be exposed to legal claims relating to third-party content stored or transmitted on our networks.
Third-party content stored or transmitted on our networks could result in liability or otherwise damage our reputation. While we disclaim liability for third-party content in most of our service contracts, as a private network provider we potentially could be exposed to legal claims relating to third-party content stored or transmitted on our networks.
We cannot assure you we will be able to successfully extend these arrangements when their terms expire, or to enter into new arrangements that may be necessary to implement our network expansion opportunities. Climate change could disrupt our operations, cause us to incur substantial additional capital and operating costs or negatively affect our business.
We cannot assure you we will be able to successfully extend these arrangements when their terms expire, or to enter into new arrangements that may be necessary to implement our network expansion opportunities. 18 Extreme weather conditions and climate changes could disrupt our operations, cause us to incur substantial additional capital and operating costs or negatively affect our business.
To remain competitive, we will need to accurately predict and respond to changes in technology, to continue developing products and services attractive to our customers, to timely provision our products and services, to maintain and expand our network to enable it to support customer demands for greater transmission capacity and speeds, and to discontinue outdated products and services on a cost-effective basis.
To remain competitive, we will need to accurately predict and respond to changes in technology, to continue developing and offering products and services attractive to our customers, to migrate our customers from legacy to newer products and services, to timely provision our products and services, to maintain and expand our network to enable it to support customer demands for significantly greater transmission capacity and speeds, and to discontinue outdated products and services on a cost-effective basis.
We rely on rights-of-way, colocation agreements, franchises and other authorizations granted by governmental bodies, railway companies, utilities, carriers and other third parties to locate a portion of our network equipment over, on or under their respective properties.
We rely on rights-of-way, colocation agreements, franchises, licenses and other authorizations granted by governmental bodies, railway companies, utilities, carriers and other third parties to locate a portion of our network equipment over, on or under their respective properties, or to conduct operations within their jurisdictions.
As of December 31, 2023, approximately 43% of our employees were members of various bargaining units represented by labor unions. Although we have agreements with these labor unions, we cannot predict the outcome of our future negotiations of these agreements.
As of December 31, 2024, approximately 42% of our employees were members of various bargaining units represented by labor unions. Although we have agreements with these labor unions, we cannot predict the outcome of our future negotiations of these agreements.
We are subject to numerous requirements and interpretations under various international, federal, state and local laws, rules and regulations, which are often quite detailed and occasionally in conflict with each other. Accordingly, we cannot ensure we will always be considered to be in compliance with all these requirements at any single point in time.
We are subject to numerous requirements and interpretations under various international, federal, state and local laws, rules and regulations, which are often quite detailed or unclear and are occasionally in conflict with each other. Accordingly, we cannot ensure we will always be in compliance with all these requirements at any particular time.
Over half of the debt of Lumen Technologies, Inc. is guaranteed by certain of its principal domestic subsidiaries, some of which have pledged substantially all of their assets (including certain of their respective subsidiaries) to secure their guarantees. The remainder of the debt of Lumen Technologies, Inc. is neither guaranteed nor secured.
Roughly three-quarters of the debt of Lumen Technologies, Inc. is guaranteed by certain of its principal domestic subsidiaries, some of which have pledged substantially all of their assets (including certain of their respective subsidiaries) to secure their guarantees. The remainder of the debt of Lumen Technologies, Inc. is neither guaranteed nor secured.
From time to time these events have disrupted the operations of us or our affiliates, and similar future events could cause substantial damages, including downed transmission lines, flooded facilities, power outages, fuel shortages, network delays or failures, damaged or destroyed property and equipment, and work interruptions.
From time to time these events have disrupted our operations, and similar future events could cause substantial damages, including downed transmission lines, flooded facilities, power outages, fuel shortages, network delays or failures, damaged or destroyed property and equipment, and business interruptions.
As such, investors in our consolidated debt instruments should be aware that (i) determining the priority of their rights as creditors is a complex matter which is substantially dependent upon the assets and earning power of the entities that issued or guaranteed (if any) the applicable debt and (ii) a substantial portion of such debt is structurally subordinated to all liabilities of the non-guarantor subsidiaries of Lumen Technologies, Inc. to the extent of the value of those subsidiaries that are obligors.
As such, our investors should be aware that (i) determining the priority of the rights of holders of the debt instruments of us and our affiliates is a complex matter which is substantially dependent upon the assets and earning power of the entities that issued or guaranteed (if any) the applicable debt and (ii) such debt is structurally subordinated to all liabilities of the non-guarantor subsidiaries of Lumen Technologies, Inc. to the extent of the value of those subsidiaries that are obligors.
Over half of the debt of Level 3 Financing is (i) secured by a pledge of substantially all of its assets and (ii) guaranteed on a secured basis by certain of its affiliates.
Most of the debt of Level 3 Financing, Inc. is (i) secured by a pledge of substantially all of its assets and (ii) guaranteed on a secured basis by certain of its affiliates.
The failure of us or our affiliates to comply with the above-described restrictive or financial covenants could result in an event of default, which, if not cured or waived, could accelerate our debt repayment obligations. Certain of our debt instruments have cross-default or cross-acceleration provisions.
The failure of us or our affiliates to comply with the above-described restrictive or financial covenants could result in an event of default, which, if not cured or waived, could accelerate our debt repayment obligations.
Unfavorable general economic, societal, health or environmental conditions, including unstable economic and credit markets, or depressed economic activity caused by trade wars, epidemics, pandemics, wars, societal unrest, rioting, civic disturbances, natural disasters, terrorist attacks, environmental disasters, political instability or other factors, could negatively affect our business or operations in a variety of ways. 28 Shareholder or debtholder activism efforts could cause a material disruption to our business.
Unfavorable general economic, societal, health or environmental conditions, including unstable economic and credit markets, or depressed economic activity caused by trade wars, epidemics, pandemics, wars, societal unrest, rioting, civic disturbances, natural disasters, terrorist attacks, environmental disasters, political instability or other factors, could negatively affect our business or operations in a variety of ways.
Such third-party content could also result in adverse publicity and damage our reputation. Moreover, as noted above, pending proposals to change the law could materially heighten our legal exposure. Pending legal proceedings against us or our affiliates could have a material adverse impact on us. There are several potentially material proceedings pending against us and our affiliates.
Such third-party content could also result in adverse publicity and damage our reputation. Moreover, as noted above, pending proposals to change the law could materially heighten our legal exposure and potentially require us to implement changes to manage this exposure. Pending legal proceedings against us or our affiliates could have a material adverse impact on us.
Any failure to timely accomplish these initiatives may negatively affect our (i) customer and employee experiences, (ii) ability to meet regulatory, legal or contractual obligations, (iii) network stability, (iv) ability to realize anticipated efficiencies, (v) ability to timely repair infrastructure and respond to service outages or (vi) ability to deliver services to our customers at required speed and scale.
Any failure to timely accomplish these initiatives may negatively affect our (i) ability to deliver services to our customers at required speed and scale, (ii) ability to realize anticipated efficiencies and attain our operational cost reduction projections, (iii) network stability, (iv) ability to timely repair infrastructure and respond to service outages or (v) ability to meet regulatory, legal or contractual obligations.
We regularly transfer our cash for centralized management by Lumen Technologies, which exposes us to certain risks. We are controlled by Lumen Technologies, our ultimate parent company. Under our cash management arrangement with Lumen, we regularly transfer our cash to Lumen, which we recognize on our consolidated balance sheets as advances to affiliates.
We are controlled by Lumen Technologies, our ultimate parent company. Under our cash management arrangement with Lumen, we regularly transfer our cash to Lumen, which we recognize on our consolidated balance sheets as advances to affiliates.
We may also experience reputational harm from negative assertions about the public health or environmental impact of our lead-sheathed cables, which could adversely affect our business, even if such allegations ultimately prove to be inaccurate. Such damage to our reputation could be difficult, expensive and time-consuming to repair.
We may also experience reputational harm from negative assertions about the public health or environmental impact of our lead-sheathed cables, which could adversely affect our business, even if such allegations ultimately prove to be inaccurate.
Each of our business and mass market offerings faces increasingly intense competition, with increased pressure to timely offer digitally integrated services, from a wide range of sources under evolving market conditions that have increased the number and variety of companies that compete with us.
Each of our Business and Mass Market offerings faces increasingly intense competition from a wide range of sources under evolving market conditions that have increased the number and variety of companies that compete with us.
Additionally, future investigations can potentially result in enforcement actions, litigation, fines, settlements or reputational harm, or could cause us to change our sales practices or operations. Our prior participation in the FCC's CAF II program and current participation in the FCC's RDOF program subjects us to certain financial risks.
Additionally, future investigations can potentially result in enforcement actions, litigation, fines, settlements or reputational harm, or could cause us to change our sales practices or operations. Our prior or current participation in certain of the FCC's buildout programs subjects us to certain financial risks.
Our actual or perceived failure to achieve our ESG-related initiatives, goals, commitments, or to meet evolving stakeholder expectations or standards could adversely impact us by resulting in legal or regulatory proceedings against us, customer or employee attrition, reputational damage, or other negative impacts on our business. Adverse developments impacting our non-consolidated affiliates could indirectly impact us.
Our actual or perceived failure to achieve our environmental-related initiatives, goals, commitments, or to meet evolving stakeholder expectations or standards could adversely impact us by resulting in legal or regulatory proceedings against us, customer or employee attrition, reputational damage, or other negative impacts on our business.
Consequently, certain of these covenants may significantly restrict our ability to engage in transactions with Level 3, including receiving cash from Level 3 or Level 3’s ability to distribute cash to us or our affiliated entities. Lumen Technologies, Inc.’s senior secured credit facilities, as well as our term loan debt, contain financial maintenance covenants.
Consequently, certain of these covenants may significantly restrict our ability to engage in transactions with Level 3 Parent, LLC, including receiving cash from Level 3 Parent, LLC or Level 3 Parent, LLC’s ability to distribute cash to us or our affiliated entities. Lumen Technologies, Inc.’s senior secured credit facilities contain financial maintenance covenants.
For all these reasons, we cannot assure you that our use of AI will not harm our business, operations or reputation. We have been accused of infringing the intellectual property rights of others and will likely face similar accusations in the future.
For all these reasons, our use of AI could materially harm our business, operations or reputation. 21 We have been accused of infringing the intellectual property rights of others and will likely face similar accusations in the future.
While we always welcome constructive input from our stakeholders, activist shareholders at the Lumen level may from time to time engage in proxy solicitations, advance shareholder proposals or otherwise attempt to effect changes or acquire control over Lumen and its affiliates, including us.
Shareholder or debtholder activism efforts could cause a material disruption to our business. While we always welcome constructive input from our stakeholders, activist shareholders at the Lumen level may from time to time engage in proxy solicitations, submit shareholder proposals or otherwise attempt to effect changes or acquire control over Lumen and its affiliates, including us.
Such allegations may subject us to legislative or regulatory actions, removal costs, litigation, compliance costs or penalties. Accordingly, we may incur substantial expenses, which could have a material adverse impact on our financial results or condition.
These allegations have resulted in regulatory inquiries and lawsuits, and could in the future subject us to legislative or regulatory actions, removal costs, compliance costs or penalties. Accordingly, we may incur substantial expenses, which could have a material adverse impact on our financial results or condition.
Nor can we assure you that these steps, even if successfully implemented, would not be detrimental to our operations, financial performance or future prospects. We are part of a highly complex debt structure, which could impact the rights of our investors.
Even if successfully implemented, these transactions could be detrimental to our operations, financial performance or future prospects. 23 We are part of a highly complex debt structure, which could impact the rights of our investors.
Potential impacts of high inflation include (i) lower revenue if inflationary pressures cause customers to defer, decrease or cancel their expenditures on our products and services, (ii) lower margins if we cannot offset the higher cost of our labor and supplies by raising our prices or reducing our other expenses, (iii) higher interest costs to the extent inflation places upwards pressure on prevailing interest rates and (iv) as noted above, potential difficulties retaining personnel if we do not match the salary increase expectations of our workforce.
Potential impacts of high inflation include (i) lower revenue if inflationary pressures cause our customers to defer or decrease their orders, (ii) lower profit margins, (iii) higher interest costs to the extent inflation places upwards pressure on prevailing interest rates and (iv) as noted above, potential difficulties retaining personnel if we do not match the salary increase expectations of our workforce.
These initiatives, goals, or commitments could be difficult to achieve and costly to implement. To the extent that our required and voluntary disclosures about ESG matters increase, we could be criticized for their accuracy, adequacy, or completeness. We could fail to achieve, or be perceived to fail to achieve, our ESG-related initiatives, goals, or commitments.
To the extent that our required or voluntary disclosures about environmental initiatives, we could be criticized for their accuracy, adequacy, or completeness. We could fail to achieve, or be perceived to fail to achieve, our environmental-related initiatives, goals, or commitments.
These uncertainties could adversely impact our ability to attract, retain and motivate our employees. 16 These uncertainties coupled with Lumen's low stock trading price could adversely impact our ability to attract, retain and motivate our employees. Lumen grants equity-based incentive awards to key personnel, the value of which is tied to its stock price, its financial performance or both.
Concerns regarding our future prospects and ability to discharge our obligations, coupled with Lumen's relatively low stock trading price and recent reductions of our workforce, could adversely impact our ability to attract, retain and motivate our employees. Lumen grants equity-based incentive awards to key personnel, the value of which is tied to its stock price, its financial performance or both.
Although Lumen Technologies maintains insurance coverage that may, subject to policy terms and conditions (including self-insured deductibles, coverage restrictions and monetary coverage caps), cover certain aspects of our cyber risks, such insurance coverage may be unavailable or insufficient to cover our losses.
Although Lumen Technologies maintains insurance coverage that may, subject to policy terms and conditions (including self-insured deductibles, coverage restrictions and monetary coverage caps), cover certain aspects of our cyber risks, such insurance coverage may be unavailable or insufficient to cover our losses. We could be harmed by outages in our network or various platforms, or other failures of our services.
To offer certain services in certain of our markets, we must either purchase services or lease network capacity from, or interconnect our network with, the infrastructure of other communications carriers or cloud companies who typically compete against us in those markets. Our reliance on these supply or interconnection arrangements limits our control over the delivery and quality of our services.
To offer certain services in certain of our markets, we must either purchase services or lease network capacity from, or interconnect our network with, the infrastructure of other communications carriers or cloud companies who typically compete against us in those markets.
Many of these technological changes are (i) displacing or reducing demand for certain of our services, (ii) enabling the development of competitive products or services, (iii) enabling customers to reduce or bypass use of our networks or (iv) reducing our profit margins.
Many of these technological changes are (i) displacing or reducing demand for certain of our services, (ii) enabling the development of competitive products or services, (iii) enabling customers to reduce or bypass use of our networks or (iv) reducing our profit margins. For example, our competitors may overbuild in our markets and roll out high speed connectivity products.
In recent years, competitive pressures have commoditized pricing for some of our products and services and lowered market prices for many of our other products and services.
In recent years, competitive pressures have commoditized pricing for some of our products and services and lowered market prices for many of our other products and services. Continued competitive pressures will likely place further downward pressure on market pricing.
We believe the importance of our network to global internet data flows will continue to make it a target to a wide range of threat actors, including nation state actors and other advanced persistent threat actors.
Any or all of the foregoing developments could have a material adverse impact on us. We believe the importance of our network to global internet data flows will continue to make it a target to a wide range of threat actors, including nation state actors and other advanced persistent threat actors.
Business Risks Challenges with integrating or modernizing our existing applications and systems could harm our performance. To succeed, we need to integrate, update and upgrade our existing applications and systems, including many legacy systems from past acquisitions.
Business Risks Challenges with integrating or modernizing our existing applications and systems could harm our performance. To attain our operational and strategic goals and our projected cost savings, we need to integrate, simplify, upgrade, and modernize our existing applications and systems, including many legacy systems from past acquisitions.
Our ability to do so could be restricted by various factors, including limitations of our existing network, technology, capital or personnel. If we fail at that, we could lose customers or fail to attract new ones. We may be unable to attract, develop and retain leaders and employees with the right skillsets and technical expertise.
Our ability to do so could be restricted by various factors, including limitations of our existing network, technology, capital or personnel. If we fail at that, we could fail to retain customers or attract new ones.
A substantial number of our facilities are located in areas that subject them to the risk of earthquakes, floods, fires, tornadoes or other similar casualty events.
A substantial number of our domestic facilities are located in areas that subject them to the risks associated with severe tropical storms, hurricanes, tornadoes, earthquakes, floods, wildfires or other similar casualty events.
We face other financial risks. We face other financial risks, including among others the risk that downgrades in our credit ratings or unfavorable financial analyst reports regarding us, our affiliates, or our industry could adversely impact the liquidity or market prices of our outstanding debt securities.
We face other financial risks, including among others the risk that: • downgrades in our credit ratings or unfavorable financial analyst reports regarding us, our affiliates, or our industry could adversely impact the liquidity or market prices of our outstanding debt securities; and • one or more of our ongoing tax audits or examinations could result in tax liabilities that differ materially from those we have recognized in our consolidated financial statements.
Legal and Regulatory Risks We are subject to an extensive, evolving regulatory framework that could create operational or compliance costs. As explained in greater detail elsewhere in this annual report, our domestic operations are regulated by the FCC and other federal, state and local agencies are regulated by a wide range of various foreign and international bodies.
As explained in greater detail elsewhere in this annual report, our domestic operations are regulated by the FCC and other federal, state and local agencies are regulated by a wide range of various foreign and international bodies.
Some of our customers impose similar requirements on us that are equally or more demanding. If we fail to comply with any of these governmental or contractual requirements, we could incur potential substantial penalties and reputational damage. 21 Adapting and responding to changing regulatory requirements has historically materially impacted our operations.
Some of our customers impose similar requirements on us that are equally or more demanding. If we fail to comply with any of these governmental or contractual requirements, we could incur potential substantial penalties and reputational damage. 20 For years, the laws governing our operations have been unsettled, which has impacted our ability to plan for the future.
Results of these legal proceedings cannot be predicted with certainty. As of any given date we could have exposure to losses under proceedings in excess of our accrued liability.
There are several potentially material proceedings pending against us and our affiliates, including several derivative and class action suits. Results of these legal proceedings cannot be predicted with certainty. As of any given date we could have exposure to losses under proceedings in excess of our accrued liability.
We believe some of our competitors with greater resources and fewer cost constraints than us have from time to time been able to offer compensation, benefits or accommodations in excess of what we are able to offer.
The prevalence of remote working arrangements has expanded the pool of companies that can compete for our employees and employee candidates. We believe some of our competitors with greater resources and fewer cost constraints than us have from time to time been able to offer compensation or benefits in excess of what we are able to offer.
Due to the complexity of its design and algorithms, AI presents various risks and challenges, and its use could have unintended adverse consequences. While we aim to develop and use AI responsibly and attempt to identify and mitigate ethical and legal issues presented by its use, we may be unsuccessful in identifying or resolving issues before they arise.
While we aim to use AI responsibly and attempt to identify and mitigate ethical and legal issues presented by its use, we may be unsuccessful in identifying or resolving issues before they arise.
In addition, we intend to continue to distribute to our direct stockholder a substantial portion of our consolidated cash flow, thereby reducing our capital resources for debt repayments or other purposes. These and other risks of investing in our debt securities are more fully described in our disclosure documents distributed at the time of issuance.
In addition, we intend to continue to distribute to our direct stockholder a substantial portion of our consolidated cash flow, thereby reducing our capital resources for debt repayments or other purposes.
These risks to attracting and retaining key personnel may have been exacerbated by the impacts of the low trading price of Lumen's common stock, which, as discussed below, restricted Lumen's ability in 2023 to offer competitive equity incentive compensation to our key employees.
These risks to attracting and retaining key personnel may have been exacerbated by the impacts of the low trading price of Lumen's common stock, which, as discussed below, has diminished Lumen's ability to offer competitive compensation to our key employees. Our failure to successfully attract and retain key personnel could materially adversely impact our business or financial performance.
For these and other reasons, we can give no assurance additional financing for any of these purposes will be available on terms acceptable to us, or at all. 24 If we are unable to make required debt payments or refinance our debt, we would likely have to consider other options, such as selling assets, issuing additional securities, cutting or delaying costs or otherwise reducing our cash requirements, or negotiating with our lenders to restructure our applicable debt.
If we are unable to make required debt payments or refinance our debt, we would likely have to consider other options, such as selling assets, issuing additional securities, cutting or delaying costs or otherwise reducing our cash requirements, or negotiating with our lenders to restructure our applicable debt.
Thus far, none of our past security incidents have had a material adverse effect on us, and we continue to take steps designed to limit our cyber risks.
Thus far, none of our past security incidents have had a material adverse effect on us, and we continue to take steps designed to limit our cyber risks. Nonetheless, we cannot assure you that future cyber incidents or events will not ultimately have a material adverse impact on our business, operations or financial results.
If our intangible assets are determined to be impaired in the future, we may be required to record additional significant, non-cash charges to earnings during the period in which the impairment is determined to have occurred. Any such charges could, in turn, have a material adverse effect on our results of operation or financial condition.
If our intangible assets are determined to be impaired in the future, we may be required to record additional significant, non-cash charges to earnings, which could have a material adverse effect on our results of operations or financial condition. We regularly transfer our cash for centralized management by Lumen Technologies, which exposes us to certain risks.
The recent increase in the activism of debt holders could increase the risk of claims being made under the debt agreements of us or our affiliates. We face other general risks.
The recent increase in the activism of debt holders could increase the risk of claims being made under the debt agreements of us or our affiliates. 26 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
As of such date, Lumen’s pension plans and our other post-retirement benefit plans were substantially underfunded from an accounting standpoint. The amounts contributed by us through Lumen Technologies are not segregated or restricted and may be used to provide benefits to employees of Lumen’s other subsidiaries.
The amounts contributed by us through Lumen Technologies are not segregated or restricted and may be used to provide benefits to employees of Lumen’s other subsidiaries.
These modernization efforts will require efficient allocation of resources, development capacity, greater use of artificial intelligence ("AI") and other emerging technologies, access to subject-matter experts, development of a sustainable operating model and successful collaboration between legal, privacy and security personnel.
These modernization efforts will require efficient allocation of resources, development capacity, greater use of artificial intelligence (“AI”) and other emerging technologies, access to subject-matter experts, development of a sustainable and resilient operating model, advanced project management capabilities, and successful collaboration among personnel with differing expertise. We cannot assure you these efforts will be successful.
Additionally, several companies rely on our network to transmit their data or voice traffic. Their reliance on our network exposes us to the risk that they may transfer all or a portion of this traffic from our network to alternative networks owned, constructed or leased by them, thereby reducing our revenue.
Their reliance on our network exposes us to the risk that they may transfer all or a portion of this traffic from our network to alternative networks owned, constructed or leased by them, thereby reducing our revenue. For instance, certain of our hyperscaler customers have built infrastructure that has reduced their reliance on us. Reliance on key suppliers and vendors.
As we note below, several of our competitors have dedicated substantially more resources to their development. If we fail to develop competitive AI services, our business and financial performance could be adversely impacted.
Increasingly, customers are demanding higher transmission speeds and more technologically advanced products that suit their evolving needs, including traditional and generative AI services. As we note below, several of our competitors have dedicated substantially more resources to developing such advanced services. If we fail to develop competitive services, our business and financial performance could be adversely impacted.
Similar events impacting one of our competitors could result in negative publicity for our entire industry that indirectly harms our business. We may also experience reputational damage if customers, vendors, employees, advocacy groups, regulators, investors, the media, social media influencers or others criticize our services, operations or public positions.
We may also experience reputational damage if customers, vendors, employees, advocacy groups, regulators, investors, the media, social media influencers or others criticize our services, operations or public positions.
Primarily as a result of the competitive and technological changes discussed above, we have experienced a prolonged systemic decline in our local voice, long-distance voice, network access and private line revenues. Consequently, we have experienced declining consolidated revenues (excluding acquisitions) for a prolonged period and have not been able to realize cost savings sufficient to fully offset the decline.
Several of our services continue to experience declining revenue, and our efforts to offset these declines may not be successful. Primarily as a result of the competitive and technological changes discussed above, we have experienced a prolonged systemic decline in our local voice, long-distance voice, network access and private line revenues.
Accordingly, we may not be successful in attaining our goal of achieving future revenue growth. Our operations, financial performance and liquidity are materially reliant on key suppliers, vendors and other third parties.
Accordingly, the operating and strategic plans that we have implemented to address these challenges may not succeed in attaining our goal of achieving future revenue growth in the time frames we project, or at all. 17 Our operations, financial performance and liquidity are materially reliant on key suppliers, vendors and other third parties.
We expect to continue to require significant capital to pursue our Quantum Fiber buildout plans and to otherwise maintain, upgrade and expand our network infrastructure and product offerings, based on several factors, including (i) changes in customers’ service requirements; (ii) our need to replace aging or obsolete infrastructure; (iii) our continuing need to expand and improve our network to remain competitive and meet customer demand; and (iv) our regulatory commitments.
These capital requirements are driven by several factors, including (i) changes in customers’ service requirements; (ii) our need to continue to maintain aging or obsolete infrastructure until it can be replaced; (iii) our continuing need to expand and improve our network to remain competitive and meet customer demand; and (iv) our regulatory and contractual commitments.
We may be unable to attract and retain skilled and motivated leaders and employees who possess the right skillsets and technical, managerial and development expertise to execute our plans for transformation, innovation and strategic growth.
We may be unable to attract and retain skilled and motivated leaders and employees who possess the technical, development, operational, sales or managerial expertise to execute our plans for transformation, innovation and strategic growth. We operate in a highly competitive and expanding industry, where competition for highly skilled employees has grown increasingly intense and competitors have targeted hiring our employees.
These threats may also arise from failure or intrusions of systems owned, operated or controlled by other unaffiliated operators, upon whom we are materially reliant to operate our business.
Cyber-attacks can put at risk personally identifiable information, customer data or protected health information, thereby implicating stringent domestic and foreign data protection laws. These threats may also arise from failure or intrusions of systems owned, operated or controlled by other unaffiliated third-party operators, upon whom we are materially reliant to operate our business.
We have several complex high-value national and global customer contracts. These contracts are frequently impacted by a variety of factors that could reduce or eliminate the profitability of these contracts. Moreover, we would be adversely impacted if we fail to renew major contracts upon their expiration. 19 Reliance on landowners.
Moreover, if we incorporate licensed technology into our network, we may have limited flexibility to deploy different technologies from alternative licensors. Reliance on key customer contracts. We have several complex high-value national and global customer contracts. These contracts are frequently impacted by a variety of factors that could reduce or eliminate the profitability of these contracts.
Increases in costs for pension and healthcare benefits for our active and retired employees may have a material impact on us. As of December 31, 2023, we had a substantial number of active employees participating in a qualified pension plan sponsored by Lumen Technologies that has assumed the obligations under Qwest Communications International Inc.’s predecessor pension plan.
As of December 31, 2024, we had a substantial number of active employees participating in a qualified pension plan sponsored by Lumen Technologies that has assumed the obligations under Qwest Communications International Inc.’s predecessor pension plan. As of such date, Lumen’s pension plans and our other post-retirement benefit plans were substantially underfunded from an accounting standpoint.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeLumen also periodically holds employee trainings on our privacy, cybersecurity and information management policies, conduct phishing tests and generally seek to promote a company-wide awareness of cybersecurity risk through broad-based communications and educational initiatives.
Biggest changeLumen generally seeks to promote a company-wide awareness of cybersecurity risk through broad-based communications and educational initiatives, including regularly conducting phishing tests and holding employee trainings on our privacy, cybersecurity and information management policies, at least annually and more frequently when legal or other developments warrant. 28 • The Technology, Security, and Privacy Council, co-chaired by the CSO, the Chief Information Officer (CIO), and the Chief Privacy Officer (CPO), leverages the combined expertise of various security, IT, legal, internal audit, and operational leaders across the company.
Our privacy and cybersecurity policies encompass information security, incident response procedures, and vendor management. Our risk management team works closely with our Information Technology, Privacy, Product, and Operations departments to continuously evaluate emerging cyber risk.
Our cybersecurity and privacy policies encompass information security, incident response procedures, and vendor management. Our risk management team works closely with our information technology, privacy, product, and operations departments to continuously evaluate emerging cyber risk.
We monitor existing or proposed privacy and cybersecurity laws, regulations and guidance that are or may be applicable to us in the regions where we operate, including in the European Union and the United Kingdom where we are subject to GDPR, as well as various other laws governing privacy rights, data protection and cybersecurity in other regions.
We monitor existing or proposed cybersecurity and privacy laws, regulations and guidance that are or may be applicable to us in the regions where we operate, including in the European Union and the United Kingdom where we are subject to the GDPR, as well as various other laws governing privacy rights, data protection and cybersecurity in other regions.
These independent external auditors and consultants are accredited under various information security standards, including those administered by the International Organization for Standardization and the PCI Security Council. These engagements typically include penetration testing, third-party certifications, compliance assessments, audits, and assessments of vulnerabilities and emerging threats. We also periodically deploy our Internal Audit processes to conduct additional reviews and assessments.
These independent external auditors and consultants are accredited under various information security standards, including those administered by the International Organization for Standardization and the PCI Security Standards Council. These engagements typically include penetration testing, third-party certifications, compliance assessments, audits, and assessments of vulnerabilities and emerging threats. We also periodically deploy our Internal Audit processes to conduct additional reviews and assessments.
Despite our efforts to prevent security incidents, (i) some of these attacks have resulted in security incidents (although thus far we do not believe that any of these incidents has resulted in a material adverse effect on our operating results or financial condition) and (ii) future security incidents are likely (some of which could have a material adverse effect on our operating results or financial condition).
Despite our efforts to prevent security incidents, (i) some of these attacks have resulted in security incidents (although thus far we do not believe that any of these incidents has resulted in a material adverse effect on our operating results or financial condition) and (ii) future security incidents are likely (some of which could have a material adverse effect on operating results or financial condition).
Specifically, our Risk and Security Committee, which meets quarterly, (i) receives periodic reports from Lumen's Chief Security Officer (“CSO”) on security programs, including incident reports, (ii) reviews risk assessments from information security, privacy, and internal audit management teams with respect to cybersecurity, including the adequacy and effectiveness of the Company’s internal controls regarding cybersecurity; (iii) reviews emerging cybersecurity developments and threats; (iv) reviews compliance with applicable laws and industry standards; and (v) periodically reviews our strategy to mitigate cybersecurity risks, such as our cyber insurance coverage and contingency plans in the event of security incidents or other system disruptions.
Specifically, our Risk and Security Committee, which meets quarterly, (i) receives periodic reports from Lumen's Chief Security Officer (“CSO”) on security programs, including incident reports, (ii) reviews cybersecurity risk assessments from information security, privacy, and internal audit management teams, including the adequacy and effectiveness of the Company’s internal controls regarding cybersecurity; (iii) reviews emerging cybersecurity developments and threats; (iv) reviews compliance with applicable laws and industry standards; and (v) periodically reviews our strategy to mitigate cybersecurity risks, such as our cyber insurance coverage and contingency plans in the event of security incidents or other system disruptions.
See Item 1A “Risk Factors” for a further discussion of cybersecurity risks. Lumen maintains an Incident Response Playbook that provides a set of guidelines for our stakeholders to follow when handling any data incident.
See Item 1A “Risk Factors” for a further discussion of cybersecurity risks. 27 Lumen maintains an Incident Response Playbook that provides a set of guidelines for our stakeholders to follow when handling any data incident.
In addition to addressing our more significant cyber incidents, CSWAT manages risks from matters related to business continuity, including risks posed by cybersecurity threats, and implements controls to mitigate such operational risks.
In addition to addressing our more significant cyber incidents, the CSWAT manages risks from matters related to business continuity, including risks posed by cybersecurity threats, and implements controls to mitigate such operational risks.
These escalation provisions, together with Lumen's Disclosure Controls and Procedures, are designed to ensure that appropriate representatives throughout the Company are available to assess how to respond to such incidents and make any necessary public notifications. The Incident Response Team (“CIRT”) is notified of all cybersecurity incidents, and is responsible for detecting and coordinating responses to security incidents.
These escalation provisions, together with Lumen's disclosure controls and procedures, are designed to ensure that appropriate representatives throughout the Company are available to assess how to respond to such incidents and make any necessary public notifications. The Cybersecurity Incident Response Team (“CIRT”) is responsible for detecting and coordinating responses to all security incidents.
In those instances, it will notify the Cyber Security Watch Team, which is responsible for addressing cybersecurity incidents that raise more significant risks. The Cyber Security Watch Team (“CSWAT”) is comprised of senior IT, operations, risk, legal and compliance leaders across business segments.
In those instances, it will notify the Cyber Security Watch Team ("CSWAT"), which is responsible for addressing cybersecurity incidents that raise more significant risks. The CSWAT is comprised of senior IT, operations, risk, legal and compliance leaders across business segments.
This Playbook describes how we assess incidents and how our security team shares information about such incidents with others at Lumen, including senior leadership and, if warranted, with some or all members of the Board of Directors.
This playbook describes how we assess incidents and how our security team shares information about such incidents with others at Lumen, including senior leadership and, if warranted, with some or all members of its Board of Directors.
We also share and receive threat intelligence with government agencies, cyber analysis centers and cybersecurity associations. 29 As noted elsewhere in this annual report, we are materially reliant on a variety of third-party service providers to operate our business, which exposes us to the risk of cyber incidents impacting those providers’ systems.
We also mutually exchange threat intelligence with government agencies, cyber analysis centers and cybersecurity associations. As noted elsewhere in this annual report, we are materially reliant on a variety of third-party service providers to operate our business, which exposes us to the risk of cyber incidents impacting those providers’ systems.
The Security and Privacy Council provides a forum for these cross-functional members of management to consider emerging technologies, such as artificial intelligence and emerging cybersecurity risks; review cybersecurity and privacy regulations; approve, review and update policies and standards as appropriate; and promote cross-functional collaboration to manage cybersecurity and privacy risks across the enterprise.
This council provides a forum for these cross-functional members of management of our leadership team to consider emerging technologies, such as artificial intelligence and emerging cybersecurity risks; review cybersecurity and privacy regulations; review and update policies and standards as appropriate; and promote cross-functional collaboration to manage cybersecurity and privacy risks across the enterprise.
We leverage a defense-in-depth model to identify, detect, protect and respond to threats to our information systems. Our security operations center provides advanced threat detection and response capabilities. Lumen maintains an insider threat program to detect, investigate and mitigate insider threat risks to Lumen assets, data, services and personnel globally.
This program seeks to identify, detect, protect and respond to threats to our information systems. Our security operations center provides advanced threat detection and response capabilities. Lumen maintains an insider threat program to detect, investigate and mitigate insider threat risks to Lumen assets, data, services and personnel globally.
As described in Item 1A “Risk Factors,” several features of our operations heighten our susceptibility to cyber-attacks, including (i) our material reliance on our owned and leased networks to conduct our operations, (ii) our transmission of large amounts of data over our systems and (iii) our processing and storage of sensitive customer data.
As described in Item 1A “Risk Factors,” several features of our operations heighten our susceptibility to cyber-attacks, including (i) our material reliance on systems owned, operated or controlled by unaffiliated third-party operators and (ii) our processing and storage of large amounts of sensitive customer data.
At the day-to-day operational level, Lumen maintains an experienced information security team who are tasked with implementing our privacy and cybersecurity program and support the CSO in implementing our detection, reporting, security and mitigation functions.
Lumen's cybersecurity organization includes a response team and management level committees who support our processes to assess and manage cybersecurity risk as follows: • At the day-to-day operational level, Lumen maintains an experienced information security team who are tasked with implementing our privacy and cybersecurity program and support the CSO in implementing our detection, reporting, security and mitigation functions.
Cyber-attacks on our systems may stem from a variety of sources, including fraud, malice or sabotage on the part of foreign nations, third parties, vendors, or employees and attempts by outside parties to gain access to sensitive data that is stored in or transmitted across our network.
Cyber-attacks on our systems may be initiated by a wide variety of intruders, including employees, cyber-criminals, nation state actors and other advanced persistent threat actors, and may include attempts by outside parties to gain access to sensitive data that is stored in or transmitted across our network.
Removed
Lumen's CSO has worked in the public and private sectors in information security since 1997 and has been a chief security officer since 2017. His technical and process certifications include CISSP, ITIL Foundation, Six Sigma Certified, CISCO CCNP, and CCNA, and he oversees the implementation and compliance of our information security standards and mitigation of information security related risks.
Added
Lumen's CSO has extensive experience working in the public and private sectors leading security organizations, managing risk management functions, and driving large information technology deployments. He has an Engineering degree, a Master of Business Administration, a Chief Information Security Officer Certification, and a Global Information Assurance Certification Security Leadership Certification.
Removed
Lumen also has management level committees and response teams who support our processes to assess and manage cybersecurity risk as follows: 30 • The Risk Oversight Committee (“ROC”), whose core members include the CFO, Chief Technology Officer, Chief Product Officer, and General Counsel, is responsible for making risk management decisions to ensure consideration of all relevant factors and alignment with our overall risk mitigation strategy.
Added
He oversees the implementation and compliance of our information security standards and mitigation of information security related risks.
Removed
The ROC also oversees key risk management activity to help ensure accountability, adequacy of resourcing, implementation of Company directives, and alignment of oversight provided by the Board and senior management. • The Technology Security and Privacy Council, co-chaired by the CSO, Chief Information Officer, and Chief Privacy Officer, brings together IT, legal and internal audit personnel, and other function leads.
Added
Members of this council are responsible for reporting on cybersecurity and privacy risks to the Risk Oversight Committee (“ROC”). • The ROC, whose core members include our Chief Financial Officer, Chief Technology and Product Officer, Executive Vice President of Enterprise Operations, and Chief Legal Officer, oversees our company-wide risk mitigation strategies.
Added
With respect to cyber risks, the ROC's oversight function helps to ensure accountability, adequacy of resourcing, implementation of Company directives, and alignment of oversight provided by our Board of Directors and our senior leadership team. Some of the more significant risks discussed by the ROC are also reported to our Risk and Security Committee at least quarterly.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur gross property, plant and equipment consisted of the following components: As of December 31, 2023 2022 Land 2 % 2 % Fiber, conduit and other outside plant (1) 42 % 43 % Central office and other network electronics (2) 32 % 33 % Support assets (3) 17 % 17 % Construction in progress (4) 7 % 5 % Gross property, plant and equipment 100 % 100 % _______________________________________________________________________________ (1) Fiber, conduit and other outside plant consists of fiber and metallic cable, conduit, poles and other supporting structures.
Biggest changeOur gross property, plant and equipment consisted of the following components as of the dates below: As of December 31, 2024 2023 Land 2 % 2 % Fiber, conduit and other outside plant (1) 46 % 42 % Central office and other network electronics (2) 33 % 32 % Support assets (3) 16 % 17 % Construction in progress (4) 3 % 7 % Gross property, plant and equipment 100 % 100 % _______________________________________________________________________________ (1) Fiber, conduit and other outside plant consists of fiber and metallic cable, conduit, poles and other supporting structures.
For additional information, see Note 8—Property, Plant and Equipment to our consolidated financial statements in Item 8 of Part II of this report. We have entered into various agreements regarding our unused office and technical space to reduce our ongoing operating expenses regarding such space.
For additional information, see Note 8—Property, Plant and Equipment to our consolidated financial statements in Item 8 of Part II of this report. We have entered into various agreements regarding our unused office and technical space to reduce our ongoing operating expenses regarding such space. 29
It is possible that we may lose our rights under one or more of these agreements, due to their termination or expiration or in connection with legal challenges to our rights under such agreements. 31 Our net property, plant and equipment was approximately $8.7 billion and $8.3 billion at December 31, 2023 and 2022, respectively.
It is possible that we may lose our rights under one or more of these agreements, due to their termination or expiration or in connection with legal challenges to our rights under such agreements. Our net property, plant and equipment was approximately $8.9 billion and $8.7 billion at December 31, 2024 and 2023, respectively.
However, we also lease from third parties certain facilities, plant and equipment and software under various finance and operating lease arrangements. We also own and lease administrative offices in major metropolitan locations primarily within our local service area.
However, we also lease from third parties certain facilities, network capacity and equipment and software under various lease or other arrangements. We also own and lease administrative offices in major metropolitan locations primarily within our local service area.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Not Applicable. ITEM 6. [Reserved]
Biggest changeITEM 4. MINE SAFETY DISCLOSURES Not applicable. 30 PART II References in this report to "QC," "Qwest," "we," "us" and "our" refer to Qwest Corporation and its consolidated subsidiaries, unless the context otherwise requires. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Not Applicable. ITEM 6. [Reserved]
Removed
MINE SAFETY DISCLOSURES Not applicable. 32 PART II Unless the context requires otherwise, (i) references in this report to "QC" refer to Qwest Corporation, (ii) references to "Qwest," "we," "us," "the Company" and "our" refer to Qwest Corporation and its consolidated subsidiaries, (iii) references to "QSC" refer to our direct parent company, Qwest Services Corporation and its consolidated subsidiaries, (iv) references to "QCII" refer to QSC's direct parent company and our indirect parent company, Qwest Communications International Inc., and its consolidated subsidiaries and (v) references to "Lumen Technologies", or "Lumen Technologies, Inc." or "Lumen" refer to QCII's direct parent company and our ultimate parent company, Lumen Technologies, Inc., and its consolidated subsidiaries including Level 3 Parent, LLC, referred to as "Level 3".

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] 33 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 33 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 47 Item 8.
Biggest changeItem 6. [Reserved] 31 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 31 Overview 31 Results of Operations 33 C ritical Accou nting P olici es and Estimates 38 Liquidity and Capital Res ources 40 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 44 Item 8.
Consolidated Financial Statements and Supplementary Data 48 Consolidated Statements of Operations 50 Consolidated Balance Sheets 51 Consolidated Statements of Cash Flows 52 Consolidated Statements of Stockholder's Equity 53 Notes to Consolidated Financial Statements 54
Consolidated Financial Statements and Supplementary Data 45 Consolidated Statements of Operations 47 Consolidated Balance Sheets 48 Consolidated Statements of Cash Flows 49 Consolidated Statements of Stockholder's Equity 50 Notes to Consolidated Financial Statements 51

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOperating Expenses The following table summarizes our consolidated operating expenses: Years Ended December 31, % Change 2023 2022 (Dollars in millions) Cost of services and products (exclusive of depreciation and amortization) $ 1,608 1,646 (2) % Selling, general and administrative 478 454 5 % Operating expenses-affiliates 796 734 8 % Depreciation and amortization 823 860 (4) % Goodwill impairment 2,405 — nm Total operating expenses $ 6,110 3,694 65 % _______________________________________________________________________________ nm Percentages greater than 200% and comparisons between positive and negative values or to/from zero values are considered not meaningful.
Biggest changeWithin each revenue category, this decrease was primarily due to: • Decreases in Other Broadband of $179 million primarily due to fewer customers for our low speed broadband services; • Decreases in Voice and Other of $68 million due almost entirely to the continued loss of copper-based voice customers; • Decreases in Fiber Broadband by $96 million driven by fewer subscribers for our fiber services, primarily as a result of migrations to the Quantum Fiber services offered by Lumen (which bills customers for such services and pays us for use of our network in providing such services, as further described below); • Decreases in Harvest of $108 million primarily attributable to (i) declines in legacy voice services for Business customers of $57 million, (ii) lower unbundled network elements revenue of $21 million and (iii) a decrease in private line services of $12 million; • Decreases in Nurture of $36 million primarily due to declines in Ethernet services for Business customers; • Decreases in Grow of $10 million primarily due to declines in wavelengths services for Business customers; and • Increases in Affiliate Services of $90 million primarily due to a $43 million increase in fiber broadband and other direct telecommunication services provided to our affiliates, and $47 million of additional employee shared services expense allocated to our affiliates. 34 Operating Expenses The following table summarizes our consolidated operating expenses: Years Ended December 31, % Change 2024 2023 (Dollars in millions) Cost of services and products (exclusive of depreciation and amortization) $ 1,505 1,608 (6) % Selling, general and administrative 438 478 (8) % Operating expenses-affiliates 761 796 (4) % Depreciation and amortization 753 823 (9) % Goodwill impairment — 2,405 nm Total operating expenses $ 3,457 6,110 (43) % _______________________________________________________________________________ nm Percentages greater than 200% and comparisons between positive and negative values or to/from zero values are considered not meaningful.
Continued inflationary pressures, supply constraints or business uncertainty could materially impact our financial results in a variety of ways, including by increasing our expenses, decreasing our revenues, further delaying our network expansion plans or otherwise interfering with our ability to deliver products and services.
Continued business uncertainty, supply constraints or inflationary pressures could materially impact our financial results in a variety of ways, including by increasing our expenses, decreasing our revenues, further delaying our network expansion plans or otherwise interfering with our ability to deliver products and services.
Our ultimate parent company, Lumen Technologies, Inc., has cash management arrangements or loan arrangements with a majority of its subsidiaries that include lines of credit, affiliate obligations, capital contributions and dividends. As part of these cash management or loan arrangements, affiliates provide lines of credit to certain other affiliates.
Our ultimate parent company, Lumen Technologies, Inc., has cash management arrangements or loan arrangements with a majority of its subsidiaries that include lines of credit, affiliate obligations, capital contributions and dividends. As part of these cash management or loan arrangements, affiliates provide lines of credit to certain other affiliates.
Amounts outstanding under these lines of credit and intercompany obligations vary from time to time. Under these arrangements, the majority of our cash balance is advanced on a daily basis for centralized management by Lumen's service company affiliate.
Amounts outstanding under these lines of credit and intercompany obligations vary from time to time. Under these arrangements, the majority of our cash balance is advanced on a daily basis for centralized management by Lumen's service company affiliate.
If the estimated fair value was greater than the carrying value, we concluded that no impairment exists. If the estimated fair value was less than the carrying value, we recorded a non-cash impairment charge equal to the excess amount.
If the estimated fair value was greater than the carrying value, we concluded no impairment exists. If the estimated fair value was less than the carrying value, we recorded a non-cash impairment charge equal to the excess amount.
In assessing goodwill for impairment, we may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. 41 Our annual impairment assessment date for goodwill was October 31, at which date we compared our estimated fair value of equity of our reporting unit to the carrying value of equity.
In assessing goodwill for impairment, we may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. 38 Our annual impairment assessment date for goodwill was October 31, at which date we compared our estimated fair value of equity of our reporting unit to the carrying value of equity.
We amortize capitalized software using the straight-line method primarily over estimated lives ranging up to 7 years. We annually review the estimated lives and methods used to amortize our other intangible assets. The amount of future amortization expense may differ materially from current amounts, depending on the results of our annual reviews.
We amortize capitalized software using the straight-line method primarily over estimated lives ranging up to seven years. We annually review the estimated lives and methods used to amortize our other intangible assets. The amount of future amortization expense may differ materially from current amounts, depending on the results of our annual reviews.
The fair value of our reporting unit was estimated under the market approach, using revenue and EBITDA market multiples weighted depending on the characteristics of the reporting unit.
The fair value of our reporting unit was estimated under the market approach, using these revenue and EBITDA market multiples weighted depending on the characteristics of our reporting unit.
Benefits paid by Lumen's qualified pension plan are paid through a trust that holds all of the plan's assets. Based on current laws and circumstances, Lumen Technologies does not expect any contributions to be required for their qualified pension plan during 2024.
Benefits paid by Lumen's qualified pension plan are paid through a trust that holds all of the plan's assets. Based on current laws and circumstances, Lumen Technologies does not expect any contributions to be required for their qualified pension plan during 2025.
The amount of required contributions to Lumen's qualified pension plan in 2025 and beyond will depend on a variety of factors, most of which are beyond their control, including earnings on plan investments, prevailing interest rates, demographic experience, changes in plan benefits and changes in funding laws and regulations.
The amount of required contributions to Lumen's qualified pension plan in 2026 and beyond will depend on a variety of factors, most of which are beyond their control, including earnings on plan investments, prevailing interest rates, demographic experience, changes in plan benefits and changes in funding laws and regulations.
You can find descriptions of these legal proceedings in Lumen's quarterly and annual reports filed with the SEC. Because we are not a party to any of the matters, we have not accrued any liabilities for these matters as of December 31, 2023.
You can find descriptions of these legal proceedings in Lumen's quarterly and annual reports filed with the SEC. Because we are not a party to any of the matters, we have not accrued any liabilities for these matters as of December 31, 2024.
The effect on deferred income tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. 42 The measurement of deferred taxes often involves the exercise of considerable judgment related to the realization of tax basis.
The effect on deferred income tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. 39 The measurement of deferred taxes often involves the exercise of considerable judgment related to the realization of tax basis.
Our determination of the discount rate was based on a weighted average cost of capital approach, which uses a market participant’s cost of equity and after-tax cost of debt and reflects certain risks inherent in the projected cash flows.
Our determination of the discount rate was based on a weighted average cost of capital approach, which used a market participant’s cost of equity and after-tax cost of debt and reflects certain risks inherent in the projected cash flows.
For additional information on income taxes, see Note 12—Income Taxes. 40 Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with accounting principles that are generally accepted in the United States.
For additional information on income taxes, see Note 12—Income Taxes. 37 Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with accounting principles that are generally accepted in the United States.
See Note 9—Employee Benefits to the consolidated financial statements in Item 8 of Part II of this report and Note 11—Employee Benefits to the consolidated financial statements in Item 8 of Part II of Lumen's annual report on Form 10-K for the year ended December 31, 2023 for additional information about our and Lumen's pension and post-retirement benefit arrangements.
See Note 10—Employee Benefits to the consolidated financial statements in Item 8 of Part II of this report and Note 11—Employee Benefits to the consolidated financial statements in Item 8 of Part II of Lumen's annual report on Form 10-K for the year ended December 31, 2024 for additional information about our and Lumen's pension and post-retirement benefit arrangements.
From time to time we may declare and pay dividends to QSC, our direct parent, using cash owed to us under these advances, which has the net effect of reducing the amount of these advances. We report the balance of these transfers on our consolidated balance sheet as advances to affiliates.
From time to time we may declare and pay dividends to Qwest Services Corporation ("QSC"), our direct parent, using cash owed to us under these advances, which has the net effect of reducing the amount of these advances. We report the balance of these transfers on our consolidated balance sheet as advances to affiliates.
In 2015, we agreed to a plan to settle the outstanding pension and post-retirement affiliate obligations, net balance with QCII over a 30 year term. Under the plan, payments are scheduled to be made on a monthly basis. For the year ended December 31, 2023, we made net settlement payments of $57 million to QCII in accordance with the plan.
In 2015, we agreed to a plan to settle the outstanding pension and post-retirement affiliate obligations, net balance with QCII over a 30 year term. Under the plan, payments are scheduled to be made on a monthly basis. For the year ended December 31, 2024, we made net settlement payments of $52 million to QCII in accordance with the plan.
Changes in the affiliate obligations, net are reflected in operating activities on our consolidated statements of cash flows. For the year ended 2024, we expect to make aggregate settlement payments of $52 million to QCII under the plan. 45 For 2023, Lumen's expected annual long-term rate of return on pension plan assets, net of administrative expenses was 6.5%.
Changes in the affiliate obligations, net are reflected in operating activities on our consolidated statements of cash flows. For the year ended 2025, we expect to make aggregate settlement payments of $48 million to QCII under the plan. For 2024, Lumen's expected annual long-term rate of return on pension plan assets, net of administrative expenses was 6.5%.
Depending on the facts and circumstances, we typically estimated the fair value by considering either or both of (i) a discounted cash flow method, which is based on the present value of projected cash flows over a discrete projection period and a terminal value, which is based on the expected normalized cash flows following the discrete projection period, and (ii) a market approach, which includes the use of multiples of publicly-traded companies whose services are comparable to ours.
Depending on the facts and circumstances, we typically estimated the fair value by considering either or both of (i) a discounted cash flow method, which was based on the present value of projected cash flows over a discrete projection period and a terminal value, which was based on the expected normalized cash flows following the discrete projection period, and (ii) a market approach, which included the use of multiples of publicly-traded companies whose services were comparable to ours.
Additionally, we have a current obligation for asset retirement obligations of $3 million and a long-term obligation of $27 million. Dividends We periodically pay dividends to QSC, our direct parent company, which reduce our capital resources for debt repayments and other purposes.
Additionally, we have a current obligation for asset retirement obligations of $5 million and a long-term obligation of $24 million. Dividends We periodically pay dividends to QSC, our direct parent company, which reduce our capital resources for debt repayments and other purposes.
None of these effects, individually or in the aggregate, have to date materially impacted our financial performance or financial position. Industry developments over the past couple years have increased fiber construction demand. The resulting increase in construction labor rates increased the cost of enabling units to be capable of receiving our fiber broadband services.
None of these effects, individually or in the aggregate, have to date materially impacted our financial performance or financial position. Industry developments over the past few years have increased fiber construction demand from customers. The resulting increase in construction labor rates increased the cost of enabling units to be capable of receiving our Quantum Fiber broadband services.
For 2024, Lumen's expected annual long-term rate of return on these assets is 6.5%. However, actual returns could be substantially different. For additional information, see "Risk Factors—Financial Risks in Item 1A of Part I of this report.
For 2025, Lumen's expected annual long-term rate of return on these assets, net of administrative expenses, is 6.5%. However, actual returns could be substantially different. For additional information, see "Risk Factors—Financial Risks in Item 1A of Part I of this report.
Therefore, we concluded that goodwill was not impaired as of June 30, 2023. When we performed an impairment test during the fourth quarter of 2023, we concluded the estimated fair value of our reporting unit was less than the carrying value of equity as of our testing date.
When we performed the impairment test during the second quarter of 2023, we concluded the estimated fair value of our reporting unit was greater than the carrying value of equity as of our testing date. Therefore, we concluded that goodwill was not impaired as of June 30, 2023.
As a result, we recorded a non-cash, non-tax-deductible goodwill impairment charge aggregating to $2.4 billion for the year ended December 31, 2023. When we performed our impairment tests during the fourth quarter of 2022 and 2021, we concluded the estimated fair value of our reporting unit was greater than our carrying value of equity as of our testing date.
When we performed an impairment test during the fourth quarter of 2023, we concluded the estimated fair value of our reporting unit was less than the carrying value of equity as of our testing date. As a result, we recorded a non-cash, non-tax-deductible goodwill impairment charge aggregating to $2.4 billion for the year ended December 31, 2023.
From time to time over the past couple of years, we have engaged in various refinancings, redemptions, tender offers, open market purchases and other transactions designed to reduce our consolidated indebtedness, lower our interest costs, improve our financial flexibility or otherwise enhance our debt profile.
From time to time over the past couple of years, we have engaged in various debt refinancings, redemptions, tender offers, exchange offers, open market purchases and other transactions designed principally to reduce our consolidated indebtedness, extend our debt maturities, improve our financial flexibility or otherwise enhance our debt profile.
We are expanding and enhancing our fiber network, connecting more buildings to our network to generate revenue opportunities and reducing our reliance upon other carriers. • Changes in customer preferences and in the regulatory, technological and competitive environment are (i) significantly reducing demand for our more mature service offerings, commoditizing certain of our other offerings, or resulting in volume or rate reductions for other of our offerings and (ii) also creating certain opportunities for us arising out of increased demand for lower latency provided by Edge computing and for faster and more secure data transmissions. • The operating margins of several of our newer, more technologically advanced services, some of which may connect to customers through other carriers, are lower than the operating margins on our traditional, on-net wireline services. • Uncertainties regarding our financial performance, leverage and the debt covenant compliance of our affiliates have caused, and may continue to cause, certain of our customers and other third parties to reduce or cease transacting business with us. • Declines in our traditional wireline services and other more mature offerings have necessitated right-sizing our cost structures to remain competitive.
We are expanding and enhancing our fiber network, connecting more buildings to our network to generate revenue opportunities and reducing our reliance upon other carriers. • Changes in customer preferences and in the regulatory, technological and competitive environment are (i) significantly reducing demand for our more mature service offerings, commoditizing certain offerings, or resulting in volume or rate reductions for other offerings and (ii) also creating certain opportunities for us arising out of increased demand for advanced networking services and high-speed, low-latency secure data transmissions. • The operating margins of several of our newer, more technologically advanced services, some of which may connect to customers through other carriers, are lower than the operating margins on our traditional, on-net wireline services. • Uncertainties regarding our financial performance and overall leverage of us and our affiliates have caused, and may continue to cause, certain customers and other third parties to avoid transacting business with us. • Declines in our traditional wireline services and other more mature offerings have necessitated right-sizing our cost structure to remain competitive.
For the reasons noted in Note 1—Background and Summary of Significant Accounting Policies we have determined that we have one reportable segment. 33 Products, Services and Revenue We reported our revenue derived from our operations serving our mass markets customers, primarily within the first three categories listed below, and our revenue derived from our operations servicing our business customers, primarily in the 'Harvest', 'Nurture' and 'Grow' categories listed below: • Other Broadband , under which we provide primarily lower speed broadband services to residential and small business customers utilizing our copper-based network infrastructure; • Voice and Other, under which we derive revenues from (i) providing local and long-distance voice services, professional services, and other ancillary services, (ii) federal broadband and state support programs, and (iii) equipment, IT solutions and other services; • Fiber Broadband , under which we provide high speed broadband services to residential and small business customers utilizing our fiber-based network infrastructure; • Harvest , which includes our legacy services managed for cash flow, including Time Division Multiplexing ("TDM") voice, private line and other legacy services; • Nurture , which includes our more mature offerings, including primarily ethernet; • Grow , which includes products and services marketed to our business customers that we anticipate will grow, including dark fiber and wavelengths services; and • Affiliate Services , which are communications services that we also provide to external customers.
For the reasons noted in Note 1—Background and Summary of Significant Accounting Policies we have determined that we have one reportable segment. 31 Products, Services and Revenue We reported our revenue derived from our operations serving our Mass Markets customers, primarily within the first three categories listed below, and our revenue derived from our operations servicing our Business customers, primarily in the 'Harvest', 'Nurture' and 'Grow' categories listed below: • Other Broadband , under which we provide primarily lower speed broadband services to residential and small business customers utilizing our copper-based network infrastructure; • Voice and Other, under which we derive revenues from (i) providing local and long-distance services, professional services, and other ancillary services, (ii) federal broadband and state support payments, and (iii) equipment, IT solutions and other services; • Fiber Broadband , under which we provide high speed broadband services to residential and small business customers utilizing our fiber-based network infrastructure; • Harvest , which includes our legacy services managed for cash flow, including Time Division Multiplexing voice and private line services; • Nurture , which includes our more mature offerings, including primarily ethernet; • Grow , which includes existing and emerging products and services in which we are significantly investing, including our dark fiber and wavelengths services; and • Affiliate Services , which are (i) communications services that we provide to our affiliates and also provide to external customers and (ii) application development and support services that we provide to our affiliates, as described further in Note 14—Affiliate Transactions.
Goodwill and Other Intangible Assets We have a significant amount of goodwill that is assessed at least annually for impairment. At December 31, 2023, goodwill and intangible assets totaled $7.1 billion, or 43%, of our total assets.
Goodwill and Other Intangible Assets We have a significant amount of goodwill that is assessed at least annually for impairment. At December 31, 2024, goodwill and intangible assets totaled $7.0 billion, or 41%, of our total assets.
Under our operating leases as noted in Note 4—Leases, we have a current obligation, including interest, of $22 million and a long-term obligation of $52 million. As noted in Note 14—Commitments, Contingencies and Other Items, we have a current obligation related to right-of-way agreements and purchase commitments of $48 million and a long-term obligation of $125 million.
Under our operating leases as noted in Note 4—Leases, we have a current obligation, including interest, of $20 million and a long-term obligation of $64 million. As noted in Note 14—Commitments, Contingencies and Other Items, we have a current obligation related to right-of-way agreements and purchase commitments of $38 million and a long-term obligation of $143 million.
At December 31, 2023, the accounting unfunded status of Lumen's qualified and non-qualified defined benefit pension plans and qualified post-retirement benefit plans was approximately $769 million and $1.9 billion, respectively.
At December 31, 2024, the accounting unfunded status of Lumen's qualified and non-qualified defined benefit pension plans and qualified post-retirement benefit plans was approximately $645 million and $1.7 billion, respectively.
See Note 14—Commitments, Contingencies and Other Items for additional information. Lumen Technologies is involved in several legal proceedings to which we are not a party that, if resolved against it, could have a material adverse effect on its business and financial condition. As a wholly owned subsidiary of Lumen Technologies, our business and financial condition could be similarly affected.
Lumen Technologies is involved in several legal proceedings to which we are not a party that, if resolved against it, could have a material adverse effect on its business and financial condition. As a wholly owned subsidiary of Lumen Technologies, our business and financial condition could be similarly affected.
We record deferred income tax assets and liabilities reflecting future tax consequences attributable to tax credit carryforwards and differences between the financial statement carrying value of assets and liabilities and the tax bases of those assets and liabilities.
Our provision for income taxes includes amounts for tax consequences deferred to future periods. We record deferred income tax assets and liabilities reflecting future tax consequences attributable to tax credit carryforwards and differences between the financial statement carrying value of assets and liabilities and the tax bases of those assets and liabilities.
In 2022 and 2021, we believe these factors contributed to a delay in attaining our Quantum Fiber buildout targets.
We believe these factors also occasionally contributed to a delay in attaining our Quantum Fiber buildout targets.
Cash Flow Activities The following table summarizes our consolidated cash flow activities: Years Ended December 31, (Decrease) / Increase 2023 2022 (Dollars in millions) Net cash provided by operating activities $ 2,389 2,626 (237) Net cash used in investing activities (466) (1,349) (883) Net cash used in financing activities (1,921) (1,271) 650 Operating Activities Net cash provided by operating activities decreased by $237 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily due to a net loss adjusted for non-cash items and partially offset by increases related to changes in working capital.
Cash Flow Activities The following table summarizes our consolidated cash flow activities: Years Ended December 31, $ Change 2024 2023 (Dollars in millions) Net cash provided by operating activities $ 2,194 2,389 (195) Net cash used in investing activities (1,891) (466) 1,425 Net cash used in financing activities (287) (1,921) (1,634) 43 Operating Activities Net cash provided by operating activities decreased by $195 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to net income adjusted for non-cash items and partially offset by increases related to changes in working capital.
See Note 6—Long-Term Debt and Note Payable - Affiliate for additional information on our outstanding debt securities and financing activities. Other Matters We are subject to various legal proceedings and other contingent liabilities that individually or in the aggregate could materially affect our financial condition, future results of operations or cash flows.
Other Matters We are subject to various legal proceedings and other contingent liabilities that individually or in the aggregate could materially affect our financial condition, future results of operations or cash flows. See Note 14—Commitments, Contingencies and Other Items for additional information.
Additionally, as discussed further elsewhere herein, the pandemic and macroeconomic changes arising therefrom have resulted in (i) increases in certain revenue streams and decreases in others, (ii) operational challenges resulting from inflation and, to a lesser extent, shortages of certain components and other supplies that we use in our business, (iii) delays in our cost transformation initiatives and (iv) delayed decision-making by certain of our customers.
We believe macroeconomic changes over the past few years have resulted in (i) increases in certain revenue streams and decreases in others, (ii) operational challenges resulting from inflation and shortages of certain components and other supplies that we use in our business, (iii) delays in our cost transformation initiatives and (iv) delayed decision-making by certain of our customers.
The affiliate obligations, net in other within current liabilities and noncurrent liabilities on our consolidated balance sheets primarily represents the cumulative allocation of expenses, net of payments, associated with QCII's pension plans and post-retirement benefits plans prior to the plan mergers.
Substantially all of Lumen's post-retirement health care and life insurance benefits plans are unfunded and are paid by Lumen Technologies with available cash. 42 The affiliate obligations, net in other within current liabilities and noncurrent liabilities on our consolidated balance sheets primarily represents the cumulative allocation of expenses, net of payments, associated with QCII's pension plans and post-retirement benefits plans prior to the plan mergers.
Related to debt, as noted in Note 6—Long-Term Debt and Note Payable - Affiliate, we have long-term obligations of $2.2 billion, with $1 million of current maturities and no obligations related to note payable - affiliate, as discussed above.
Future Contractual Obligations Our estimated future obligations as of December 31, 2024 include both current and long term obligations. Related to debt, as noted in Note 6—Long-Term Debt and Note Payable - Affiliate, we have long-term obligations of $1.7 billion, with $239 million of current maturities and no obligations related to note payable - affiliate, as discussed above.
These projected cash flows consider recent historical results and are consistent with the Company's short-term financial forecasts and long-term business strategies. The development of these projected cash flows, and the discount rate applied to such cash flows, is subject to inherent uncertainties, and actual results could vary significantly from such estimates.
These projected cash flows considered recent historical results and are consistent with the Company's short-term financial forecasts and long-term business strategies. Due to inherent uncertainties, actual cash flows could vary significantly from our projected cash flows.
See Note 13—Affiliate Transactions for additional information. Income Taxes We are included in the consolidated federal income tax return of Lumen Technologies. Lumen Technologies treats our consolidated results as if we were a separate taxpayer. We are required to pay our tax liabilities to Lumen Technologies based upon our separate return taxable income.
Income Taxes We are included in the consolidated federal income tax return of Lumen Technologies. Lumen Technologies treats our consolidated results as if we were a separate taxpayer. We are required to pay our tax liabilities to Lumen Technologies based upon our separate return taxable income. We are also included in the combined state tax returns filed by Lumen Technologies.
We cannot provide any assurances that we will be able to borrow additional funds on favorable terms, or at all. See "Risk Factors—Financial Risks" in Item 1A of Part I of this report.
Any future changes in the senior unsecured or secured debt ratings of us or our subsidiaries could impact our access to capital or borrowing costs. We cannot provide any assurances that we will be able to borrow additional funds on favorable terms, or at all. See "Risk Factors—Financial Risks" in Item 1A of Part I of this report.
Lumen Technologies occasionally makes voluntary contributions in addition to required contributions and reserves the right to do so in the future. Lumen Technologies has advised that it does not expect to make a voluntary contribution to the trust of the qualified pension plan in 2024.
Lumen Technologies occasionally makes voluntary contributions in addition to required contributions and reserves the right to do so in the future. Lumen made a voluntary contribution of $170 million to the trust for the Combined Pension Plan in 2024.
We are continuing to enhance our product capabilities and simplify our product portfolio based on demand and profitability to enable customers to have access to greater bandwidth. • Businesses continue to adopt distributed, global operating models.
We are continuing to enhance our product and service offerings and taking other steps to enable customers to have access to greater bandwidth and capacity. • Businesses continue to adopt distributed, global operating models.
For the first phase of this program, RDOF Phase I, the FCC ultimately awarded $6.4 billion in support payments to be paid in equal monthly installments over 10 years.
Federal Broadband Support Programs In January 2020, the FCC created the Rural Digital Opportunity Fund ("RDOF"), which is a federal support program designed to fund broadband development in rural America. For the first phase of this program, RDOF Phase I, the FCC awarded $6.4 billion in support payments to be paid in equal monthly installments over 10 years.
For additional information on the impacts of the pandemic and the macroeconomic changes arising therefrom, see (i) the remainder of this item, including "—Liquidity and Capital Resources—Overview of Sources and Uses of Cash" and (ii) Item 1A of this report. 34 Trends Impacting Our Operations In addition to the above-described impact of the pandemic and its aftermath, our consolidated operations have been, and will continue to be, impacted by the following company-wide trends: • Customers' demand for automated products and services and competitive pressures will require that we continue to invest in new technologies and automated processes to improve the customer experience and reduce our operating expenses. • The increased use of digital applications, online video, gaming and artificial intelligence has substantially increased demand for robust, scalable network services.
Trends Impacting Our Operations In addition to the above-described impact of macroeconomic and industry pressures, our consolidated operations have been, and will continue to be, impacted by the following trends: • Customers' demand for automated products and services and competitive pressures will require that we continue to invest in new technologies and automated processes to improve our customers' experience and reduce our operating expenses. 32 • The increased use of digital applications, video streaming, gaming, robotics, quantum computing and artificial intelligence has substantially increased demand for robust, scalable network services.
This decline was primarily due to higher capitalized interest of $25 million, which was partially offset by the increase in our average interest rate from 6.50% to 6.79%. See Note 6—Long-Term Debt and Note Payable - Affiliate and Liquidity and Capital Resources below for additional information about our debt.
The decline was primarily due to (i) a decrease of approximately $114 million in average net outstanding debt and (ii) an increase of capitalized interest of $21 million. See Note 6—Long-Term Debt and Note Payable - Affiliate and Liquidity and Capital Resources below for additional information about our debt.
Investing Activities Net cash used in investing activities decreased by $883 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily due to a decrease in advances to affiliates, partially offset by an increase in capital expenditures. 46 Financing Activities Net cash used in financing activities increased by $650 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily due to an increase in dividends paid to our parent, partially offset by the timing of payments of the Note Payable - Affiliate.
Investing Activities Net cash used in investing activities increased by $1.4 billion for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to an increase in advances to affiliates, partially offset by a decrease in capital expenditures.
These decreases were partially offset by higher network expenses of $32 million. 37 Selling, General and Administrative Selling, general and administrative expenses are expenses incurred in selling products and services to our customers, corporate overhead and other operating expenses.
Selling, General and Administrative Selling, general and administrative expenses are expenses incurred in selling products and services to our customers, corporate overhead and other operating expenses.
Cost of services and products (exclusive of depreciation and amortization) decreased by $38 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022. These decreases were primarily due to reductions in allocated employee related costs of $58 million and insurance and fees of $10 million.
Cost of services and products (exclusive of depreciation and amortization) decreased by $103 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to lower employee-related expenses of $71 million and lower facilities costs of $35 million.
See Note 12—Income Taxes to our consolidated financial statements in Item 8 of Part II of this report and "Critical Accounting Policies and Estimates—Income Taxes" below for additional information.
The effective tax rate for the year ended December 31, 2023 includes a $505 million unfavorable aggregate impact of non-deductible goodwill impairment. See Note 12—Income Taxes to our consolidated financial statements in Item 8 of Part II of this report and "Critical Accounting Policies and Estimates—Income Taxes" below for additional information.
Overview We are a facilities-based technology and communications company that provides a broad array of integrated communications products and services to our business and mass markets customers. Our specific products and services are detailed in Note 3—Revenue Recognition and below under the heading "Operations - Products and Services" in Item 1 of Part I of this report.
Our specific products and services are detailed in Note 3—Revenue Recognition and below under the heading "Operations - Products and Services" in Item 1 of Part I of this report.
Given the continued erosion in Lumen's market capitalization, we determined our quantitative impairment analysis would estimate the fair value of our reporting unit using only the market approach. 38 When we performed the impairment test during the second quarter of 2023, we concluded the estimated fair value of our reporting unit was greater than the carrying value of equity as of our testing date.
Given the continued erosion in Lumen's market capitalization, we determined our quantitative impairment analysis would estimate the fair value of our reporting unit using only the market approach.
These and other developments and trends impacting our operations are discussed elsewhere in this Item 7. 35 Results of Operations The following table summarizes the results of our consolidated operations for the years ended December 31, 2023 and 2022: Years Ended December 31, 2023 2022 (Dollars in millions) Operating revenue $ 5,915 6,449 Operating expenses 6,110 3,694 Operating (loss) income (195) 2,755 Total other expense, net (75) (165) (Loss) income before income taxes (270) 2,590 Income tax expense 561 671 Net (loss) income $ (831) 1,919 Operating Revenue The following table summarizes our consolidated operating revenue recorded under our revenue categories described in Note 3—Revenue Recognition: Years Ended December 31, % Change 2023 2022 (Dollars in millions) Other Broadband $ 1,111 1,275 (13) % Voice and Other 589 691 (15) % Fiber Broadband 470 461 2 % Harvest 1,048 1,134 (8) % Nurture 393 435 (10) % Grow 145 159 (9) % Affiliate Services 2,159 2,294 (6) % Total operating revenue $ 5,915 6,449 (8) % Total operating revenue decreased by $534 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Results of Operations The following table summarizes the results of our consolidated operations for the years ended December 31, 2024 and 2023: Years Ended December 31, 2024 2023 (Dollars in millions) Operating revenue $ 5,508 5,915 Operating expenses 3,457 6,110 Operating income (loss) 2,051 (195) Total other expense, net (37) (75) Income (loss) before income taxes 2,014 (270) Income tax expense 527 561 Net income (loss) $ 1,487 (831) 33 Operating Revenue The following table summarizes our consolidated operating revenue recorded under our revenue categories described in Note 3—Revenue Recognition: Years Ended December 31, % Change 2024 2023 (Dollars in millions) Other Broadband $ 932 1,111 (16) % Voice and Other 521 589 (12) % Fiber Broadband 377 473 (20) % Harvest 939 1,047 (10) % Nurture 357 393 (9) % Grow 133 143 (7) % Affiliate Services 2,249 2,159 4 % Total operating revenue $ 5,508 5,915 (7) % Total operating revenue decreased by $407 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
The availability, interest rate and other terms of any new borrowings will depend on the ratings assigned to Qwest Corporation by credit rating agencies, among other factors. As of the filing date of this report, the credit ratings for Qwest Corporation's senior unsecured debt were as follows: Agency Credit Ratings Standard & Poor's B Moody's Investors Service, Inc.
As of the filing date of this report, the credit ratings for Qwest Corporation's senior unsecured debt were as follows: Agency Credit Ratings Standard & Poor's B- Moody's Investors Service, Inc. Caa3 Fitch Ratings B+ Lumen's and Qwest Corporation's credit ratings are reviewed and adjusted from time to time by the rating agencies.
Our capital expenditures continue to be focused on enhancing network operating efficiencies, supporting new service developments, and expanding our fiber network, including our Quantum Fiber buildout plan.
Our capital expenditures continue to be focused on enhancing network operating efficiencies, supporting new service developments, and expanding our fiber network, including our Quantum Fiber buildout plan. For more information on our capital spending, see "Business" and "Risk Factors" in Items 1 and 1A, respectively, of Part I of this report.
Affiliate Transactions We recognize intercompany charges for the amounts billed to us by our affiliates and we recognize intercompany revenue for services we bill to our affiliates.
For additional information on our goodwill balances and results of our impairment analyses, see Note 2—Goodwill and Other Intangible Assets for additional information. Affiliate Transactions We recognize intercompany charges for the amounts billed to us by our affiliates and we recognize intercompany revenue for services we bill to our affiliates.
At December 31, 2023, we served approximately 2.1 million broadband subscribers. Our methodology for counting broadband subscribers may not be comparable to those of other companies.
At December 31, 2024, we served approximately 1.6 million broadband subscribers. Our methodology for counting broadband subscribers may be different than the methodologies used by other companies.
Federal officials have proposed changes to current programs and laws that could impact us, including proposals designed to increase broadband access, increase competition among broadband providers, lower broadband costs and re-adopt "net neutrality" rules similar to those adopted under the a prior administration. In late 2021, the U.S.
Federal officials have proposed changes to current programs and laws that could impact us, including proposals designed to increase broadband access, increase competition among broadband providers, lower broadband costs and increase broadband regulation. In late 2021, the U.S. Congress enacted legislation that appropriated $65 billion to improve broadband affordability and access, primarily through federally funded state grants.
Goodwill Impairment We are required to perform impairment tests related to our goodwill annually, which we perform as of October 31, or sooner if an indicator of impairment occurs. During the second quarter of 2023, the Company determined circumstances existed indicating it was more likely than not that the carrying value of our reporting unit exceeded its fair value.
Therefore, we concluded no impairment existed as of our annual assessment date in the fourth quarter of 2024. During the second quarter of 2023, the Company determined circumstances existed indicating it was more likely than not that the carrying value of our reporting unit exceeded its fair value.
These and other factors contributed to us recognizing the above-described goodwill impairment. If these pressures continue, we may experience additional deterioration in our projected cash flows or make significant changes to our assumptions of discount rates and market multiples. Any of these could result in additional goodwill impairments in future quarters.
To the extent these pressures continue, we could experience additional deterioration in our projected cash flows, or make significant changes to the assumed discount rates or market multiples that we use to determine the fair value of our reporting unit. Any of these could result in additional future impairments of our approximately $7.0 billion of remaining goodwill.
Congress enacted legislation that appropriated $65 billion to improve broadband affordability and access, primarily through federally funded state grants. As of the date of this report, various state and federal agencies are continuing to take steps to make this funding available to eligible applicants, including us.
As of the date of this report, various state and federal agencies are continuing to take steps to make this funding available to eligible applicants, including us. We anticipate that the release of this funding would increase competition for broadband customers in newly-served areas.
We performed sensitivity analyses that considered a range of discount rates and a range of EBITDA market multiples and we believe the estimates, judgments, assumptions and allocation methods used by us were reasonable. For additional information on our goodwill balances and results of our impairment analyses, see Note 2—Goodwill And Other Intangible Assets for additional information.
We performed sensitivity analyses that considered a range of discount rates and a range of EBITDA market multiples and we believe the estimates, judgments, assumptions and allocation methods used by us were reasonable. Nonetheless, changes in any of them can significantly affect whether we must incur impairment charges, as well as the size of such charges.
Subject to market conditions, restrictions under our debt covenants, and other limitations, we may pursue similar transactions in the future to the extent feasible. See Note 6—Long-Term Debt and Note Payable - Affiliate to our consolidated financial statements in Item 8 of Part II of this report for additional information.
Subject to market conditions, restrictions under our debt covenants, and other limitations, we expect to opportunistically pursue similar transactions in the future to the extent feasible.
See Note 2—Goodwill and Other Intangible Assets to our consolidated financial statements in Item 8 of Part II of this report for further details on these tests and impairment charges. 39 Other Consolidated Results The following table summarizes our total other expense, net and income tax expense: Years Ended December 31, % Change 2023 2022 (Dollars in millions) Interest expense $ (95) (112) (15) % Interest income (expense) - affiliate, net 15 (60) (125) % Other income, net 5 7 (29) % Total other expense, net $ (75) (165) (55) % Income tax expense $ 561 671 (16) % Interest Expense Interest expense decreased by $17 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Other Consolidated Results The following table summarizes our total other expense, net and income tax expense: Years Ended December 31, % Change 2024 2023 (Dollars in millions) Interest expense $ (62) (95) (35) % Interest income - affiliate, net 24 15 60 % Other income, net 1 5 (80) % Total other expense, net $ (37) (75) (51) % Income tax expense $ 527 561 (6) % Interest Expense Interest expense decreased by $33 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Note Payable - Affiliate We are permitted to borrow up to $2.0 billion from our parent Lumen Technologies under a revolving promissory note. On September 30, 2022, we repaid all amounts owed to Lumen Technologies under this promissory note. Since that time, we have not owed any amounts to Lumen Technologies under this promissory note.
On September 30, 2022, we repaid all amounts owed to Lumen Technologies under this promissory note. Since that time, we have not owed any amounts to Lumen Technologies under this promissory note. For more information, see "Note Payable—Affiliate" in Note 6—Long-Term Debt and Note Payable - Affiliate — to the financial statements appearing elsewhere herein.
Selling, general and administrative expenses increased by $24 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily due to an increase in employee related expenses of $43 million.
These decreases were partially offset by an increase of $31 million in employee related expenses, inclusive of severance costs. 35 Operating Expenses-Affiliates Operating expenses-affiliates decreased by $35 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
None of our outstanding debt is due in the next 12 months (excluding finance lease obligations). Subject to market conditions, and to the extent permitted under applicable debt covenants, Qwest Corporation may issue debt securities from time to time in the future primarily to refinance a portion of our maturing debt.
Subject to market conditions, and to the extent permitted under applicable debt covenants, Qwest Corporation may issue debt securities from time to time primarily to refinance a portion of our maturing debt. The availability, interest rate and other terms of any new borrowings will depend on the ratings assigned to Qwest Corporation by credit rating agencies, among other factors.
Amortization expense decreased by $12 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a decrease of $17 million due to net decrease in amortizable assets. The decrease was partially offset by an increase of $4 million resulting from annual rate amortizable life changes of software for the period.
Amortization expense decreased by $26 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a decrease of $24 million associated with changes in the method of amortization from the group method to straight line by individual asset method.
Interest Expense - Affiliate, Net Interest expense - affiliate, net changed by $75 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022. The change in interest expense - affiliate, net was primarily due to the repayment of the outstanding principal and interest on the Note Payable - Affiliate on September 30, 2022.
Interest Income - Affiliate, Net Interest income - affiliate, net increased by $9 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The increase in interest income - affiliate, net was primarily due to a higher average receivable from affiliate.
See note under "Results of Operations—Goodwill Impairment" for consideration of the potential for additional goodwill impairments in future quarters. Capital Expenditures We incur capital expenditures on an ongoing basis in order to expand and improve our service offerings, enhance and modernize our networks, and compete effectively in our markets.
We anticipate further legislative activity and administrative guidance throughout 2025 and continue to monitor evolving global tax legislation. 40 Capital Expenditures We incur capital expenditures on an ongoing basis in order to expand and improve our service offerings, enhance and modernize our networks, and compete effectively in our markets.
In addition, we provide to our affiliates application development and support services and network support. From time to time, we may change the categorization of our products and services.
From time to time, we may change the categorization of our products and services. Macroeconomic Changes Over the past few years, macroeconomic changes have impacted us and our customers in several ways.
For more information, see Note 18—Subsequent Event, to our consolidated financial statements included under Item 8 of Part II of this annual report. As of December 31, 2023, we had a face amount of approximately $2.2 billion aggregate outstanding indebtedness (excluding finance leases, unamortized premiums, net, unamortized debt issuance costs, and Note Payable - Affiliate).
As of December 31, 2024, we had approximately $2.0 billion aggregate outstanding indebtedness (excluding finance leases, unamortized premiums, net, unamortized debt issuance costs, and Note Payable - Affiliate). $237 million of our outstanding debt is due in the next 12 months (excluding finance lease obligations).
Removed
Changes in the Macroeconomic, Industry and Work Environments Societal, governmental and macroeconomic changes have impacted us, our customers and our business in several ways since the onset of the COVID-19 pandemic in the U.S. in March 2020.
Added
Overview We are a networking company with the goal of connecting people, data, and applications quickly, securely and effortlessly. We are unleashing the world's digital potential by providing a broad array of integrated products and services to our domestic and global Business customers and our domestic Mass Markets customers.
Removed
Beginning in the second half of 2020 and continuing into 2023, we rationalized our lease footprint and ceased using seven underutilized leased property locations. These lease cancellations resulted in accelerated lease costs, including $1 million and $3 million of such costs recognized during the years ended December 31, 2021 and 2023, respectively, but will lower our future operating costs.
Added
These and other developments and trends impacting our operations are discussed elsewhere in Item 1A and this Item 7.
Removed
We did not incur material accelerated lease costs during the year ended December 31, 2022. In conjunction with our plans to continue to reduce costs, we expect to continue our real estate rationalization efforts and expect to incur additional accelerated real estate costs in future periods.
Added
Selling, general and administrative expenses decreased by $40 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to (i) a decrease of $18 million in marketing and advertising expense, (ii) a decrease of $17 million in bad debt expense, (iii) a decrease of $17 million in external commissions and (iv) a decrease of $11 million related to gains on various real estate and other operating asset sales during the year.
Removed
Inflation has placed downward pressure on our margins and macroeconomic uncertainties have likely contributed to delayed decision-making by certain of our customers, which are trends that will likely continue to impact us as long as inflation rates remain elevated.
Added
The decrease was primarily due to a decrease of $18 million in direct telecommunication services charged to us by affiliates and a decrease of $17 million of lower allocated employee and professional services provided to us by our affiliates.

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