8x8 2009 Annual Report Download - page 24

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31, 2009. Interconnected VoIP providers do not have to route such calls to the "appropriate relay center," meaning the relay
center(s) serving the state in which the caller is geographically located or the relay center(s) associated with the caller's last
registered address until the waiver period expires. As of April 5, 2008, we have implemented a 7-1-1 system which routes such
calls to the appropriate relay center based upon the customer’ s assigned telephone number. We may be subject to enforcement
actions including, but not limited to, fines, cease and desist orders, or other penalties if the FCC believes we are not compliant
with these new disability requirements.
There may be risks associated with our ability to comply with the requirements of federal and other regulations related
to Customer Proprietary Network Information (CPNI).
On April 2, 2007, the FCC released an order extending the application of the customer proprietary network information, or
CPNI, rules to interconnected VoIP providers. VoIP providers have six months from the effective date of the order to
implement all the CPNI rules. CPNI includes information such as the phone numbers called by a consumer, the frequency,
duration, and timing of such calls, and any services/features purchased by the consumer, such as call waiting, call forwarding,
and caller ID, in addition to other information that may appear on a consumer’ s bill.
Under the FCC’ s existing rules, carriers may not use CPNI without customer approval except in narrow circumstances related
to the provision of existing services, and must comply with detailed customer approval processes when using CPNI outside of
these narrow circumstances. The new CPNI requirements are also aimed at establishing more stringent security measures for
access to a customer’ s CPNI data in the form of required passwords for on-line access and call-in access to account information
as well as customer notification of account or password changes.
At the present time, we do not utilize our customer’ s CPNI in a manner which would require us to obtain consent from our
customers but, in the event that we do in the future, we will be required to adhere to specific CPNI rules aimed at marketing
such services. By December 8, 2007, we implemented internal processes in order to be in compliance with all of the FCC’ s
CPNI rules. Our failure to achieve compliance with any future CPNI orders, rules, filings or standards, or any enforcement
action initiated by the FCC or other agency, state or task force against us could have a material adverse effect on our business,
financial condition or operating results.
There may be risks associated with our ability to comply with funding requirements of the Universal Service Fund, or
USF, Telecommunications Relay Service, or TRS, fund, federal regulatory recovery fees and similar state or federal
funds, or that our customers will cancel service due to the impact of these price increases to their services.
On June 21, 2006, the FCC expanded the base of Universal Service Fund, or USF, contributions to interconnected VoIP
providers. The FCC established a safe harbor percentage of interstate revenue of 64.9% of total VoIP service revenue. We were
allowed to calculate our contribution based on the safe harbor or by preparing a traffic study. We began contributing to the
federal USF on October 1, 2006. For a period of at least two quarters beginning October 1, 2006, we were required to
contribute to the USF for all subscribers' retail revenues as well as through its underlying carriers' wholesale charges. The FCC
order applying USF contributions to interconnected VoIP providers was appealed and on June 1, 2007, the U.S. Court of
Appeals for the District of Columbia ruled that the FCC was within its authority when it required interconnected VoIP service
providers to contribute to the Universal Service Fund, though it struck down the provision of the order which required pre-
approval of traffic studies by the FCC and the provision that required double contributions to the fund for two quarters from
our underlying carriers’ wholesale charges. There is also a risk that state Universal Service Funds may attempt to impose state
USF contribution obligations and other state and local charges. At this time, at least three states, including Nebraska, contend
that providers of interconnected VoIP services, like us, should contribute to its USF fund. On March 3, 2008, the U.S. District
Court for Nebraska issued a preliminary injunction and found that Nebraska’ s state Public Service Commission does not have
jurisdiction to require Universal Service contributions from VoIP providers. On May 1, 2009, a panel of the U.S. Circuit Court
of Appeals for the Eighth Circuit affirmed the U.S. District court ruling. But, on May 14, 2009, the Nebraska Public Service
Commission requested a rehearing or a rehearing en banc of the decision handed down by the three-judge panel. We cannot
predict the outcome of this ongoing litigation. As of March 31, 2009, we were collecting or remitting state USF in one state.
Effective June 1, 2009, we will cease collecting and remitting state USF.
We charge our subscribers a USF fee equal to the USF contribution amounts we must contribute based upon our subscribers'
retail revenues. The impact of this price increase on our customers or our inability to recoup our costs or liabilities in remitting
USF contributions or other factors could have a material adverse effect on our financial position, results of operations and cash
flows.
The FCC and various state commissions are considering the imposition of additional fees on interconnected VoIP providers,
like us. Several states are either considering extending or have imposed state USF, state TRS fees, and other taxes and fees on