Vonage 2010 Annual Report Download - page 27

p
roviding call content and call-identifying information to a loca
l
enforcement a
g
ency, or LEA, pursuant to a court order or othe
r
l
a
wf
u
l
au
th
o
riz
a
ti
o
n.
T
he F
CC
required all interconnected VoIP providers t
o
b
ecome full
yC
ALEA compliant b
y
Ma
y
14, 2007. To date, we
have taken significant steps towards
C
ALEA compliance, whic
h
include testing a
C
ALEA solution with the Federal Bureau of
Investigation and delivering lawful
C
ALEA requests. We have als
o
im
p
lemented alternative solutions that allow
C
ALEA access to call
content and call-identifyin
g
information. The F
CC
and law
enforcement officials have been advised as to our
C
ALEA pro
g
-
r
ess and our efforts at implementin
g
alternative solutions. W
e
could be subject to an enforcement action by the F
CC
if our
C
ALEA solution is deemed not fully operational.
F
e
d
era
l
–
L
oca
lN
um
b
er
P
orta
bili
t
y
O
nMa
y
13, 2009, the F
CC
adopted an order that reduced t
o
one business da
y
the amount of time that a telecommunications
p
rov
id
er suc
h
as us
h
ave to port a te
l
ep
h
one num
b
er to anot
h
e
r
p
rovider. If we, or third parties we rely upon for porting, have diffi-
cu
l
ty execut
i
ng t
h
e new one-
d
ay port
i
ng requ
i
rement, we cou
ld
b
e subject to F
CC
enforcement action
.
Federal – Net Neutralit
y
C
lear and enforceable net neutrality rules would make it mor
e
di
ff
icult
f
or broadband Internet service
p
roviders to block or dis
-
criminate a
g
ainst Vona
g
e service. Also explicitly applyin
g
ne
t
neutrality rules to wireless broadband Internet service could cre
-
ate
g
reater opportunities
f
or VoIP applications that run on wireles
s
b
roadband Internet service. In October 2009, the FCC
p
ro
p
ose
d
t
he adoption o
f
en
f
orceable net neutrality rules
f
or both wired an
d
w
i
re
l
ess
b
roa
db
an
dI
nternet serv
i
ce
p
rov
id
ers.
Th
e
p
ro
p
ose
d
ru
l
es
wou
ld p
ro
hibi
tw
i
re
d
an
d
w
i
re
l
ess
b
roa
db
an
dI
nternet serv
i
c
e
p
roviders
f
rom blockin
g
or hinderin
g
law
f
ul content, applications
,
or services and
f
rom unreasonably discriminating when trans
-
mitting law
f
ul network tra
ff
ic. In addition, broadband Internet serv-
i
ce providers would have to publicl
y
disclose certain in
f
ormatio
n
a
b
out t
h
e
i
r networ
k
management pract
i
ces.
I
n
D
ecem
b
er 2010,
t
he FCC adopted enforceable net neutralit
y
rules based on it
s
O
ctober 2009 proposal. All of the proposed rules in the
O
ctober
2009 proposa
l
app
ly
to w
i
re
db
roa
db
an
dI
nternet prov
id
ers.
The
F
CC
applied some but not all of the proposed rules to wireles
s
b
roa
db
an
d
serv
i
ce.
Wi
re
l
ess
b
roa
db
an
dI
nternet serv
i
ces pro-
v
iders are prohibited from blocking or hindering voice or vide
o
app
li
cat
i
ons t
h
at compete w
i
t
h
t
h
e
b
roa
db
an
dI
nternet serv
i
ce
p
rov
id
er
’
svo
i
ce or v
id
eo serv
i
ces.
Wi
re
l
ess prov
id
ers are a
l
s
o
s
u
bj
ect to transparenc
y
requ
i
rements,
b
ut t
h
e
y
are not su
bj
ect to
th
e pro
hibi
t
i
on on unreasona
bl
e
di
scr
i
m
i
nat
i
on t
h
at app
li
es t
o
wired broadband Internet services providers.
S
everal broadband
Internet service providers have filed appeals of the F
CC
’s ne
w
r
ules in the D.
C
.
C
ircuit
C
ourt alleging that the F
CC
lacks authorit
y
t
o app
ly i
ts ru
l
es to
b
roa
db
an
dI
nternet serv
i
ce prov
id
ers
.
S
tate Telecommunications Regulation
In
g
eneral, the focus of interconnected VoIP tele
-
communications re
g
ulation is at the federal level.
On
November 12, 2004, the F
CC
issued a declaratory rulin
g
providin
g
t
hat our service is subject to federal re
g
ulation and preempted the
M
innesota Public Utilities
C
ommission from imposin
g
certain of
i
ts re
g
ulations on us. The F
CC
’s decision was based on its con
-
clusion that our service is interstate in nature and cannot be se
p
a-
r
ated into interstate and intrastate com
p
onents.
O
n March 21
,
2007, the United
S
tates
C
ourt of A
pp
eals for the 8th
C
ircui
t
affirmed the F
CC
’s declaratory rulin
g
preemptin
g
state re
g
ulation
of our service. The 8th
C
ircuit found that it is im
p
ossible for us t
o
s
e
p
arate our interstate tra
ff
ic
f
rom our intrastate tra
ff
ic because o
f
t
he nomadic nature of the service. As a result, the 8th
C
ircuit held
t
hat it was reasonable for the F
CC
to preempt state re
g
ulation o
f
our service. The 8th Circuit was clear, however, that the
p
re-
emptive effect of the FCC’s declaratory rulin
g
may be reexamined
if
technolo
g
ical advances allow
f
or the separation o
f
interstat
e
and intrastate com
p
onents o
f
the nomadic VoIP service. There
-
f
ore, the preemption o
f
state authority over our service under this
r
ulin
gg
enerally hin
g
es on the inability to separate the interstat
e
and intrastate com
p
onents o
f
the service
.
W
hile this rulin
g
does not exempt us
f
rom all state oversi
g
ht
o
f
our service, it e
ff
ectively prevents state telecommunication
s
r
e
g
ulators
f
rom imposin
g
certain burdensome and inconsistent
market entry requirements and certain other state utility rules an
d
r
e
g
ulations on our service. State re
g
ulators continue to probe th
e
l
imits o
ff
ederal preemption in their attempts to apply state tele
-
communications re
g
ulation to interconnected VoIP service. Law-
s
uits by the Nebraska Public Service Commission and New
M
exico Public Re
g
ulatory Commission that were resolved in 200
9
are examples o
f
state public utility commission attempts t
o
extend traditional state telecommunications re
g
ulation to ou
r
s
ervice. In these cases, the state public utility commission
s
s
ou
g
ht to apply state universal service
f
undin
g
requirements to
us. The Kansas Cor
p
oration Commission also has taken the
p
osi
-
t
ion that it has jurisdiction to seek state universal service
f
undin
g
from nomadic VoIP providers. Similarl
y
, the Public Utilit
y
C
ommission of Ohio has adopted rules that would appl
y
stat
e
fees for Telephone Rela
y
Service to nomadic VoIP service.
O
n July 16, 2009, the Nebraska Public Service Commission
and the Kansas Cor
p
oration Commission filed a
p
etition with th
e
FCC seekin
g
a declaratory rulin
g
or, alternatively, adoption of
a
r
u
l
e
d
ec
l
ar
i
ng t
h
at state aut
h
or
i
t
i
es may app
l
yun
i
versa
l
serv
i
c
e
funding (“USF”) requirements to nomadic VoIP providers. We par-
t
icipated in the FCC proceedings on the petition. On November 5,
2010, the FCC issued a declaratory ruling that allowed states t
o
assess state USF on nomadic VoIP providers on a going forwar
d
b
as
i
s prov
id
e
d
t
h
at t
h
e states comp
ly
w
i
t
h
certa
i
n con
di
t
i
ons t
o
ensure that imposing state U
S
F does not conflict with federal law
or po
li
c
y
.
W
e expect t
h
at state pu
bli
cut
ili
t
y
comm
i
ss
i
ons an
d
s
tate
l
eg
i
s
l
ators w
ill
cont
i
nue t
h
e
i
r attempts to app
l
y state te
l
e-
commun
i
cat
i
ons regu
l
at
i
ons to noma
di
c
V
o
IP
serv
i
ce
.
S
tate and Munici
p
al Taxe
s
In accordance with
g
enerally accepted accountin
g
principles
,
we make a provision
f
or a liability
f
or taxes when it is both prob
-
able that a liability has been incurred and the amount o
f
the los
s
or ran
g
eo
f
loss can be reasonably estimated. These provision
s
are reviewed at least quarterly and adjusted to re
f
lect the impact
s
o
f
ne
g
otiations, settlements, rulin
g
s, advice o
f
le
g
al counsel, an
d
other in
f
ormation and events pertainin
g
to a particular case. For a
p
eriod o
f
time, we did not collect or remit state or munici
p
al taxe
s
(such as sales, excise, utility, use, and ad valorem taxes), fees o
r
s
urchar
g
es (“Taxes”) on the char
g
es to our customers for our
s
erv
i
ces, except t
h
at we
hi
stor
i
ca
ll
y comp
li
e
d
w
i
t
h
t
h
e
N
ew
J
erse
y
s
ales tax. We have received in
q
uiries or demands
f
rom a numbe
r
o
f
state and municipal taxin
g
and 911 a
g
encies seekin
g
payment
o
f
Taxes that are applied to or collected
f
rom customers o
f
pro
-
2
0
VO
NA
G
E ANN
U
AL REP
O
RT 2010