8x8 2008 Annual Report Download - page 22

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location and phone number to those local authorities, which can also delay the delivery of emergency services. In the event
that a customer experiences a broadband or power outage, or if a network failure were to occur, the customer will not be able to
reach an emergency services provider using our services.
Delays our customers may encounter when making emergency services calls and any inability of the answering point to
automatically recognize the caller’ s location or telephone number can result in life threatening consequences. Customers may,
in the future, attempt to hold us responsible for any loss, damage, personal injury or death suffered as a result of any failure of
our E-911 services and, unlike traditional wireline and wireless telephone providers, there are no state or federal provisions that
currently indemnify or limit the liability of VoIP services such as ours for connecting and carrying emergency 9-1-1 phone
calls over IP networks.
In May 2005, the FCC unanimously adopted an order and Notice of Proposed Rulemaking, or NPRM, which required VoIP
providers that interconnect with the PSTN, or interconnected VoIP providers, to provide enhanced 9-1-1, or E-911, service.
On November 7, 2005, the Enforcement Bureau of the FCC issued a notice to interconnected VoIP providers detailing the
information required to be submitted to the FCC in E-911 compliance letters due by November 28, 2005. In this notice, the
Enforcement Bureau stated that, although it would not require providers that had not achieved full E-911 compliance by
November 28, 2005, to discontinue the provision of interconnected VoIP services to any existing customers, it did expect that
such providers would discontinue marketing VoIP services, and accepting new customers for their services, in all areas where
they are not transmitting 9-1-1 calls to the appropriate PSAP in full compliance with the Commission's rules. On November 28,
2005, we began offering nomadic E-911 service to all of our customers with United States service addresses, and began
charging those customers an additional $1.99 per month plus any applicable local 9-1-1 taxes and surcharges effective January
1, 2006. On November 28, 2005, we also modified the Packet8 account signup procedures to require service addresses to be
entered and validated, at the time an order for service is placed, to ascertain whether Packet8's nomadic E-911 service is
available at that address. On November 28, 2005, we also filed our E-911 compliance report which is available on the FCC's
website, at http://www.fcc.gov, under Wireline Competition Docket Number 05-196. On March 19, 2007, the Company
received a letter from the Enforcement Bureau of the FCC requesting that the Company file an updated E-911 Status Report no
later than April 11, 2007. On April 11, 2007, the Company responded to the FCC stating that 91% of the Company’ s
subscribers are either in compliance with the VoIP 9-1-1 order or were signed up prior to November 28, 2005. We provide a
nomadic emergency calling service to 100% of our subscribers who have a service location, as registered by the customer,
within the United States.
The FCC may determine that our nomadic emergency calling solution does not satisfy the requirements of its VoIP E-911
order because, in some instances, our nomadic emergency calling solution requires that we route an emergency call to a
national emergency call center instead of connecting Packet8 subscribers directly to a local PSAP through a dedicated
connection and through the appropriate selective router. The FCC may issue further guidance on compliance requirements in
the future that might require us to disconnect those subscribers not receiving access to emergency services in a manner
consistent with the VoIP E-911 order. The effect of such disconnections, monetary penalties, cease and desist orders or other
enforcement actions initiated by the FCC or other agency or task force against us could have a material adverse effect on our
business, financial condition or operating results.
On June 1, 2007, the FCC released a Notice of Proposed Rulemaking in which it tentatively concluded that all interconnected
VoIP service providers that allow customers to use their service in more than one location (nomadic VoIP service providers
such as us) must utilize an automatic location technology that meets the same accuracy standards which apply to providers of
commercial mobile radio services (mobile phone service providers). The outcome of this proceeding cannot be determined at
this time and we may or may not be able to comply with any such obligations that may be adopted. At present, we currently
have no means to automatically identify the physical location of one of our subscribers on the Internet. The FCC’ s VoIP E-911
order has increased our cost of doing business and may adversely affect our ability to deliver the Packet8 service to new and
existing customers in all geographic regions or to nomadic customers who move to a location where emergency calling
services compliant with the FCC's mandates are unavailable. Our compliance with and increased costs due to the FCC’ s VoIP
E-911 order put us at a competitive disadvantage to those VoIP service providers who have chosen not to comply with the
FCC’ s mandates. We cannot guarantee that emergency calling service consistent with the VoIP E-911 order will be available
to all of our subscribers, especially those accessing our services from outside of the United States. The FCC’ s current VoIP E-
911 order or follow-on orders or clarifications or their impact on our customers due to service price increases or other factors
could have a material adverse effect on our business, financial condition or operating results.