8x8 2013 Annual Report Download - page 24

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Under the FCC’s rules, companies like us 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 rules also require 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. Before 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.
If we are unable to improve our process for local number portability provisioning, our growth may be negatively
affected.
We support local number portability, or LNP, which allows our customers to retain their existing telephone numbers when
subscribing to our services. Transferring numbers is a manual process that, in the past, has taken us 20 business days or longer,
although we have taken steps to automate this process to reduce the delay. A new customer of our services must maintain both
the new 8x8 service and the customer’s existing telephone service during the number transfer process. By comparison,
transferring wireless telephone numbers among wireless service providers generally takes several hours, and transferring
wireline telephone numbers among traditional wireline service providers generally takes a few days. The additional delay that
we experience is due to our reliance on third party carriers to transfer the numbers, as well as the delay the existing telephone
service provider may contribute to the process. Local number portability is considered an important feature by many potential
customers, especially our business customers, and if we fail to reduce related delays, we may experience increased difficulty in
acquiring new customers or retaining existing customers. Moreover, the FCC requires interconnected VoIP providers, like us,
to comply with industry standard timeframes and a shorter timeframe for certain types of ports. If we are unable to process
ports within the requisite timeframes, we could be subject to fines and/or penalties. Additionally, both customers and carriers
may seek relief from the relevant state public utility commission, the FCC, and/or in state or federal court.
The rates we pay to underlying telecommunications carriers may increase which may reduce our profitability and
increase the retail price of our service.
The FCC has several open proceedings considering new rules that may impact charges that regulated telecommunications
carriers assess each other for originating and terminating traffic. It is possible that the FCC will adopt new rules that subjects
interconnected VoIP traffic to increased charges. Should this occur, the rates that we pay to our underlying carriers may
increase which may reduce our profitability and may also increase the retail price of our service making our service less
competitive with other providers of similar calling services. We cannot predict either the timing or the outcome of these
proceedings.
Our success also depends on our ability to handle a large number of simultaneous calls, which our network may not be
able to accommodate.
We expect the volume of simultaneous calls to increase significantly as the 8x8 subscriber base grows. Our network hardware
and software may not be able to accommodate this additional volume. If we fail to maintain an appropriate level of operating
performance, or if our service is disrupted, our reputation could be hurt and we could lose customers, all of which could have a
material adverse effect on our business, financial condition or operating results.
We could be liable for breaches of security on our web site, fraudulent activities of our users, or the failure of third
party vendors to deliver credit card transaction processing services.
A fundamental requirement for operating an Internet-based, worldwide voice and video communications service and
electronically billing our 8x8 customers is the secure transmission of confidential information and media over public networks.
Although we have developed systems and processes that are designed to protect consumer information and prevent fraudulent
credit card transactions and other security breaches, failure to mitigate such fraud or breaches may adversely affect our
operating results. The law relating to the liability of providers of online payment services is currently unsettled and states may
enact their own rules with which we may not comply. We rely on third party providers to process and guarantee payments
made by 8x8 subscribers up to certain limits, and we may be unable to prevent our customers from fraudulently receiving