8x8 2014 Annual Report Download - page 28

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The FCC adopted orders reforming the system of payments between regulated carriers that we partner with to interface with the
public switch telephone network . The FCC reformed the system under which regulated providers of telecommunications services
compensate each other for various types of traffic, including VoIP traffic that terminates on the PSTN and applied new call signaling
requirements to VoIP providers and other service providers. The FCC's new rules require, among other things, interconnected VoIP
providers, like us, that originate interstate or intrastate traffic destined for the PSTN, to transmit the telephone number associated with the
calling party to the next provider in the call path. Intermediate providers must pass calling party number or charge number signaling
information they receive from other providers unaltered, to subsequent providers in the call path. While we believe we are in compliance
with this rule, to the extent that we pass traffic that does not have appropriate calling party number or charge number information, we
could be subject to fines, cease and desist orders, or other penalties. The FCC's Order reforming payments between carriers for various
types of traffic also includes a Further Notice of Proposed Rulemaking. Depending on the rules adopted by the FCC in this proceeding,
the payments we make to underlying carriers to access the PSTN may increase, which may result in us increasing the retail price of our
service, potentially making our offering less competitive with traditional providers of telecommunications services, or may reduce our
profitability.
Our emergency and E-911 calling services are different from those offered by traditional wireline telephone companies and may expose
us to significant liability. There may be risks associated with limitations associated with E-911 emergency dialing with the 8x8 service.
Both our emergency calling service and our E-911 calling service are different, in significant respects, from the emergency calling services
offered by traditional wireline telephone companies. In each case, the differences may cause significant delays, or even failures, in callers'
receipt of the emergency assistance they need.
The FCC may determine that our nomadic emergency calling service does not satisfy the requirements of its VoIP E-911 order because, in some
instances, our nomadic emergency calling service requires that we route an emergency call to a national emergency call center instead of
connecting our customers directly to a local public-safety answering point through a dedicated connection and through the appropriate selective
router.
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. In July 2008, the President signed into law
the New and Emerging Technologies 911 Improvement Act of 2008. The law provides public safety entities, interconnected VoIP providers and
others involved in handling 911 calls the same liability protections when handling 911 calls from interconnected VoIP users as from mobile or
wired telephone service users. The applicability of the liability protections to our national call center service is unclear at the present time. Also,
we may be exposed to liability for 911 calls made prior to the adoption of this new law although we are unaware of any such liability.
Increased energy costs, power outages, and limited availability of electrical resources may adversely affect our operating results.
Our data centers are susceptible to increased costs of power and to electrical power outages. Our customer contracts do not contain provisions
that would allow us to pass on any increased costs of energy to our customers, which could affect our operating margins. Any increases in the
price of our services to recoup these costs could not be implemented until the end of a customer contract term. Further, power requirements at
our data centers are increasing as a result of the increasing power demands of today's servers. Increases in our power costs could impact our
operating results and financial condition. Since we rely on third parties to provide our data centers with power sufficient to meet our needs, our
data centers could have a limited or inadequate amount of electrical resources necessary to meet our customer requirements. We attempt to limit
exposure to system downtime due to power outages by using backup generators and power supplies. However, these protections may not limit
our exposure to power shortages or outages entirely. Any system downtime resulting from insufficient power resources or power outages could
damage our reputation and lead us to lose current and potential customers, which would harm our operating results and financial condition.
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