Vonage 2008 Annual Report Download - page 21

launches ma
y
be de
f
erred or canceled as a result o
f
an
y
proceed-
ings, and we may be required to make changes to our present
and planned products or services. If, as a result of an
y
proceed-
in
g
s, a jud
g
ment is rendered or a decree is entered a
g
ainst us, it
m
ay materially and adversely affect our business, financial con
-
dition and results of o
p
erations and harm our re
p
utation.
Certain as
p
ects of our service are not the same as tradi-
tional tele
p
hone service, which ma
y
limit the acce
p
tanc
e
o
f
our services by mainstream consumers and our poten
-
tial
f
or growth.
For certain users, certain aspects o
f
our service are not the
s
ame as traditional telephone service.
O
ur continued growth i
s
dependent on the adoption of our services b
y
mainstream
customers, so these di
ff
erences are important. For example
:
>
B
oth our E-911 and emergency calling services are different
,
in si
g
nificant respects, from the 911 service associated wit
h
t
raditional wireline and wireless telephone providers and, i
n
certa
i
n cases, w
i
t
h
ot
h
er
V
o
IP p
rov
id
ers.
>
O
ur customers may experience lower call quality than they
are used to from traditional wireline telephone companies
,
including static, echoes and delays in transmissions.
>
Our customers may experience higher dropped-call rate
s
t
han they are used to from traditional wireline telephone
compan
i
es.
>
C
ustomers who obtain new phone numbers from us do no
t
appear in the phone book and their phone numbers are no
t
available through directory assistance services offered b
y
t
ra
di
t
i
ona
l
te
l
ep
h
one compan
i
es
.
>
Our customers cannot accept collect calls.
>
Our customers cannot call premium-rate telephone numbers
s
uch as 1-900 numbers and 976 numbers
.
>
I
n the event o
f
a
p
ower loss or Internet access interru
p
tion
exper
i
ence
db
y a customer, our serv
i
ce
i
s
i
nterrupte
d
.
U
n
lik
e
s
ome o
f
our competitors, we have not installed batteries at
customer premises to provide emergency power
f
or our
customers’ equipment if they lose power, althou
g
hwedo
h
ave backup power s
y
stems
f
or our network equipment and
s
ervice
p
lat
f
orm.
I
f customers do not acce
p
t the differences between our serv-
i
ce and traditional telephone service, the
y
ma
y
choose to remain
with their current telephone service provider or may choose t
o
r
eturn to serv
i
ce prov
id
e
db
y tra
di
t
i
ona
l
te
l
ep
h
one compan
i
es
.
Our emer
g
ency and E-911 callin
g
services may expose u
s
to signi
f
icant liability.
The Federal
C
ommunications
C
ommission
(
“F
CC
”
)
rules fo
r
t
he provision of 911 service b
y
interconnected VoIP providers,
s
uch as the VoIP service we provide, require that
f
or all
g
eo
-
graphic areas covered by the traditional wireline E-911 network,
i
nterconnecte
dV
o
IP p
rov
id
ers must
p
rov
id
e
E
-911 serv
i
ce a
s
defined b
y
the FCC’s rules. Under the FCC’s rules, E-911 service
m
eans that interconnected VoIP
p
roviders must transmit the call-
er’s telephone number and re
g
istered location information to th
e
appropriate public safety answerin
g
point (“PSAP”) for the caller’s
r
egistered location. Vonage provides E-911 service, under the
F
CC
’s rules, to approximately 99.1% of its subscriber lines
.
The remainin
g
subscriber lines do not have E-911 service
f
o
r
a variety of reasons including refusal by P
S
APs to accept VoIP
9
11 calls, the inability of PSAPs to receive the re
g
istered locatio
n
d
ata from us, and the failure by third party companies with who
m
w
e contract to
p
rovide as
p
ects of our E-911 service to obtain th
e
necessar
y
access or complete implementation o
f
the necessar
y
i
nter
f
aces to the traditional wireline E-911 in
f
rastructure. In addi-
tion, certain of our services desi
g
ned to be hi
g
hly mobile includin
g
V
ona
g
e SoftPhone service, which is software that enables a cus-
tomer to make telephone calls
f
rom a computer, the Vonag
e
V
-Phone, which is a softphone on a U
S
B memory device tha
t
e
nables the user to make telephone calls
f
rom an
y
computer t
o
w
hich the V-Phone is connected, and Vonage Companion, which
i
s a soft
p
hone that can be loaded on a
p
ersonal com
p
uter, do not
p
rovide E-911 service. These services route callers to a nationa
l
e
mergency call center that in turns routes the call to the appro-
p
riate P
S
AP.
W
e could be subject to enforcement action b
y
the FCC fo
r
o
ur su
b
scr
ib
er
li
nes t
h
at
d
o not
h
ave
E
-911 serv
i
ce.
This
e
nforcement action could result in si
g
nificant monetary penalties
a
nd restrictions on our abilit
y
to o
ff
er non-compliant services
.
D
e
l
ays our customers may encounter w
h
en ma
ki
ng emer-
g
ency services calls and any inability of a PSAP to automaticall
y
recognize the caller’s location or telephone number can have
d
evastating consequences.
C
ustomers have attempted, and ma
y
i
n the
f
uture attempt, to hold us responsible
f
or any loss, dama
g
e,
p
ersonal injur
y
or death su
ff
ered as a result. In Jul
y
2008, the New
a
nd Emerging Technologies 911 Improvement Act of 2008
b
ecame
l
aw an
d
prov
id
e
d
t
h
at
i
nterconnecte
dV
o
IP
prov
id
er
s
have the same protections
f
rom liabilit
yf
or the operation o
f
91
1
s
erv
i
ce as tra
di
t
i
ona
l
w
i
re
li
ne an
d
w
i
re
l
ess
p
rov
id
ers.
Li
m
i
tat
i
ons
o
n liability for the provision of 911 service are normally
g
overned
by
state law and these limitations t
y
picall
y
are not absolute. Thus,
for example, we could be subject to liability for a problem with our
9
11 service where our failures are
g
reater than mere ne
g
li
g
ence. It
i
s also unclear under the FCC’s rules whether the limitations on
li
a
bili
ty wou
ld
app
l
ytot
h
ose su
b
scr
ib
er
li
nes w
h
ere
V
onage
d
oe
s
not prov
id
e
E
-911 serv
i
ce
.
O
ur abilit
y
to
p
rovide our service is de
p
endent u
p
on third-
p
arty
f
acilities and equipment, the
f
ailure o
f
which coul
d
c
ause delays or interruptions o
f
our service, damage our
r
eputat
i
on, cause us to
l
ose customers an
dli
m
i
t our
g
rowth.
O
ur success depends on our abilit
y
to provide qualit
y
and
reliable telephony service, which is in part dependent upon th
e
p
roper functionin
g
of facilities and equipment owned and oper
-
a
ted b
y
third parties and is, there
f
ore, be
y
ond our control. Unlike
traditional wireline tele
p
hone service or wireless service, our serv
-
i
ce re
q
u
i
res our customers to
h
ave an o
p
erat
i
ve
b
roa
db
an
dI
nter-
net connection and an electrical power suppl
y
, which are
p
rovided by the customer’s Internet service provider and electric
utility company, respectively, and not by us. The quality of som
e
b
roadband Internet connections ma
y
be too poor
f
or customers
to use our services properly. In addition, i
f
there is any interruption
to a customer
’
s
b
roa
db
an
dI
nternet serv
i
ce or e
l
ectr
i
ca
lp
owe
r
s
upp
ly
,t
h
at customer w
ill b
e una
bl
etoma
k
e or rece
i
ve ca
ll
s,
i
ncluding emergency calls, using our service. We also outsourc
e
s
everal of our network functions to third-party providers. Fo
r
e
xample, we outsource the maintenance o
f
our re
g
ional data
c
onnection points, which are the
f
acilities at which our network
i
nterconnects with the
p
ublic switched tele
p
hone network. If ou
r
13