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Vonage Sues Nebraska Commission Over Fee

Date: 1/29/2008 3:01:36 AM

Telecom service providers are entering the ad game just as this multibilliondollar market appears to be coming apart at the seams

Thanks to digital TV, the Internet and mobility, its easier today to describe what the TV advertising market isnt. That would be a staid, safe place where advertisers buy 30 and 60second commercial spots that their agencies cleverly fill with brandreinforcing content and place on network shows, where they are seen by a quantifiable number of potential customers.

“There is no question that the traditional ad model is changing and that the advertising industry in the States is undergoing a structural transition,” said George Shababb, chief operating officer for TNS Media Research. “This change is being brought about by the digital technologies.”

He and others point to three key factors that are driving change. First, there is the growing popularity of timeshifting via digital video recorders (DVRs), which enables consumers to easily view content at a later time and fastforward through commercials. Second, more traditional TV content is now available on the Internet, both as streaming video and as Vonage Holdings Corp. has asked a federal court to prevent the state from forcing it and its customers to pay a state telephone fee.

Vonage offers a service called Voice over Internet Protocol or VoIP which converts the sound of a voice into packets of data, sends them across the Internet, and reassembles them into sound on the other end of a call.

In a lawsuit recently filed in U.S. District Court, Vonage says the Nebraska Public Service Commission and its officials should not force it to pay into the states Universal Service Fund.

"These defendants know that Vonages service is subject to exclusive federal regulatory jurisdiction, yet they are attempting to compel Vonage to pay a statelaw surcharge for the Nebraska Service Fund in violation of the United States Constitution, the Communications Act of 1934 and the Telecommunications Act of 1996," the complaint reads.

The state Universal Service Fund helps subsidize phone and Internet services to poor and rural areas, schools and libraries.

All traditional phone companies pay into a Universal Service Fund. But VoIP providers say they provide an information service rather than a telecommunications service.

Traditional telephone providers have argued that VoIP services should be subject to the same oversight and fee requirements that they face.

But VoIP providers say they should be classified as a data service provider and left alone, much as cable TV companies have been.

Vonage cites rulings by the 8th U.S. Circuit Court of Appeals upholding decisions that the Minnesota Public Utilities Commission cannot subject Vonage to state telephone regulations.

Vonage offers Internet voice service by leasing transmission lines from telephone and cable companies.

Nebraska Public Service Commissioner Anne Boyle referred questions Friday to Jeff Pursley, director of state Universal Service Fund and a defendant in the lawsuit. A message left by The Associated Press for Pursley on Friday was not immediately returned.

ernal data today. Neither of these businesses approaches the volume of what telcos do today.”

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