In another key legal development involving the FCC, the DC Circuit Court of Appeals rejected an appeal filed by Vonage Holdings, ruling that the FCC had acted within its authority in requiring voice-over-Internet protocol (VoIP) providers to contribute to the universal service fund (USF). Upholding USF contribution rules that went into effect last year, the court also determined that “safe harbor” levels established by the FCC with respect to the percentage of long-distance traffic carried on VoIP networks are reasonable. (Under FCC rules, carriers that are subject to USF requirements must pay a percentage of their long-distance revenues into the fund.) Finding that telecommunications services are components of VoIP services, the court asserted that the FCC is authorized under Section 254(d) of the 1996 Telecommunications Act to impose USF requirements on VoIP operators. The court also rejected objections, raised by Vonage, that the 64.9% safe harbor percentage adopted for VoIP providers had been set unfairly to a level equal to that of interexchange operators instead of at the 37.1% level mandated by the FCC for wireless carriers. Observing that “the mere fact that both VoIP and wireless are ‘all distance’ services hardly compels the conclusion that usage patterns for VoIP are closer to those for wireless,” the court determined that Vonage’s contention “does nothing to disturb the Commission’s conclusion that VoIP and wireless are likely to attract different types of customers, with VoIP customers predisposed, on average, to making more long distance and international calls.” The news was not all bad for Vonage, however, as the court vacated portions of the FCC’s decision that required VoIP providers to seek pre-approval of traffic studies and that suspended “carrier’s carrier” rules that prevent double-payment on the retail and wholesale levels.