To the applause of Vonage Holdings, a three-judge panel of the Eighth Circuit Court upheld a federal district court injunction that prohibits the Nebraska Public Service Commission (NPSC) from requiring the collection of universal service fund (USF) customer surcharges by interconnected voice-over-Internet protocol (VoIP) operators. Although the U.S. District Court for the District of Nebraska issued the preliminary injunction last year, it still has yet to reach its final decision in the case brought by Vonage against the NPSC. Vonage, which has successfully challenged attempts at VoIP regulation in Minnesota and other states, contends that the NPSC and other state regulators have no right to force the collection of USF surcharges from VoIP providers—even if the states base their requirements only on that portion of a VoIP provider’s revenue that the FCC does not require the provider to include in calculating its interstate USF contributions. The appeals court upheld the injunction in spite of statements made in an FCC brief that the agency’s 2004 order on the preemption of state VoIP regulation does not preempt states from requiring VoIP contributions to the USF that are calculated in accordance with rules (adopted by the FCC in 2006) that base such contributions on interstate revenues. Pointing to the FCC’s determination in the Minnesota PUC preemption order that the “impossibility” of separating interstate and intrastate components of VoIP service largely precludes state regulation of VoIP operators, the Eighth Circuit panel said it was reasonable for the district court to conclude that the FCC’s intention in that order was to assert “sole regulatory control.” The appeals court also cited the possibility of conflicts between the methods used by different states for determining the address on which a VoIP subscriber’s USF charges should be based. Experts believe the court’s decision could complicate efforts at the FCC and on the state level to maintain existing subsidies as phone service subscribers continue to migrate from landline networks.