The lawsuit was filed just before Christmas in the US District Court of the District of Nebraska and seeks to end Nebraska's requirement that Vonage subscribers within its borders pay into the state's Universal Service Fund. Under a 2006 ruling, Vonage and other VoIP providers are required to pay into the federal USF, with the exact amount based on 64.9 percent of the carrier's revenues.

The Nebraska USF is intended to complement the federal USF and is used to keep local telephone rates down in rural and other areas where local phone service is expensive. It also funds a statewide network linking 60 rural hospitals to facilities in larger cities and subsidizes broadband access in rural areas (which are legion in Nebraska).

After a public hearing, the Nebraska PSC issued a finding last year that state law "authorized it to require that interconnected VoIP providers pay a surcharge to the Nebraska Universal Service Fund ('NUSF') for all their intrastate Nebraska traffic and that federal law did not preempt that authorization."

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