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Global Media and Communications Watch The International Legal Blog for the Tech, Media and Telecoms Industry
Posted in Policy & Regulation, Telecoms & Broadband Trey Hanbury

Government Shutdown Limits FCC Operations to Safety-of-Life and Spectrum Auction Activities

The federal government shutdown that began at midnight December 29, 2018 shows no sign of ending soon. The Federal Communications Commission tapped on-hand funds to continue operations uninterrupted but ran out of time – and money – last week.

The FCC earlier issued a statement that the agency had enough funding to remain open through January 2, 2019, but has furloughed most staff as the shutdown continues. On December 18, 2018, the Commission released its Plan for Orderly Shutdown Due to Lapse of Congressional Appropriations (“Shutdown Plan”), which details how the agency will allocate its limited resources during the shutdown.

On its last day of operations, the FCC issued a Public Notice that details the effects of the shutdown on agency operations. Many online databases will remain operational, but the Commission will not update content past January 2, 2019. While the FCC’s Fee Filer System will not be available during the shutdown, the Commission notes that fee deadlines will not be extended unless payment can only be made through Fee Filer.

How will the shutdown affect the technology, media and telecom industries and the billions of dollars of investment that depend on regulatory action by the FCC? How soon before cell phone manufacturers face launch delays of products that need FCC approval to enter the market? When will other consumer electronics makers start to see product delays? Will wireless emergency alerts continue to be available? And will the shutdown affect the nation’s bid in the global race for leadership in the deployment of advanced, fifth-generation wireless networks? These are just some of the questions as the TMT sectors confront the possibility of an extended period of time without a functioning regulator.

Consumer Electronics Makers May See the Shutdown’s Effects First

Device manufacturers will be among the first to feel the effects of a protracted government shutdown. In the United States, virtually all electronic devices must receive FCC equipment certification prior to sale. Every cell phone. Every television. Every computer. Each device emits a unique radio frequency signature, and the FCC reviews this signature to limit the potential for harmful interference to other devices. All told, the FCC and its third-party contractors process an estimated 16,000 equipment certification applications annually. But with further processing impossible during the shutdown, electronic devices not already approved by the FCC cannot lawfully be sold in the United States.

While the FCC has already approved a number of forthcoming wireless devices, the longer the shutdown continues, the greater the risk that new devices will sit in warehouses and shipping containers unassembled or pending final design approval. Even upon the resumption of operations, moreover, the backlog of equipment certifications has the potential to delay important consumer product launches from manufacturers as well as from smaller manufacturers who seek to deploy innovative equipment for medical, industrial, and scientific use.

Spectrum Assignment Delays Could Postpone Next-Generation Wireless Services

According to the trade association CTIA, the wireless industry supports more than 4.7 million jobs and contributes roughly $475 billion annually to the US economy – more than the auto manufacturing, agriculture, and oil and gas industries. But without new spectrum assignments to support additional wireless deployments, CTIA has warned that America’s wireless leadership is at risk. “We’re at a critical moment,” CTIA has explained. “The EU, China, Japan, South Korea and others are doing everything they can to seize our wireless leadership.” An extended shutdown could postpone a number of pending rulemaking proceedings intended to open vast expanses of radio frequency spectrum for wireless broadband use. Citing new innovations in technical development, the FCC has made additional spectrum available in the 24 GHz, 28 GHz, 37 GHz, 39 GHz, and 64-71 GHz bands. But more work remains to be done before wireless operators and unlicensed device manufacturers can access these and other bands of spectrum. In addition, numerous lower-frequency bands, including the 3.5 GHz citizen broadband radio service, remain at critical stages of development where progress on deployment may suffer if FCC oversight remains on hold for an extended period of time.

One bit of good news on the spectrum front, however: spectrum auctions support will generally continue despite the shutdown. According to the FCC, up to 200 employees will be retained to support spectrum auction-related activities because their salaries and expenses are not funded out of annual appropriations. Even so, some delays are likely as 1,197 employees, roughly 83 percent of the agency’s total staff, will remain furloughed.

Telecommunications and Media Companies Face Merger, Filing, and Licensing Delays

The FCC will suspend its transaction review and competition enforcement activities during the shutdown as the agency diverts remaining resources towards activities “necessary for the protection of life or property.” The FCC has said it will suspend the 180-day transaction review shot clock for pending transactions until normal operations resume. The shutdown will also affect comment and other filing deadlines on open proceedings. The FCC has said it will “extend[] the normal filing deadlines under the Commission’s rules so that all Commission submissions that would be due during a suspension of operations, including submissions otherwise due on January 3, will be due on the second day of normal operations.” This extension only affects filing deadlines that fall within the shutdown period, and will also apply to deadlines for pleadings that are responsive to those affected submissions. The FCC has added that “filings related to spectrum auction activities authorized by section 309(j), including the broadcast incentive auction, can and must be made by or before the previously announced deadlines.”

Delays are also likely to occur in licensing and spectrum assignments. The FCC has said it will suspend licensing services, meaning possible delays for any outstanding licenses for winning bidders in recent spectrum auctions.

Wireless Emergency Alert System Will Function, But Face Improvement Delays

The FCC’s Wireless Emergency Alert system provides warnings of “imminent threats to safety or life,” including extreme weather, terror attacks, and natural disasters. WEA will continue to function during a shutdown. Wireless carriers and public safety authorities – not the FCC – administer most of the day-to-day functions of the WEA system and, even during a shutdown, authorized national, state or local government authorities may send alerts regarding public safety emergencies – such as evacuation orders or shelter-in-place orders – using WEA.

Subsidies for Rural and High-Cost Areas Will Remain Available – for Now

Disbursements will continue in the near term for Universal Service Fund (USF) programs, including the Connect America Fund (Phase II) and the Rural Health Care Program, but they may be delayed due to a reduction in FCC staff available to certify USF disbursements. Moreover, a prolonged shutdown could place continued funding of these important programs into doubt. The Connect America Fund provides subsidies to carriers to deliver voice and broadband service to high-cost areas and is budgeted to provide $2 billion in subsidies over the next ten years. With annual funding of $400 million, the Rural Health Care Program provides support for broadband connectivity for healthcare providers serving rural areas, enabling telemedicine services to underserved populations.

All of these programs are administered by the Universal Service Administrative Company (USAC). USAC is an independent, not-for-profit organization that, unlike federal agencies, is not required to shut down once federal funding has been exhausted. Nonetheless, disruptions could occur as soon as continued funding for USF requires FCC action. For example, USAC submits quarterly projections of revenues of telecommunications carriers, which the FCC uses to establish a “contribution factor” for the upcoming quarter requiring a certain set of proceeds to be set aside by the carriers for USF funding. The longer a shutdown lasts, the more uncertain funding for USF programs will become.