On October 1, 2013, after the U.S. Congress failed to reach agreement on a Continuing Resolution (CR) to extend appropriations for most U.S. discretionary programs beyond September 30, 2013, the U.S. government was forced to partially shut down, resulting in the closing of many U.S. Government offices, parks, and programs, and the furlough of approximately 800,000 federal employees. Many government contractors have also been forced to furlough employees as a result.
In addition, the U.S. Treasury Department has indicated that it will reach the US$16.7 trillion limit of its statutory authority to borrow money to fund U.S. government obligations — the federal debt ceiling — by October 17, 2013.
While we expect Congress to reach at least a short-term agreement to extend the debt ceiling by October 17, opposing factions in Congress and the White House continue to be a long way from resolving the debt-ceiling and CR impasse. And while Republican congressional leaders have indicated that they would like to see a debt-ceiling increase combined with a CR, we believe it is possible we could see: a) short-term extensions of both, requiring Congress to address these issues yet again, perhaps in less than two months, or b) a debt-ceiling increase without a CR, resulting in a continued government shutdown. Also very possible is a “sidecar” of provisions — more likely added to a CR and/or debt-ceiling increase after short-term extensions — that could include a process and schedule for tax and entitlement reform, and relief from sequestration spending cuts.
In the meantime, more individuals and businesses operating in the United States are likely to experience the far-reaching effects. Although some U.S. government programs, such as those funded by user fees and those with mandatory funding, continue most have been negatively affected in some way by the shutdown. And many other government offices and programs have been shut-down completely.
The Federal Communications Commission (FCC) has furloughed 98 percent of 1,754 employees, leaving only 38 people to serve as emergency contacts for staff, monitor network outage reporting systems, and support national security functions. The FCC has disabled its website, including all consumer advisories, comment filing databases, licensing databases, and complaint intake mechanisms. The FCC has also shut down its phone lines; ceased issuing new wireless, wireline, and broadcast licenses; and turned off the lights in its facility to process equipment certifications for new electronic devices.
Of all the suspended activities, the cessation of equipment certification seems likely to affect the technology, media, and telecoms sectors most immediately. 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.
The FCC has already approved certain widely anticipated devices, such as the iPad 5 and the iPad Mini 2; however, 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 such as Google, Apple, Samsung, HTC, and LG, as well as from smaller manufacturers who seek to deploy innovative equipment for medical, industrial, and scientific use.
If the shutdown persists, the FCC seems likely to postpone critical near-term spectrum auctions. Wireless devices need spectrum to operate, and the industry has long sought more spectrum to limit dropped calls, increase data speeds, and improve wireless coverage. Prior to the shutdown, the FCC scheduled its first wireless broadband spectrum auction in five years for January 2014 and had planned for two other major auctions for later that year. Following the shutdown, these auctions — and the tens of billions of potential revenues for the U.S. Treasury they were expected to generate — seem likely to be delayed unless the engineers, economists, lawyers, and staff that process new spectrum allocations and license assignments resume work in the near future.