FCC Shutdown’s Impact on Firms and Clients a 'Glitch' so Far, May Become Big

The halt in regular FCC operations isn't having a large impact on communications law firms and most clients yet, said attorneys who continue to draft pleadings, provide advice, handle litigation and do other work. But if the shuttering lasts an extended period, it will cause delays and backlogs that increasingly have negative fallout on matters large and small, rippling through industry, they said this week.

"There will be a slowdown in rulemakings and processing of applications" that affects "a broader ecosystem that relies on the FCC,” said Hogan Lovells' Ari Fitzgerald. "It depends on how long it lasts," said Holland & Knight's Peter Connolly. "If it lasts for a few days, it's a minor glitch. If it lasts for a month or two, it would be a major problem, for everybody."

The next commissioners' meeting is scheduled for Jan. 30 (see 1901030039). Final lobbying that would normally occur over the next two weeks is on hold. The FCC could shorten the usual last week of lobbying restrictions, but time is running out, said Kelley Drye's Steve Augustino. "I would expect the January meeting could be delayed." The agency didn't comment Wednesday.

Most staffers were furloughed and activities suspended Jan. 3, with filings generally not being processed and online databases not being updated even if available (see 1901020048). Equipment certifications are frozen (see 1901040008). Commissioners and some staffers remain to handle still-funded auction matters and emergency requests.

"Our folks working on auctions are busy," particularly with incentive auction repacking, said ex-FCC Chairman Richard Wiley of Wiley Rein. "The other stuff, we'll have to wait and see." If the shutdown extends into February, "people would be twiddling their thumbs -- lawyers prefer to be writing their time down," said Reed Hundt, another ex-chairman.

There were no signs of progress on Capitol Hill Wednesday as the partial shutdown reached its 19th day. President Donald Trump ended his Wednesday meeting with Hill Democrats early, calling it a “total waste of time” amid the impasse over whether to include funding for a wall on the U.S.-Mexico border. Senate Minority Leader Chuck Schumer, D-N.Y., and Speaker Nancy Pelosi, D-Calif., told reporters they asked Trump to agree to sign off on funding for most shuttered federal agencies, which he refused to do absent the wall funding. The shutdown will become the longest shuttering on record if it continues into Saturday, breaking the 21-day record set in 1995-96.

The House passed a new version Wednesday of the FY 2019 Financial Services and General Government funding bill. HR-264 includes appropriations for the FCC and FTC, as part of Democrats' bid to end the shutdown (see 1901090067).

Unsettling Uncertainty

The shutdown's open-ended time frame is particularly problematic, some said.

"The biggest factor is the uncertainty, which is probably the most disconcerting word to businessmen," said Morgan Lewis' Andrew Lipman. "If they knew when it would end, that's one thing. But not knowing the end date obviously makes it very difficult to plan."

"I think we’ll start seeing this shutdown having significant real-world consequences soon, when people can’t get their deals done, their initiatives through, and business issues resolved because the FCC is closed," Fitzgerald said. "Another two days, another week" won't be a big deal, said Davis Wright's Chris Savage. "If we're sitting here in late February or March" and much of government remains closed, "the FCC will probably be the least of our problems."

Meantime, attorneys labor away.

"We have our ongoing work for now," said Lawler Metzger's Gina Keeney. "A lot of what we do is counseling people on longer-term projects." She cited the planned Sprint sale to T-Mobile. "For a big merger, days do matter; weeks matter even more," she said. "If they open tomorrow, it will have slowed us down a little bit. But we don't know if it'll be tomorrow or next week or when."

Courts, USF

The federal judiciary remains open.

The shutdown is "having no effect at all" on work so far, said John Thorne of Kellogg Hansen, which is "unbelievably busy" with litigation. The Administrative Office of the U.S. Courts says it's working to sustain paid operations through Jan. 18, and if funds run out, "essential work" can continue, including case resolution, with each court determining staff needed (see 1901080047).

Davis Wright's Peter Karanjia noted DOJ is requesting stays in many cases. The FCC participated in an auction-related argument Wednesday in GLH Communications at the U.S. Court of Appeals for the D.C. Circuit (see 1901090057). Absent new funding, "federal courts face serious disruptions," said the D.C. Circuit.

USF disbursements and collections continue, said a Universal Service Administrative Co. spokesperson. USAC said Monday it's "open for business as usual," with deadlines in effect.

Briefings Thwarted

The broader government shutdown was "relatively painless" over the holidays because not much happens then, and FCC proceedings tend to be slow into early January, said Fletcher Heald's Donald Evans, who argued for GLH. “It’s starting to have a little bit of an impact, because it’s delaying deals that people want to have processed or get under way.” Attorney Jack Goodman has a couple of deals that aren’t ready to be filed, but when they are, "if the FCC isn’t open for business, that would be a problem."

"It's really quiet. It's slowed down the start of the year," Augustino said. "We've diversified, so we have things that aren't FCC dependent ... Starting next week, you could start to see more impact."

Several said they aren't making filings in proceedings, since the commission won't consider them accepted until the day after the return to normal operations. "The good news is it gives you more time to think about your comments," said Bill Wiltshire of Harris Wiltshire. "The bad news is now there’s a longer period of limbo before the rules are adopted. Things are just going to start piling up."

Parties are hampered by their inability to meet with commission officials on most matters. "You can't get meetings with staff," said Jones Day's Michael Hazzard. "Now is the time when you'd be ramping up," said Harris Wiltshire's John Nakahata. "There are things going on where normally you would interact with the FCC. If you've got a transaction, you're basically stuck." Waivers are another common industry need, he said, noting generally, "whatever analysis the FCC was doing is not being done."

"There's just a lot of routine stuff that's going to get hung up," Connolly said. "People underestimate the importance of the routine work that's being disrupted." He cited licensing matters and authorizations, including for experimental uses. "Say you need to make adjustments to transactions. You can't do that," he said. "There are relatively small businesses and consumers that count on the FCC to get basic things done," said Keeney, calling it "frustrating" for agency staff to be locked out.

If the shutdown drags on, "it's going to have a cascading impact," said Lipman. "A delay in one proceeding is inevitably going to cause delays in other proceedings." Once the FCC reopens, backlogs will be a problem, said Blair Levin, who as chief of staff for Hundt in the mid-1990s continued to work during what for now remains the longest federal shutdown and remembers envelopes flooding out of the mail room when he opened the door. "It'll take you potentially weeks" to catch up, he said. "People may want to meet with you, but you don't have time. So it's actually really bad."

Hundt remembers meeting an Indonesian telecom delegation during that shutdown. "They come into the office and ask, 'Where is everybody?" he said. "I said, 'The legislative branch has shut down the executive branch.' The leader of the delegation said, 'In my country, it's the other way around.'"

Shutdown Notebook

The FCC's updated plan for government shutdown keeps 262 employees on board (18 percent of its 1,437 person workforce), an increase from the 245 previously targeted (see 1812180056). Up to 44 employees in the Office of Inspector General are to be retained until further notice, due to availability of prior funds; also remaining are up to 164 whose salaries and expenses aren't funded by annual appropriations and who will support spectrum auction-related activities, said the plan Wednesday. A December plan included 200 in the latter category (see 1812210048). Other descriptions in the new plan are mostly the same. Tweaks included a notation that up to 12 employees would be "retained initially to assist in the orderly shutdown of operations by the Agency (e.g. process timesheets)."

A roundtable with Commissioner Mike O'Rielly planned for Monday was postponed until further notice, Wiley Rein said.

An FCBA panel at the FCC with wireline advisers Jan. 16 may be postponed if the government doesn't reopen, the association emailed Wednesday. Panel information here.