Digital Television Transition
Questions on the DTV Converter Box Subsidy Program and a DTV Inter-Agency Task Force
Gao ID: GAO-08-297R November 19, 2007
This letter responds to questions from the November 7, 2007, Congressional letter inquiring about issues discussed at the October 17, 2007, hearing before the Subcommittee on Telecommunications and the Internet on the digital television (DTV) transition. The letter asked if we have concerns about the converter box subsidy program. Congress also asked whether the National Telecommunications and Information Administration (NTIA) should prepare for a potential shortfall in program funding, in part by developing a process to address a potential shortfall. The letter also asked us to elaborate on the statutory provisions that we believe provide the Federal Communications Commission (FCC) with the necessary authority to convene an inter-agency task force. We prepared our responses during November 2007 in accordance with generally accepted government auditing standards. Our responses are based on our previous and ongoing work and our knowledge of the subjects raised by your questions. Because our responses are based on work for which we sought and incorporated agency comments, we did not seek agency comments on our responses to these questions.
Regarding the converter box subsidy program, we believe the subsidy program faces challenges that could affect the outcome of the program. These challenges include the coordination of several groups, readiness of retailers to accept coupons, and potential issues related to inventory planning. In particular, the subsidy program's outcome depends on the coordination and participation of NTIA, its contractor IBM, converter box manufacturers, retailers, and consumers. We have not evaluated whether NTIA should prepare for a shortfall in funding for the converter box subsidy program. However, we note that the Digital Television Transition and Public Safety Act provided an initial amount of $990 million for the converter box subsidy program, of which $100 million can be used for administrative expenses. If NTIA determines the initial allocation of funds is insufficient to fulfill coupon requests, the act requires NTIA to certify that the funds are insufficient to the House Committee on Energy and Commerce and the Senate Committee on Commerce, Science, and Transportation. The act provides that 60 days following this notification, NTIA will receive $510 million in additional program funds, of which $60 million can be used for administrative expenses. In response to the question about the statutory authority for FCC to convene an inter-agency task force, the Federal Advisory Committee Act (FACA) authorizes federal agencies (in addition to Congress and the President) to establish federal advisory committees, which may consist of private as well as public sector members. FCC has several federal advisory committees that provide advice and recommendations to the commission on numerous technical, operational, and consumer telecommunications issues. All of FCC's federal advisory committees are discretionary, meaning the committees were not required to be established by law but rather were established by FCC.
GAO-08-297R, Digital Television Transition: Questions on the DTV Converter Box Subsidy Program and a DTV Inter-Agency Task Force
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United States Government Accountability Office:
GAO:
November 19, 2007:
The Honorable John D. Dingell:
Chairman:
Committee on Energy and Commerce:
House of Representatives:
Subject: Digital Television Transition: Questions on the DTV Converter
Box Subsidy Program and a DTV Inter-Agency Task Force:
Dear Chairman Dingell:
This letter responds to questions from your November 7, 2007, letter
inquiring about issues discussed at the October 17, 2007, hearing
before the Subcommittee on Telecommunications and the Internet on the
digital television (DTV) transition.[Footnote 1] In your letter, you
asked if we have concerns about the converter box subsidy program. You
also asked whether the National Telecommunications and Information
Administration (NTIA) should prepare for a potential shortfall in
program funding, in part by developing a process to address a potential
shortfall. You also asked us to elaborate on the statutory provisions
that we believe provide the Federal Communications Commission (FCC)
with the necessary authority to convene an inter-agency task force. We
prepared our responses during November 2007 in accordance with
generally accepted government auditing standards. Our responses are
based on our previous and ongoing work and our knowledge of the
subjects raised by your questions. Because our responses are based on
work for which we sought and incorporated agency comments, we did not
seek agency comments on our responses to these questions.
Regarding the converter box subsidy program, we believe the subsidy
program faces challenges that could affect the outcome of the program.
These challenges include the coordination of several groups, readiness
of retailers to accept coupons, and potential issues related to
inventory planning. In particular, the subsidy program's outcome
depends on the coordination and participation of NTIA, its contractor
IBM, converter box manufacturers, retailers, and consumers.
Manufacturers and retailers are voluntarily participating in the
program, as NTIA does not have the authority to require their
participation. Further, retailers we contacted expressed concerns about
the possibility of a coupon redemption system that would affect their
point-of-sale systems, noting that modifying these systems can be time-
consuming, resource-intensive, and expensive, and can affect their
other financial systems. Retailers told us that March or April of 2008-
-3 to 4 months after consumers can begin requesting coupons--is a
likely time frame for retailers to be ready to participate in the
program. Retailers also told us that participating in the converter box
subsidy program could require a considerable amount of effort for a
one-time program with a product that has a limited shelf life and low
profit margin. In addition, since retailers' participation in the
subsidy program is voluntary, some manufacturer, advocacy, and retailer
representatives we contacted expressed concern about consumers' ability
to find participating retailers that are able to redeem coupons and
have converter boxes in stock. Furthermore, uncertain demand for the
converter boxes, as well as uncertainty about the extent of retailers'
participation in the program, could affect the number of converter
boxes that manufacturers produce and the corresponding availability of
coupon-eligible converter boxes in stores. During our ongoing work
associated with the DTV transition, we will continue to analyze and
examine the converter box subsidy program, exploring issues such as
fraud and retailer knowledge about the program.
We have not evaluated whether NTIA should prepare for a shortfall in
funding for the converter box subsidy program. However, we note that
the Digital Television Transition and Public Safety Act provided an
initial amount of $990 million for the converter box subsidy program,
of which $100 million can be used for administrative expenses. If NTIA
determines the initial allocation of funds is insufficient to fulfill
coupon requests, the act requires NTIA to certify that the funds are
insufficient to the House Committee on Energy and Commerce and the
Senate Committee on Commerce, Science, and Transportation. The act
provides that 60 days following this notification, NTIA will receive
$510 million in additional program funds, of which $60 million can be
used for administrative expenses (see table 1). NTIA established that
during the initial funding allocation, any household is eligible to
request and receive coupons, but once NTIA receives the additional
allocation of funds (after $890 million worth of coupons have been
redeemed, and issued but not expired) any households requesting coupons
during this second phase must certify that they do not receive cable,
satellite, or other pay television service. In addition, NTIA required
that IBM develop a Web-based electronic "dashboard" that provides real-
time access to program status and performance measures, including the
number of coupons pending, mailed, redeemed, expired, and canceled.
NTIA officials told us that they will monitor the coupon metrics on the
electronic dashboard and use this information to inform the
congressional committees if they would need the additional funds. They
added that this monitoring should help avoid any lapse in depletion of
the initial $890 million and receiving the additional funding.
Table 1: Converter Box Subsidy Program Funding (Dollars in millions):
Initial allocation:
Funds available for coupons: $890;
Funds available for administrative costs: $100;
Total: $990.
Additional allocation:
Funds available for coupons: $450;
Funds available for administrative costs: $60;
Total: $510.
Grand total:
Funds available for coupons: $1,340;
Funds available for administrative costs: $160;
Total: $1,500.
Source: GAO analysis of NTIA data.
[End of table]
In response to your question about the statutory authority for FCC to
convene an inter-agency task force, the Federal Advisory Committee
Act[Footnote 2] (FACA) authorizes federal agencies (in addition to
Congress and the President) to establish federal advisory committees,
which may consist of private as well as public sector members. FCC has
several federal advisory committees that provide advice and
recommendations to the commission on numerous technical, operational,
and consumer telecommunications issues. All of FCC's federal advisory
committees are discretionary, meaning the committees were not required
to be established by law but rather were established by FCC. FACA
requires advisory committees to have membership fairly representing an
array of viewpoints and interests. We reviewed FCC's federal advisory
committees in 2004[Footnote 3] and found that its advisory committees
had members representing numerous sectors across telecommunications
including industry, academia, advocacy groups, private consulting, and
government. We note that in June 2007, FCC rechartered an
intergovernmental advisory committee comprising 15 representatives
from local, state, and tribal governments to help it address, among
other things, consumer education about the DTV transition. Similarly,
it rechartered a consumer advisory committee that will also make
recommendations to FCC about the DTV transition on behalf of consumers,
with specific representation for people with disabilities and other
underserved or at-risk populations.
If you or your staff have any questions or would like to discuss this
response, please contact me at (202) 512-2834 or goldsteinm@gao.gov.
Sincerely yours,
Singed by:
Mark L. Goldstein:
Director, Physical Infrastructure Issues:
(543198):
[End of section]
Footnotes:
[1] GAO, Digital Television Transition: Preliminary Information on
Progress of the DTV Transition, GAO-08-191T. (Washington, D.C.: October
17, 2007).
[2] Pub. L. 92-463, codified at 5 U.S.C. app. 2.
[3] GAO, Federal Communications Commission: Federal Advisory Committees
Follow Requirements, but FCC Should Improve Its Process for Appointing
Committee Members, GAO-05-36. (Washington, D.C.: Dec. 10, 2004).
[End of section]
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