Digital Television Transition
Information on the Implementation of the Converter Box Subsidy Program and Consumer Participation in the Program Gao ID: GAO-08-1161T September 16, 2008The Digital Television Transition and Public Safety Act of 2005 requires all full-power television stations in the United States to cease analog broadcasting after February 17, 2009, known as the digital television (DTV) transition. The National Telecommunications and Information Administration (NTIA) is responsible for implementing a subsidy program to provide households with up to two $40 coupons toward the purchase of converter boxes. In this testimony, which is principally based on a report being issued today, GAO examines (1) what consumer education efforts have been undertaken by private and federal stakeholders and (2) how effective NTIA has been in implementing the converter box subsidy program, and to what extent consumers are participating in the program. To address these issues, GAO analyzed data from NTIA and reviewed legal, agency, and industry documents. Also, GAO interviewed a variety of stakeholders involved with the DTV transition.
Private sector and federal stakeholders have undertaken various consumer education efforts to raise awareness about the DTV transition. For example, the National Association of Broadcasters and the National Cable and Telecommunications Association have committed over $1.4 billion to educate consumers about the transition. This funding has supported the development of public service announcements, education programs for broadcast, Web sites, and other activities. The Federal Communications Commission (FCC) and NTIA have consumer education plans that target those populations most likely to be affected by the DTV transition. Specifically, they identified 45 areas of the country as high risk that included areas with at least 1 of the following population groups: (1) more than 150,000 over-the-air households, (2) more than 20 percent of all households relying on over-the-air broadcasts, or (3) a top 10 city of residence for the largest target demographic groups. The target demographic groups include seniors, low-income, minority and non-English speaking, rural households, and persons with disabilities. In addition to targeting these 45 areas of the country, FCC and NTIA developed partnerships with organizations that serve these hard-to-reach populations. NTIA is effectively implementing the converter box subsidy program, but its plans to address the likely increase in coupon demand as the transition nears remain unclear. As of August 31, 2008, NTIA had issued almost 24 million coupons and as of that date approximately 13 percent of U.S. households had requested coupons. As found in GAO's recent consumer survey, up to 35 percent of U.S. households could be affected by the transition because they have at least one television not connected to a subscription service, such as cable or satellite. In U.S. households relying solely on over-the-air broadcasts (approximately 15 percent), of those who intend to purchase a converter box, 100 percent of survey respondents said they were likely to request a coupon. With a spike in demand likely as the transition date nears, NTIA has no specific plans to address an increase in demand; therefore, consumers might incur significant wait time to receive their coupons and might lose television service if their wait time lasts beyond February 17, 2009. In terms of participation in the converter box subsidy program, GAO analyzed coupon data in areas of the country comprising predominantly minority and senior populations and found that households in both predominantly black and Hispanic or Latino areas were less likely to redeem their coupons compared with households outside these areas. Additionally, GAO analyzed participation in the converter box subsidy program in the 45 areas of the country on which NTIA and FCC focused their consumer education efforts and found coupon requests to be roughly the same for zip codes within the 45 targeted areas compared with areas that were not targeted. Retailers play an integral role in the converter box subsidy program by selling the converter boxes and helping to inform their customers about the DTV transition. GAO visited 132 randomly selected retail stores in 12 cities. Store representatives at a majority of the retailers GAO visited were able to correctly state that the DTV transition would occur in February 2009 and how to apply for a converter box coupon.
GAO-08-1161T, Digital Television Transition: Information on the Implementation of the Converter Box Subsidy Program and Consumer Participation in the Program
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Testimony:
Before the House Subcommittee on Telecommunications and the Internet:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 9:30 a.m. EDT:
Tuesday, September 16, 2008:
Digital Television Transition:
Information on the Implementation of the Converter Box Subsidy Program
and Consumer Participation in the Program:
Statement of Mark L. Goldstein, Director:
Physical Infrastructure:
GAO-08-1161T:
GAO Highlights:
Highlights of GAO-08-1161T, a testimony before the House Subcommittee
on Telecommunications and the Internet.
Why GAO Did This Study:
The Digital Television Transition and Public Safety Act of 2005
requires all full-power television stations in the United States to
cease analog broadcasting after February 17, 2009, known as the digital
television (DTV) transition. The National Telecommunications and
Information Administration (NTIA) is responsible for implementing a
subsidy program to provide households with up to two $40 coupons toward
the purchase of converter boxes. In this testimony, which is
principally based on a report being issued today, GAO examines (1) what
consumer education efforts have been undertaken by private and federal
stakeholders and (2) how effective NTIA has been in implementing the
converter box subsidy program, and to what extent consumers are
participating in the program. To address these issues, GAO analyzed
data from NTIA and reviewed legal, agency, and industry documents.
Also, GAO interviewed a variety of stakeholders involved with the DTV
transition.
What GAO Found:
Private sector and federal stakeholders have undertaken various
consumer education efforts to raise awareness about the DTV transition.
For example, the National Association of Broadcasters and the National
Cable and Telecommunications Association have committed over $1.4
billion to educate consumers about the transition. This funding has
supported the development of public service announcements, education
programs for broadcast, Web sites, and other activities. The Federal
Communications Commission (FCC) and NTIA have consumer education plans
that target those populations most likely to be affected by the DTV
transition. Specifically, they identified 45 areas of the country as
high risk that included areas with at least 1 of the following
population groups: (1) more than 150,000 over-the-air households, (2)
more than 20 percent of all households relying on over-the-air
broadcasts, or (3) a top 10 city of residence for the largest target
demographic groups. The target demographic groups include seniors, low-
income, minority and non-English speaking, rural households, and
persons with disabilities. In addition to targeting these 45 areas of
the country, FCC and NTIA developed partnerships with organizations
that serve these hard-to-reach populations.
NTIA is effectively implementing the converter box subsidy program, but
its plans to address the likely increase in coupon demand as the
transition nears remain unclear. As of August 31, 2008, NTIA had issued
almost 24 million coupons and as of that date approximately 13 percent
of U.S. households had requested coupons. As found in GAO‘s recent
consumer survey, up to 35 percent of U.S. households could be affected
by the transition because they have at least one television not
connected to a subscription service, such as cable or satellite. In
U.S. households relying solely on over-the-air broadcasts
(approximately 15 percent), of those who intend to purchase a converter
box, 100 percent of survey respondents said they were likely to request
a coupon. With a spike in demand likely as the transition date nears,
NTIA has no specific plans to address an increase in demand; therefore,
consumers might incur significant wait time to receive their coupons
and might lose television service if their wait time lasts beyond
February 17, 2009. In terms of participation in the converter box
subsidy program, GAO analyzed coupon data in areas of the country
comprising predominantly minority and senior populations and found that
households in both predominantly black and Hispanic or Latino areas
were less likely to redeem their coupons compared with households
outside these areas. Additionally, GAO analyzed participation in the
converter box subsidy program in the 45 areas of the country on which
NTIA and FCC focused their consumer education efforts and found coupon
requests to be roughly the same for zip codes within the 45 targeted
areas compared with areas that were not targeted. Retailers play an
integral role in the converter box subsidy program by selling the
converter boxes and helping to inform their customers about the DTV
transition. GAO visited 132 randomly selected retail stores in 12
cities. Store representatives at a majority of the retailers GAO
visited were able to correctly state that the DTV transition would
occur in February 2009 and how to apply for a converter box coupon.
What GAO Recommends:
In the report released today, GAO recommends that the Secretary of
Commerce direct NTIA to develop a plan to manage coupon requests in the
lead up to the transition. In commenting on a draft of the report, the
Department of Commerce did not state whether it agreed or disagreed
with GAO‘s recommendation, but stated its concern about an increase in
coupon demand as the transition nears. FCC noted consumer outreach
efforts it has taken.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-1161T]. For more
information, contact Mark L. Goldstein at (202) 512-2834 or
goldsteinm@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss our report being issued today
on the National Telecommunications and Information Administration's
(NTIA) implementation of the mandated converter box subsidy program.
[Footnote 1]
Federal law requires all full power television stations in the United
States to cease analog broadcasting and broadcast digital-only
transmissions after February 17, 2009--often referred to as the digital
television (DTV) transition. Currently, most television broadcasters
transmit over-the-air signals in both an analog and digital format to
television households. After the transition, consumers who rely
exclusively on over-the-air television signals viewed on analog sets
will not be able to view broadcast programming, which could include
important news information or emergency alerts, unless they take
action. In particular, these consumers could (1) purchase a television
capable of processing digital signals, (2) purchase a digital-to-analog
converter box that converts the digital signals to analog signals and
enables their display on an analog set, or (3) subscribe to cable,
satellite, or other service.
The federal government and the private sector have taken several steps
to prepare for the DTV transition. NTIA, a bureau within the U.S.
Department of Commerce, created and implemented a digital-to-analog
converter box subsidy program to provide households with up to two $40
coupons toward the purchase of converter boxes that allow consumers to
continue viewing over-the-air signals on analog television sets.
[Footnote 2] Additionally, the government, television broadcast
industry, cable and satellite providers, and other carriers of
broadcast signals have established several educational efforts
informing consumers about the DTV transition and the subsidy program.
However, the success of the DTV transition and the subsidy program
requires consumers' understanding about the transition and the steps
needed to continue receiving a television signal. In addition,
consumers will rely on retailers to provide information, as well as
supply eligible converter boxes, for the subsidy program.
In my testimony today, I will discuss (1) what consumer education
efforts have been undertaken by private and federal stakeholders and
(2) how effective NTIA has been in implementing the converter box
subsidy program and to what extent consumers are participating in the
program.
To meet these objectives, we interviewed agency officials from the
Federal Communications Commission (FCC) and NTIA and reviewed their
consumer education documents, orders, rules and proposed rules. We also
interviewed private sector stakeholders representing the broadcasting,
retailer, manufacturing, and cable industries and reviewed publicly
available information on their consumer education planning. Further, we
discussed the effectiveness of consumer education efforts with various
advocacy groups identified as NTIA partners that represent hard-to-
reach populations. We also analyzed date-specific data from NTIA on
coupon requests, issuance, redemptions, and expirations, and examined
NTIA timeliness in issuing coupons from the beginning of the converter
box subsidy program in January through August 2008. Due to report
processing constraints the report this testimony is primarily based on
only analyzed data from January through June 2008. We conducted data
reliability testing and determined that the data used in this report
were sufficiently reliable for our purposes. We conducted a "mystery
shopper" study--i.e., discussing the transition with randomly selected
retailers without identifying ourselves as government employees--to
determine retailer preparedness for the converter box subsidy program
including the level of retailer knowledge about the program and
availability of converter boxes. The study, in which we visited 132
store locations in 12 cities, was conducted from April to early May
2008. We performed our review from February to September 2008 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our review objectives. We believe
that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.
Summary:
* Private sector and federal stakeholders have undertaken various
consumer education efforts to raise awareness about the DTV transition.
For example, the National Association of Broadcasters (NAB) and the
National Cable and Telecommunications Association have committed over
$1.4 billion to educate consumers about the transition. This funding
has supported the development of public service announcements,
education programs for broadcast, Web sites, and other activities. In
addition, most national retailers participating in the converter box
subsidy program have developed consumer education campaigns to raise
awareness of the DTV transition and the subsidy program. Federal
stakeholders (FCC and NTIA) have developed consumer education plans
that target those populations most likely to be affected by the DTV
transition. In particular, they focused their outreach efforts on
certain demographic groups, including seniors, low-income, minority and
non-English speaking, rural households, and persons with disabilities.
* NTIA is effectively implementing the converter box subsidy program,
but plans to address the likely increase in coupon demand as the
transition nears remain unclear. As of August 31, 2008, NTIA had issued
approximately 24 million coupons and as of that date approximately 13
percent of U.S. households had requested coupons. As found in our
consumer survey, up to 35 percent of U.S. households could be affected
by the transition because they have at least one television not
connected to a subscription service, such as cable or satellite.
[Footnote 3] In U.S. households relying solely on over-the-air
broadcasts (approximately 15 percent), of those who intend to purchase
a converter box, 100 percent of survey respondents said they were
likely to request a coupon. Therefore, a spike in demand for converter
box coupons is likely as the transition date nears. According to NTIA,
an increase in requests around the transition date may cause a delay in
issuing coupons. However, we found NTIA has no specific plans to
address an increase in demand and that it has encountered challenges in
issuing coupons within its requirement of 10 to 15 days from the date
the coupon application was approved. Given the challenges to meet this
requirement and its lack of a clear plan to address a potential spike
in demand, consumers might incur significant wait time to receive their
coupons and might lose television service if their wait time lasts
beyond February 17, 2009. In terms of participation in the converter
box subsidy program, we analyzed coupon data in areas of the country
comprised of predominantly minority and senior populations and found
that participation varies. For example, we found that zip codes with a
high concentration of Latino or Hispanic households had noticeably
higher coupon request rates (28 percent) when compared to areas with
predominantly non-Latino or non-Hispanic households (12 percent). We
also found households in both predominantly black and Hispanic or
Latino areas were less likely, compared to households outside these
areas, to redeem their coupons once they received them. Additionally,
we analyzed participation in the converter box subsidy program in the
45 areas of the country on which NTIA and FCC focused their consumer
education efforts and found coupon requests to be roughly the same for
zip codes within the 45 targeted areas compared with areas that were
not targeted.
Background:
The DTV transition will require citizens to understand the transition
and the actions that some might have to take to maintain television
service. For those households with subscription video service on all
televisions or with all televisions capable of processing a digital
signal, no action is required. However, households with analog
televisions that rely solely on over-the-air television signals
received through rooftop or indoor antennas must take action to be able
to view digital broadcast signals after analog broadcasting ceases. The
Digital Television Transition and Public Safety Act of 2005 addresses
the responsibilities of two federal agencies--FCC and NTIA--related to
the DTV transition. The act directs FCC to require full-power
television stations to cease analog broadcasting by February 17, 2009.
The act also directed NTIA to establish a $1.5 billion subsidy program
through which households can obtain coupons towards the purchase of
digital-to-analog converter boxes. In August 2007, NTIA selected
International Business Machines Corporation (IBM) as the contractor to
provide certain services for the program. On January 1, 2008, NTIA, in
conjunction with IBM and in accordance with the act, began accepting
applications for up to two $40 coupons per household that can apply
toward the purchase of eligible digital-to-analog converter boxes and,
in mid-February 2008, began mailing the coupons. Initially, during the
first phase of the program any household is eligible to request and
receive the coupons, but once $890 million worth of coupons has been
redeemed, and issued but not expired, NTIA must certify to Congress
that the program's initial allocation of funds is insufficient to
fulfill coupon requests. NTIA will then receive $510 million in
additional program funds, but households requesting coupons during this
second phase must certify that they do not receive cable, satellite, or
any other pay television service. As of June 24, 2008, in response to
NTIA's statement certifying that the initial allocation of funds would
be insufficient, all appropriated coupon funds were made available to
the program.[Footnote 4] Consumers can request coupons up to March 31,
2009, and coupons can be redeemed through July 9, 2009. As required by
law, all coupons expire 90 days after issuance. As unredeemed coupons
expire, the funds obligated for those coupons are returned to the
converter box subsidy program.
Retailer participation in the converter box subsidy program is
voluntary, but participating retailers are required to follow specific
program rules to ensure the proper use and processing of converter box
coupons. Retailers are obligated to, among other things, establish
systems capable of electronically processing coupons for redemption and
payment and tracking transactions. Retailers must also train their
employees on the purpose and operation of the subsidy program.
According to NTIA officials, NTIA initially explored the idea of
setting requirements for training content, but decided to allow
retailers the flexibility of developing their own training programs and
provided retailers with sample training materials. Certification
requires retailers to have completed an application form by March 31,
2008, and to attest that they have been engaged in the consumer
electronics retail business for at least 1 year. Retailers must also
register in the government's Central Contractor Registration database,
have systems or procedures that can be easily audited and that can
provide adequate data to minimize fraud and abuse, agree to be audited
at any time, and provide data tracking each coupon with a corresponding
converter box purchase. NTIA may revoke retailers' certification if
they fail to comply with these regulations or if any of their actions
are deemed inconsistent with the subsidy program. Converter boxes can
also be purchased by telephone or online and be shipped directly to a
customer's home from participating retailers. At the time of our
review, 29 online retailers were participating in the converter box
subsidy program. Additionally, 13 telephone retailers were listed as
participating in the program, 2 of which are associated with national
retailers.
Private and Federal Stakeholders Have Undertaken a Myriad of Activities
Aimed at Increasing the Public's Awareness of the Transition:
Private sector stakeholders, such as broadcasters and cable providers,
have undertaken various education efforts to increase public awareness
about the DTV transition. The NAB and the National Cable and
Telecommunications Association initiated DTV transition consumer
education campaigns in late 2007 at an estimated value of $1.4 billion
combined. NAB has produced six versions of a public service
announcement, including 15-second and 30-second versions in both
English and Spanish and close-captioned versions. Private sector
stakeholders have also produced DTV transition educational programs for
broadcast and distribution, developed Web sites that provide
information on the transition, and engaged in various other forms of
outreach to raise awareness. Additionally, most of the national
retailers participating in the NTIA converter box subsidy program are
providing materials to help inform their customers of the DTV
transition and the subsidy program. Examples of these materials include
informational brochures in English and Spanish, educational videos and
in-store displays in English and Spanish, informational content on
retailer Web sites, and information provided in retailer advertising in
Sunday circulars.
FCC and NTIA also have ongoing DTV consumer education efforts, which
target populations most likely to be affected by the DTV transition.
Specifically, they focused their efforts on 45 areas of the country
that have at least 1 of the following population groups: (1) more than
150,000 over-the-air households, (2) more than 20 percent of all
households relying on over-the-air broadcasts, or (3) a top 10 city of
residence for the largest target demographic groups. The target
demographic groups include seniors, low-income, minority and non-
English speaking, rural households, and persons with disabilities.
According to NTIA, its consumer education efforts will specifically
target these 45 areas by leveraging partnerships and earned media spots
(such as news stories or opinion editorials) to better reach the
targeted populations. FCC indicated that while its outreach efforts
focus on the targeted hard-to-reach populations, the only effort
specifically targeting the 45 locations has been to place billboards in
these communities. According to FCC, contracts exist for billboards in
26 of the 45 markets, and it is working to place billboards in the
other 19 markets. Furthermore, FCC and NTIA have developed partnerships
with some federal, state, and local organizations that serve the
targeted hard-to-reach populations.
NTIA is Effectively Implementing the Converter Box Subsidy Program, But
Concerns Exist about NTIA's Ability to Manage a Potential Spike in
Demand:
NTIA has processed and issued coupons to millions of consumers, but a
sharp increase in demand might affect NTIA's ability to respond to
coupon requests in a timely manner. NTIA and its contractors have
implemented systems (1) to process coupon applications, (2) to produce
and distribute coupons to consumers, and (3) for retailers to process
coupons and receive reimbursement for the coupons from the government.
Millions of consumers have requested converter box coupons and most of
the requested coupons have been issued. Through August 2008, households
had requested approximately 26 million coupons. NTIA had issued over 94
percent of all coupon requests, for more than 24million coupons. Of
those coupons issued, about 9.5 million (39 percent) had been redeemed
and 31 percent had expired.[Footnote 5] After an initial spike at the
beginning of the program, coupon requests have remained steady and have
averaged over 105,000 requests per day. Coupon redemptions, since
coupons were first issued in February 2008, have averaged over 48,000
per day.
In our consumer survey, we found that 35 percent of U.S. households are
at risk of losing some television service because they have at least
one television not connected to a subscription service, such as cable
or satellite. However, through August 2008, only 13 percent of U.S.
households had requested converter box coupons, and less than 5 percent
had redeemed these coupons. As the transition date nears, there is the
potential that many affected households that have not taken action
might begin requesting coupons. Our consumer survey found that of those
at risk of losing some television service and intending to purchase a
converter box, most will likely request a coupon. In fact, in
households relying solely on over-the-air broadcasts (approximately 15
percent), of those who intend to purchase a converter box, 100 percent
of survey respondents said they were likely to request a coupon.
Consumers have incurred significant wait times in the processing of
their coupon requests, but the processing time from receiving requests
to issuing coupons is improving. NTIA requires that 98 percent of all
coupon requests be issued within 10 days, and the remainder be issued
within 15 days. From February 17 through August 31, 2008, our analysis
shows that the average duration between coupon request and issuance was
over 16 days.[Footnote 6] In aggregate, 53 percent of all coupon
requests had been issued within 10 days, and 39 percent of all coupon
requests had been issued more than 15 days after being requested. From
May 1 through August 31, 2008, the average processing time from coupon
request to issuance was 9 days.
Given the processing time required in issuing coupons, NTIA's
preparedness to handle volatility in coupon demand is unclear.
Fluctuation in coupon requests, including the potential for a spike in
requests as the transition date approaches, could adversely affect
consumers. When NTIA faced a deluge of coupon requests in the early
days of the converter box subsidy program, it took weeks to bring down
the deficit of coupons issued to coupons requested. According to NTIA,
it expects a similar increase in requests around the transition date,
and such an increase may cause a delay in issuing coupons. As a result,
consumers might incur significant wait time before they receive their
coupons and might lose television service during the time they are
waiting for the coupons. While NTIA and its contractors have
demonstrated the capacity to process and issue large numbers of coupon
requests over short periods, they have yet to establish specific plans
to manage a potential spike or a sustained increase in demand leading
up to the transition.
We analyzed data to compare areas of the country that comprise
predominantly minority and elderly populations with the rest of the
U.S. population and found some differences in the coupon request,
redemption, and expiration rates for Hispanic, black, and senior
households compared with the rest of the U.S. population. For example,
zip codes with a high concentration of Latino or Hispanic households
had noticeably higher request rates (28 percent) when compared with non-
Latino or non-Hispanic zip codes (12 percent). However, households in
predominantly black and Latino or Hispanic zip codes were less likely,
compared with households outside these areas, to redeem their coupons
once they received them. As shown in table 1, the overall rate of
redemption for the converter box subsidy program is 39 percent.
Approximately 37 percent of coupons have been redeemed in predominantly
Latino or Hispanic areas. In predominantly black areas, 32 percent of
coupons have been redeemed. We found that in areas of the country with
a high concentration of seniors, fewer coupons were requested (9
percent) compared with areas of the country that did not have a high
concentration of seniors (13 percent). Redemption rates for the senior
population were lower than the redemption rates in the rest of the
country. Regarding coupon expirations, we found that the areas
comprising Latino or Hispanic households allowed 27 percent of their
coupons to expire, while areas with predominantly senior populations
allowed 43 percent of their coupons to expire.
Table 1: Request, Redemption, and Expiration Rates of Converter Box
Coupons through August 2008:
U.S. population;
Request rate: 12.5;
Redemption rate: 39.0;
Expiration rate: 30.5.
Latino or Hispanic;
Request rate: 27.5;
Redemption rate: 36.6;
Expiration rate: 26.8.
Black;
Request rate: 13.4;
Redemption rate: 31.5;
Expiration rate: 30.3.
Seniors;
Request rate: 8.7;
Redemption rate: 34.0;
Expiration rate: 43.2.
Source: GAO analysis of NTIA data.
[End of table]
To determine participation in the converter box subsidy program in the
45 areas of the country receiving targeted outreach by NTIA and FCC, we
analyzed NTIA coupon data (including requests, redemptions, and
expirations) in the 45 areas compared to the rest of the country not
targeted by NTIA and FCC. We found participation levels were about the
same in the targeted areas when compared to the rest of the country.
For example, we found in the 45 targeted areas, 12.2 percent of
households have requested coupons compared with 12.8 percent for the
rest of the country not targeted by NTIA and FCC. According to NTIA,
similarities in request, redemption, and expiration rates between the
45 targeted areas and the rest of the country is viewed as a success.
As the sellers of the converter boxes, retailers play a crucial role in
the converter box subsidy program and are counted on to inform
consumers about it. At the time of our review, seven national retailers
were certified to participate in the subsidy program. Participating
retailers are obligated to, among other things, train employees on the
purpose and operation of the subsidy program. All of the retailers with
whom we spoke told us they were training employees on the DTV
transition and the subsidy program, although the retailers varied in
which staff must complete training.
As part of our work, we conducted a "mystery shopper" study by visiting
132 randomly selected retail locations in 12 cities across the United
States that were listed as participating in the converter box subsidy
program. We did not alert retailers that we were visiting their stores
or identify ourselves as government employees. During our visits, we
engaged the retailers in conversation about the DTV transition and the
subsidy program to determine whether the information they were
providing to customers was accurate and whether individual stores had
coupon-eligible converter boxes available. While not required to do so,
some stores we visited had informational material available and others
had signs describing the DTV transition and the subsidy program. We
also determined whether the information that retailers were providing
to customers was accurate and whether individual stores had coupon-
eligible converter boxes available. At most retailers (118) we visited,
a representative was able to correctly identify that the DTV transition
would occur in February 2009. Additionally, nearly all (126) retailers
identified a coupon-eligible converter box as an option available to
consumers to continue watching television after the transition. Besides
coupon eligible converter boxes, representatives identified other
options to continue viewing television after the transition, including
purchasing a digital television (67) or subscribing to cable or
satellite service (77). However, in rare instances, we heard erroneous
information from the retailers, including one representative who told
us that an option for continuing to watch television after the
transition was to obtain a "cable converter box" from a cable company
and another representative who recommended buying an "HD tuner." Since
participating retailers are obligated to train their employees on the
purpose and operation of the subsidy program, we observed whether the
representative was able to explain various aspects about the subsidy
program. A vast majority of the representatives were able to explain
how to receive or apply for a coupon and the value of the coupon.
Although we could obtain information from the majority of the stores
that we visited and that were listed as participating in the subsidy
program, in a few instances, we were not able to ask questions and
observe whether the information provided was accurate. In two
instances, there was no retailer at the store location listed as a
participating retailer on NTIA's Web site [hyperlink,
https://www.dtv2009.gov/VendorSearch.aspx]. In another instance, the
location listed was under construction and had not yet opened. In two
additional instances, the locations listed were private residences--one
was an in-home electronics store, and the other was a satellite
television installer working from a house. We asked NTIA how it ensured
the accuracy of the list of participating retailers on its Web site,
and according to NTIA, ensuring the accuracy of the list is the
responsibility of the retailers. NTIA said it provides a list of
locations to each retailer prior to placing the list on the Web site,
and retailers can update addresses or add new listings as warranted.
Conclusions and Recommendation:
NTIA estimates that it will see a large increase in the number of
coupon requests in the first quarter of 2009 and our analysis confirms
that, as the transition nears, a spike in coupon requests is likely.
However, NTIA has not developed a plan for managing that potential
spike or sustained increase in coupon demand. The time required for
processing coupons has improved since consumers incurred significant
wait times to receive their coupons at the beginning of the program,
but until recently NTIA fell short of its requirement for processing
coupons within 10 to 15 days. Given the relatively low participation
rates to date and the amount of time it took to process the spike in
coupon requests in the early days of the program, NTIA's ability to
handle volatility in coupon demand without a plan is uncertain.
Consequently, consumers face potential risks that they might not
receive their coupons before the transition and might lose their
television service.
To help NTIA prepare for a potential increase in demand for converter
box coupons and so that consumers are not left waiting a lengthy amount
of time for requested coupons, the report we are releasing today
recommends that the Secretary of Commerce direct the Administrator of
the NTIA to develop a plan to manage volatility in coupon requests so
that coupons will be processed and mailed within 10-15 days from the
day the coupon applications are approved, per NTIA's stated
requirement.
In reviewing a draft of the report, the Department of Commerce (which
contains NTIA) did not state whether it agreed or disagreed with our
recommendation, but did say the Department shares our concern about an
increase in coupon demand as the transition nears. Further, its letter
stated it is committed to doing all that it can within its statutory
authority and existing resources to ensure that all Americans are ready
for the DTV transition. In its letter, FCC noted consumer outreach
efforts it has taken related to the DTV transition.
Mr. Chairman, this concludes my prepared statement. I would be happy to
respond to any questions you or other Members of the Subcommittee may
have at this time.
GAO Contact and Staff Acknowledgments:
For further information about this testimony, please contact Mark L.
Goldstein at (202) 512-2834. Individuals making key contributions to
this testimony included Colin Fallon, Simon Galed, Eric Hudson, Bert
Japikse, Aaron Kaminsky, Sally Moino, Michael Pose, and Andrew
Stavisky.
[End of section]
Footnotes:
[1] GAO, Digital Television Transition: Implementation of the Converter
Box Subsidy Program Is Under Way, but Preparedness to Manage an
Increase in Subsidy Demand Is Unclear. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-08-1040] (Washington, D.C.:
September 16, 2008).
[2] Eligible converter boxes range in price from $40 to over $90.
[3] GAO, Digital Television Transition: Broadcasters' Transition
Status, Low-Power Station Issues, and Information on Consumer Awareness
of the DTV Transition, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-08-881T] (Washington, D.C.: June 10, 2008).
[4] With the additional $510 million, total program funding is $1.5
billion, which includes up to $1.34 billion in coupon funds and up to
$160 million in administrative funds.
[5] Our redemption rate was calculated by dividing the number of
redeemed coupons by the total number of issued coupons as of August 31,
2008. The total number of issued coupons includes coupons which had
been redeemed, had expired, and had not yet expired as of that date.
[6] For the purposes of our analysis, we assumed that all coupons were
issued in the order they were received. According to NTIA, coupon
issuance was to begin 1 year from the transition. Therefore the
processing time between coupon requests and issuance was calculated
beginning on February 17, 2008.
[End of section]
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