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entitled 'Digital Television Transition: Questions on Administrative 
Costs of an Equipment Subsidy Program' which was released on June 21, 

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June 20, 2005:

The Honorable John D. Dingell:
Ranking Member:
Committee on Energy and Commerce:

The Honorable Edward J. Markey:
Ranking Member:
Subcommittee on Telecommunications and the Internet:

House of Representatives:

Subject: Digital Television Transition: Questions on Administrative 
Costs of an Equipment Subsidy Program:

On May 26, 2005, I testified before the Subcommittee on 
Telecommunications and the Internet on a staff discussion draft of the 
DTV Transition Act of 2005.[Footnote 1] At that time, I discussed 
several challenges to administering a program for subsidizing the 
purchase of digital converter boxes to advance the DTV transition. This 
letter responds to your June 9, 2005 letter requesting that we provide 
information on the approximate cost of various administrative steps 
that might be necessary to administer such a subsidy program. 
Specifically, your letter identifies a number of administrative steps 
that might be required to administer a rebate program targeted to low- 
income households that rely solely on over-the-air television signals, 
and asks us to estimate the costs of specific administrative steps. As 
I indicated at the hearing, estimating the specific costs of these 
administrative steps is difficult because of the substantial 
uncertainty about exactly what would be required to implement them. 
Your letter also notes that the administrative costs for the rebate and 
voucher programs that we reviewed ranged from 10 percent to 39 percent. 
However, as we noted in our written statement, due to differences in 
the scope of the rebate and voucher programs we reviewed and a 
potential DTV subsidy, it is not clear how applicable the 
administrative costs of these programs are to estimating the costs of a 
DTV subsidy.

We recognize that the Committee desires a clear understanding of the 
administrative costs associated with implementing a converter box 
subsidy program in considering legislation to end the DTV transition on 
a date certain. As your letter suggests, several administrative steps 
would likely be taken to establish a rebate program targeting low- 
income households that rely solely on over-the-air television signals. 
Costs would be incurred to complete these administrative steps. For 
example, during our review, we heard from a rebate clearinghouse that 
it usually charges between $0.30 and $0.45 per redeemed rebate to cover 
the processing costs, with an additional cost of $0.37 for first class 
postage to mail the rebate check to the recipient. We believe that this 
estimate might not reflect all of the rebate clearinghouse costs for 
the rebate program you describe because a DTV subsidy program requires 
the clearinghouse to complete more steps than would be typical for most 
manufacturer or retailer rebates. This program step is just one small 
element of the overall subsidy program.

Regarding other costs, the various uncertainties surrounding a 
hypothetical subsidy complicate measuring or approximating the 
administrative costs of such a program. For example, it is unclear what 
approach would be most efficient to identify over-the-air households. 
As we indicated in our written statement, determining over-the-air 
households could be accomplished through different, albeit highly 
challenging, approaches. The tasks necessary to attain a list of over- 
the-air households and the associated administrative costs of doing so 
could vary depending on how this is done and until it is clearer what 
would need to be accomplished to develop this list, the cost of its 
derivation is unknown. Restricting eligibility further by requiring an 
income means test adds more uncertainty to the administrative costs of 
a potential DTV subsidy program. We noted in our written statement that 
one possible approach to identify low-income households would be to use 
receipt of an existing social service program as eligibility criteria 
for the DTV subsidy. However, the program could be set up in different 
ways depending on which social service programs are included as 
criteria for identifying low-income households. These differences would 
have implications for administrative costs, as would the unknown 
burdens placed on local social service agencies that oversee those 

In addition, your letter asks us to determine the total administrative 
costs for a DTV subsidy program given two hypothetical funding levels. 
Your letter subsequently asks us to determine the number of households 
that would be able to receive a rebate under various scenarios, given 
the administrative costs that would be subtracted from the total 
funding level. Because we are unable to determine the subsidy program's 
administrative costs, we cannot address these questions.

For additional information on our work on the DTV transition, please 
contact me or Amy Abramowitz on (202) 512-2834 or or

Signed by: 

Mark L. Goldstein:
Director, Physical Infrastructure Issues:



[1] GAO, Digital Broadcast Television Transition: Several Challenges 
Could Arise in Administering a Subsidy Program for DTV Equipment, GAO- 
05-623T (Washington, D.C.: May 26, 2005).