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entitled 'Digital Television Transition: Questions on the DTV Converter 
Box Subsidy Program and a DTV Inter-Agency Task Force' which was 
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United States Government Accountability Office: 

November 19, 2007: 

The Honorable John D. Dingell: 
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 

Sincerely yours, 

Singed by: 

Mark L. Goldstein: 

Director, Physical Infrastructure Issues: 


[End of section] 


[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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