Tuner Subsidies Possible Deal Breaker for DTV Bill

In Berlin, only 7.4% of households relied mainly on free, over-the-air broadcasts; the rest drew their TV signal from cable or DBS. That made the Berlin govt.’s decision to subsidize receivers for low-income consumers easy -- it affected only 6,000 households. There was contentious debate at the hearing about how many U.S. households would lose TV service in a Dec. 2008 cutoff.

Whether to extend subsidies only to low-income families or to all those unable to take DTV was another point of contention. Still another was whether subsidies would be necessary at all, given the volume of DTV converter boxes or sets that could be sold in the 3-1/2 years before the cut-off. Responding to our question at the hearing about what Circuit City would do for families that stood to be blacked out, CEO Alan McCollough said, “I'd give them the boxes,” assuming DTV converter retail prices fall to $50 by 2008, as has been projected. “You'll be surprised how few we'll have to give away,” he said.

McCollough testified at the hearing on behalf of the Consumer Electronics Retailers Coalition (CERC), which, like CEA, hasn’t taken a position on tuner subsidies. He told the subcommittee in his written testimony: “Congress should not attempt to fix the prices of real-world products based on the funds available for a subsidy. There are too many variables, including large differences in the projections of costs 2 years hence, and of the number of households and sets for which there is a demand.” Several CERC members have “voiced their views and concerns” about subsidies to the Govt. Accountability Office (GAO), McCollough said. “CERC can well understand why subsidy issues have proved vexing and controversial. We must caution that difficulties should not be purportedly ’solved’ via unrealistic assumptions with respect to how programs might operate.”

Like McCollough, GAO told the subcommittee members at the hearing there were too many variables to make an estimate how much a tuner subsidy program would cost. In a report prepared for the hearing on the “administrative challenges” of adopting a subsidy program, GAO said it’s unclear which federal agency would be responsible for it, whether a rulemaking would be needed to put it into practice, who would be eligible to receive a subsidy if it were confined to low-income households, and what measures could be taken to prevent fraud.

If the subsidy were limited to low-income households, one eligibility standard could be qualifying for public assistance such as food stamps, the report said. But a key drawback is that agencies overseeing such programs “may not be allowed to release lists of their recipients to others,” the GAO said. Moreover, if the subsidy is extended only to households that rely exclusively on over- the-air signals, no such list is available, it said. The GAO said it reviewed 4 options for handling a subsidy -- refundable tax credits, govt. equipment handouts, vouchers and rebates. “We found that the suitability of any of these methods depends on aspects of the subsidy’s design, such as which entity is most appropriate to administer the subsidy and who would be eligible to receive the benefit,” it said.

A govt. handout of converter boxes could raise several challenges, the GAO said. It said it had been told by CE retailers that a distribution program “limits consumers’ choices” and provides no mechanism for return or repair of defective product. State agencies could be assigned to handle product distribution, it said. But it said those agencies have complained they don’t have the staff or facilities to do so, and such a program would “not take advantage of existing retail supply chains that already move large quantities of goods to stores throughout the country.”