Reaction Muted to NTIA Rulemaking on DTV Converter Box Subsidies

The few public reactions rehash familiar stances but don’t address specific NTIA proposals. CEA hailed the effort as “an important milestone” in the DTV transition. Running a successful converter box program “represents the final piece of the transition-to-DTV puzzle,” said CEA Pres. Gary Shapiro. He vowed CEA and its members “will continue our award-winning efforts to help educate consumers” about the analog cutoff.

CEA -- a neutral in Hill debates over whether the analog cutoff bill should have a subsidy component -- will be an “enthusiastic” participant in NTIA’s comment process, Shapiro said. CEA pledged to work with NTIA “and all other interested parties to ensure a smooth transition.” A day earlier, NAB, which said it hopes no broadcast-only TV sets “are forced to go dark during this transition,” vowed to keep working with policymakers to ensure “minimal consumer disruption” by the Feb. 2009 cutoff.

The Consumer Electronics Retailers Coalition (CERC) is among groups keeping mum. CERC, testifying last year at a House hearing, urged DTV subsidies flow directly from govt. to “eligible consumers,” sparing retailers the administrative burden (CD May 27/05 p1). In the end CERC dropped that party line, and like others was gleeful to win enactment of a hard cutoff date.

But under the NTIA proposals, CE retailers as a group -- more than any other -- will feel the govt. spotlight’s glare while the $40 coupon program runs. Retailer participation is voluntary, and retailers that take part won’t be paid by NTIA, the rulemaking says: “We propose to permit consumers to redeem coupons at retailers that have established production and distribution channels and who have demonstrated that they can redeem coupons expeditiously and efficiently. We note that retailers are also typically familiar with coupon programs and have systems in place to process coupons. We are also interested in retailers that can handle converter box purchases with the coupons via mail, phone or the Internet-based sales.”

To participate, a retailer must promise “under penalty of law” to follow program rules and use “easily audited” systems able to prevent fraud and abuse. The rulemaking doesn’t say specifically how violations would be punished. Participating retailers must be: (1) Willing to be audited any time in the course of the program. (2) Able to send NTIA electronic sales data related to coupons used to buy converter boxes, matching each coupon by serial number with a certified converter box purchase. The rulemaking also proposes to require retailers to submit coupons for reimbursement within 30 days of consumer redemption and to keep hard copies of coupon transactions for a year.

As part of certification, NTIA plans to teach retailers about coupon program details and their rights and duties, including a requirement that they “honor all valid coupons that are tendered in the authorized manner,” it said. NTIA would reimburse retailers within 60 days of getting proper documentation, the rulemaking says: “NTIA also proposes to review and resolve any allegation by the retailer that it was improperly denied reimbursement for a valid coupon properly tendered and accepted pursuant to the rules.”

Despite the chance of incremental costs for retailers associated with accepting coupons and distributing converter boxes, “the coupon program does not restrict the retailer in pricing the converter box,” says an appendix in the rulemaking on the program’s potential impact on small businesses. Major CE chains don’t qualify as small businesses -- defined by the govt. as generating $8 million or less annual revenue -- but NARDA or PARA dealers may, and NTIA casts doubt on chances small retailers will want to participate in the program.

Still, NTIA’s analysis of the coupon program’s retail impact has findings that may apply to all. For example, along with the time it takes a retailer to submit a certification form to NTIA, “there will be actual costs” tied to meeting program requirements, NTIA says: “These costs, however, are difficult to quantify because of many varying factors,” but they're expected to be “minimal.” For example, retailers would have to ensure employees can educate customers about the need for and installation of converter boxes, NTIA says: “The costs for this compliance would be calculated by the number of hours it would take to train employees. The estimate would depend on a number of factors such as the existing sales force’s expertise, number of employees, salary levels, type of converter box that is certified and the consumer knowledge.”

The agency assumes most retailers are familiar with and accept coupons for merchandise, and that they have systems to prevent fraud, it said. But the nature of the coupon program “may require participating retailers to assume additional costs associated with preventing fraud,” and those costs can’t be estimated “at this point in the rulemaking process,” NTIA said. For example, audits may involve costs that could vary by employee pay scale and audit scope. Costs will occur when accepting coupons, redeeming them and keeping hard copies for a year, NTIA said: “These associated costs depend on a number of factors such as the particular systems that retailers currently have in place, as well as the extent to which these cost can be absorbed within existing procedures that the retailer has in place.”