Retailers Dub NTIA Coupon Rules Attentive to Their Concerns

NTIA said Mon. it expects this week to issue a request for proposals (RFP) for a vendor, starting a selection process that could take months. NTIA in early Jan. said it expected to issue the RFP Jan. 26, but apparently held off pending the final program rules’ release. CERC and others wanted NTIA to pick a vendor as early as possible this year, ideally first quarter. That would have kept working with the vendor to install coupon-processing systems from interfering with retailers’ all-important holiday selling season. That goal is likely impossible.

Still, CERC Exec. Dir. Marc Pearl singled out NTIA for praise in giving retailers until the end of Q1 2008 to decide whether to seek certification in the program. In doing so, NTIA “recognized both the seasonal demands on retailers and the importance of the implementation choices that must be made by NTIA’s program vendor, once selected,” Pearl said.

In its comments, CERC argued against holding retailers and manufacturers liable for an inability to predict or meet converter box demand. NTIA heeded those concerns, recognizing that “the product cycle for converters is unknown and perhaps atypical of consumer electronics products generally,” it said in the final rules, released Tues. “Furthermore, NTIA does not want retailers to decline to participate because they feel that our requirements are too burdensome or unrealistic. Therefore, NTIA will clarify that retailers are expected to follow commercially reasonable practices in ordering and managing inventories of ‘CECBs'” -- as NTIA terms coupon-eligible converter boxes.

In its language, NTIA seemed to walk a fine line, trying to calm retailer worries about having to install coupon processing systems at the peak of the holiday season. “NTIA reiterates that it is its intent to establish regulations and procedures that are reasonable and practical in light of commercial constraints,” the rules say. By law, the agency must accept requests for coupons Jan. 2008-March 2009 and so “proposed that retailers be ready to redeem coupons starting January 1, 2008, consistent with the statutory guidance,” they say. But the rules allow wiggle room: “NTIA expects widespread retailer POS system modifications to occur in the first quarter of 2008.”

NTIA accepted another CERC suggestion -- that retailers must have enough CE retail experience to support sale of CECBs as an additional CE product, the rules say: “We do not think that this program is appropriate for brand new ventures, either of the bricks and mortar type or online sellers. NTIA agrees with CERC that demonstrated capabilities as to staff, training, capacity to carry inventory and to order and take delivery of CECBs through commercial channels is important.” To participate, retailers must certify they've been in the CE business at least a year, the rules say: “This requirement may be waived by NTIA upon a showing of good cause. A determination of ‘good cause’ will be based on a showing of what is the best interest of the coupon program. This application process will provide NTIA with information well in advance of the 2008 launch of which retailers will participate and what markets will be served.”

For manufacturers, NTIA will adopt the FCC verification process “as the core of its technical acceptance plan to identify CECBs,” the rules say, to the apparent delight of CE makers and broadcasters that proposed it. But NTIA believes converters shouldn’t be “automatically eligible for the Coupon Program without agency confirmation,” the rules say: “While manufacturers may market any converter or other device including digital-to-analog decoding functionality outside of the Coupon Program, NTIA intends to use a central electronic tracking database to track retailers’ point-of-sale (POS) transactions, including authorization of coupon redemptions and sales data of CECBs. Action is required, therefore, by NTIA to load and update eligibility data (e.g., product SKU) for each model approved by NTIA.”

The rule requires tests by CE makers “to demonstrate that each converter model meets the features and performance specifications set forth in our regulations for CECBs,” NTIA said. It said it has an agreement with the FCC under which the Commission may review manufacturer converter box test data submitted to NTIA. The FCC may test converter boxes, if need be, the rules say: “NTIA will base its decision to approve each converter box upon its consultation with the FCC.”

NTIA will try to complete certification within the 15 days urged by CEA, MSTV and NAB, it said: “As promptly as possible, NTIA will issue a statement of eligibility or non- eligibility for each converter model submitted by a manufacturer. The agency will attempt to meet demand, although the pacing of manufacturer submissions may be uneven. Because it is impossible to determine at this time how many manufacturers will submit test results and equipment, whether multiple models will be built by each manufacturer, and when converters will be proposed for inclusion in the Coupon Program, NTIA must allow flexibility to establish the appropriate time frame for agency review.”

NTIA “reserves the right to test” boxes itself, the rules said: “As an additional means to ensure that converters made available to the public as part of the Coupon Program meet NTIA’s technical specifications, NTIA may select converters to test at any time during the course of the Coupon Program. If a converter box appears not to meet NTIA’s technical specifications, NTIA will follow a process similar to that used by the FCC in consulting with the manufacturer. If a converter box model is subsequently found not to meet the features and performance specifications set forth in the Final Rule, that model will no longer be eligible for the Coupon Program.” The agency didn’t deal with a product shortage, or any relief for retailers if popular boxes are pulled from shelves. Nor did it say what, if anything, it would do with noncompliant boxes already sold to consumers.