DTV Coupon Program Amply Funded, NTIA Says
There’s ample money in the pot -- and perhaps millions to spare -- to cover consumers who redeem DTV converter box coupons for “untethered” over-the-air analog TV sets, NTIA said in an economic analysis of its coupon program’s final rules. At our request, NTIA gave us a copy of the analysis explaining the program’s costs and benefits to the public. Such reports customarily are required under executive order for large govt. programs.
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By June 2008, when the program is “fully operational,” 10.2-26 million broadcast-only analog sets will be in use “for which coupons may be redeemed,” NTIA said. At $40 a coupon, that means $408 million-$1.04 billion in projected demand, NTIA said. Contrary to claims by Democrats in Congress that the Republican-passed DTV law underfunded coupons, even the high range of NTIA’s estimated demand is $300 million short of the $1.34 billion needed if all 33.5 million coupons are redeemed.
NTIA offered a range in the number of coupons needed and redeemed in a bow to clashing opinions heard in last year’s congressional debate on how many over-the-air analog sets will go dark in Feb. 2009. Consumers Union’s estimate of over-the-air analog sets in use Jan. 2005 was the highest at 80 million. CEA gave the lowest, 32.7 million.
By June 2008, the number of untethered analog sets in use will fall to 29.1-74.1 million through DTV replacements, NTIA said, using a measure suggested by CEA analysts. Tony Wilhelm, dir. of NTIA’s coupon program outreach effort, spoke by phone Feb. 7 with Matt Swanston, CEA dir.-business analysis, the report said. Swanston told Wilhelm that 11% of sets in broadcast-only households are replaced yearly, it said. NTIA assumed a replacement rate of zero for untethered analog sets in cable and satellite households because they're “unlikely to replace” their 2nd or 3rd analog TVs with a DTV, NTIA said.
“At most” 70% of untethered households will buy converters, NTIA said. It arrived at that forecast by assuming that all undecideds polled in recent surveys would opt for converter boxes to cope with the analog cutoff, it said. It discounted by 25% the respondents saying they would subscribe to cable or satellite or buy a DTV set, assuming that some consumers will opt for converters once they learn of the coupon program though public service announcements. “This analysis provides a range of sets requiring a converter box between 20.4 million and 51.9 million,” NTIA said. “This range constitutes our non-action baseline, since it represents a reasonable projection of the number of sets that would require a box, given known market trends and consumer behavior.”
Of those sets’ owners, NTIA “conservatively” estimates that 50% will redeem coupons for a converter box, bringing the range of sets affected to 10.2-26 million. But it admits predicting redemption rates might be a crapshoot. Nearly 1/4 of consumers don’t use coupons, it said. Redemption rates for “cents-off” coupons at supermarkets are only 1%, it said. Redemptions are only slightly higher (7%) in programs where coupons are requested. But the DTV coupon program is unique, since the coupons will cover most of the cost of a converter box, which some consumers will consider essential, NTIA said.
Other disclosures: (1) Though households can request up to 2 coupons, NTIA will send them only one if they fail in their application to say how many they will need, it said. This will “help hold down the total costs of producing and distributing coupons,” it said. (2) Unit sales of analog TVs will amount to only 200,000 sets next year from 2.5 million this year, and will disappear completely by 2009, NTIA said, citing an unpublished CEA report. DTV sales are seen rising to 29.2 million this year from 23.9 million in 2006, and they will rise to 33.4 million in 2008, 35.2 million in 2009, and 36.4 million in 2010, it said.