Inouye Plans Fall DTV Hearing, Vowing to Maintain Pressure

Consumer awareness of the transition will grow as the campaigns progress, NTIA Administrator John Kneuer said. He called Americans “very aware” of digital TV, an observation shared by Sen. Gordon Smith, R-Ore., who said his sons are fully conversant with the digital era. Kneuer said the $5 million Congress gave NTIA for consumer education under the 2005 Deficit Reduction Act will suffice to do the job when paired with industry efforts.

Kneuer raised a red flag about proposed FCC rules for the coming 700 MHz auction. They could impede revenue from which the $1.5 billion program for DTV converter boxes is to come, he said. “Are the current auction rules going to undermine the value of the auction?” Ranking Member Ted Stevens, R-Alaska, asked Kneuer. Stevens is “not just a little” worried about the funding issue, he said.

“Maximum flexibility leads to maximum revenue,” Kneuer said, citing the success achieved with flexible rules used in last year’s advanced wireless services auction. “I think it’s all very fluid,” Kneuer said, referring to agency plans for the 700 MHz auction. “At the end of the day the best outcome is to have an auction” that creates incentives for as much investment as possible, Kneuer told us.

Sen. John Sununu, R-N.H., termed it an “economic fact of life” that the more regulations imposed on the auction, the less its revenue yield. “Has the administration raised concerns” about the FCC proposal? Sununu asked. Kneuer declined to answer directly, but said there is a “lot of movement,” with industry still floating proposals. Kneuer hopes the Commission will take steps leading to maximum revenue, he told Sununu. The government’s first obligation is to provide $7.3 billion to the Treasure for deficit reduction, he added.

CTIA agrees with Kneuer that encumbrances on the auction will lead to lower revenue, it said. “In contrast, an auction with flexible service rules will create the best environment for maximum benefits and revenue for the U.S. Treasury,” a CTIA statement said. Google is no small struggling company needing government subsidy to enter the competitive wireless space, the statement said, a reference to the high-tech company’s proposal to bid $4.6 billion for the spectrum if the FCC accedes to its conditions. Conditions Google and others want would only take money “out of the pockets of American taxpayers and stuff it into the coffers of a multi-billion dollar corporation,” CTIA said.

Converter Box ‘Train Wreck’ Fear

The FCC is committed to ensuring that consumers are not “left in the dark,” after the DTV transition, said Catherine Seidel, chief of the Consumer and Governmental Affairs Bureau. She told the committee that several rulemakings, enforcement efforts and education programs are in regard to facilitating the transition. “There still will be much to do,” she said, adding that partnerships with community groups and industry will help get the word out. NAB plans to have digital transition public service announcements ready to air in December, it told us.

The FCC inspected 1,089 retailers and e-commerce sites through Tuesday, issuing 262 citations for violations of the Commission’s analog labeling order since it took effect May 25, Seidel said. That probe has led to the drafting of Notices of Apparent Liability against seven “large retailers,” seeking fines exceeding $3 million total, she said.

“As far as grades go, that’s not quite an ‘F,’ but it’s a long ways from an ‘A’ or ‘B,'” said Sen. John Thune, R- S.D., referring to the 76 percent of retailers found compliant in those inspections. Asked by Thune what is needed to improve the results, Seidel said, “The fact that enforcement action has been swift and has been consistent will help.” And the FCC and the Consumer Electronics Retailers Coalition have worked together to publish a “joint advisory” reminding dealers of their “labeling obligation.”

NTIA will be ready to cope with any “disconnect” between distribution of coupons for DTV converter boxes and retail outlet availability of boxes, Kneuer told Sen. Maria Cantwell, D-Wash. “If there was a disconnect between the availability of boxes, we wouldn’t want consumers to get those coupons, have them expire in 90 days, and not have boxes,” he said. “So we would hold and not deliver the coupons to consumers if there were for some reason a disconnect in the supply chain for boxes.”

Pressed by Cantwell for procedural details, Kneuer said NTIA will rely on information from retailers and box makers about box inventory. Cantwell asked whether NTIA will look up retailers in a ZIP code and release coupons to consumers there once satisfied that area has enough boxes. If NTIA learns of “geographic problems” in box distribution, “we would have to go back to our vendor and make sure they have systems in place to deal with that,” Kneuer said.

Participating retailers are under no inventory requirement, Kneuer said. “Our intention in designing this program was to make it as easy as possible for manufacturers and retailers to participate while doing what is possible to guard against waste, fraud and abuse,” he said. NTIA lacks “the regulatory authority” to tell retailers how many boxes to stock, Kneuer said. “That’s not the way the program is currently set up.”

Cantwell fears “a high potential for a train wreck,” she said, telling Kneuer his responses to her questions suggest that NTIA has not “optimized the program,” gearing it not to consumers but to retailers and manufacturers. Cantwell called it “shortsighted” to think that so many viewers can be switched to digital TV without problems.