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Cable Technology Feature Article

January 05, 2009

Problems with Digital TV Subsidy Program

By Jessica Kostek, TMCnet Channel Editor

We have all been hearing about the switch from analog to digital TV and how we have to be ready for the February 17th switch if we consumers want to maintain our boob-tube habits. Commercials have been informing people to switch to cable or satellite TV, buy a television set with a digital tuner or buy a converter box that can translate digital signals from the airwaves into analog. Even the government got into the mix, being so concerned that they started a fund, helping along those who weren’t able to afford the costs for the transition. However, many are still being fashionably late with approximately 8 million households still unprepared.
According to the AP, to subsidize the converter boxes, most of which cost between $40 and $80, the government has been letting consumers request up to two $40 coupons per home. But any day now, the National Telecommunications and Information Administration (NTIA), the arm of the Commerce Department in charge of administering the coupon program, expects to hit a $1.34 billion funding ceiling set by Congress.
The NTIA is warning that unless lawmakers step in quickly with more funding or new accounting rules, it will have to create a waiting list for coupon requests. That would mean it could send out additional coupons only as unredeemed ones expire, freeing up more money for the program.
Therefore, if Congress doesn't act soon, consumers who apply for coupons in the final weeks leading up to the digital transition might not get them in time.
"If the government invests in just a few million TV converter boxes, which is a drop in the bucket of the enormous amount of money being spent on the stimulus package, it would do more good to keep all households connected," said Gene Kimmelman, vice president for federal policy at Consumers Union.
Congress mandated the digital TV switch to free up more room in the wireless spectrum and the NTIA cannot commit more than $1.34 billion at any time to cover the cost of the coupons. That pool includes coupons that have already been redeemed; unexpired coupons that have been mailed out but not yet redeemed; and coupons that have been requested but not yet mailed out.
The NTIA estimates the funding cap, which excludes administrative expenses, is enough to cover 51.5 million coupons through March 31, which is the last day consumers can request them.
However, consumers have already requested 44.9 million coupons including 18 million that had been redeemed and 10.8 million that were in circulation but yet to be cashed in leaving just $68.2 million for additional coupons.
If such a demand continues, the program could hit 51.5 million coupons by late January — roughly 60 million coupons would be requested by March 31, said NTIA head Meredith Baker in a recent letter to Rep. Edward Markey, D-Mass.
Markey, who chairs the House Energy and Commerce Subcommittee on Telecommunications and the Internet, has said Congress may need to allocate additional funding for the converter box coupon program.
Congress will then have two options: raise the $1.34 billion cap by waiving the accounting rules that require the NTIA to wait for unredeemed coupons to expire before issuing new ones; distributing and estimated 56.5 million coupons by the NTIA if those rules are waived.
Or Congress could approve more money for the program. The NTIA estimates it could distribute up to 56.5 million coupons with an additional $250 million in funding, or up to 60 million coupons with another $330 million in funding.
TV industry analysts at Nielsen Co. estimate that as of December, 6.8 percent of the 114 million U.S. households with televisions remained completely unready for the digital transition. Another ten percent still had at least one television set that was not yet ready.
Unprepared households will lose all channels except for low-powered stations, which will still be allowed to transmit in analog temporarily.

Jessica Kostek is a channel editor for TMCnet, covering VoIP, CRM, call center and wireless technologies. To read more of Jessica’s articles, please visit her columnist page.

Edited by Jessica Kostek