Digital Television Transition: Questions on Administrative Costs 
of an Equipment Subsidy Program (20-JUN-05, GAO-05-837R).	 
                                                                 
This letter responds to a Congressional letter requesting that we
provide information on the approximate cost of various		 
administrative steps that might be necessary to administer a	 
subsidy program for the purchase of digital converter boxes to	 
advance the transition to digital television (DTV). Specifically,
the letter identifies a number of administrative steps that might
be required to administer a rebate program targeted to low-income
households that rely solely on over-the-air television signals,  
and asks us to estimate the costs of specific administrative	 
steps. Estimating the specific costs of these administrative	 
steps is difficult because of the substantial uncertainty about  
exactly what would be required to implement them. The		 
Congressional letter also notes that the administrative costs for
the rebate and voucher programs that we reviewed ranged from 10  
percent to 39 percent. However, due to differences in the scope  
of the rebate and voucher programs we reviewed and a potential	 
DTV subsidy, it is not clear how applicable the administrative	 
costs of these programs are to estimating the costs of a DTV	 
subsidy.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-837R					        
    ACCNO:   A27218						        
  TITLE:     Digital Television Transition: Questions on	      
Administrative Costs of an Equipment Subsidy Program		 
     DATE:   06/20/2005 
  SUBJECT:   Administrative costs				 
	     Cost analysis					 
	     Subsidies						 
	     Television broadcasting				 
	     Television equipment industry			 
	     Digital broadcasting				 
	     Vouchers						 
	     Rebates						 

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GAO-05-837R

United States Government Accountability Office Washington, DC 20548

June 20, 2005

The Honorable John D. Dingell

Ranking Member

Committee on Energy and Commerce

The Honorable Edward J. Markey

Ranking Member

Subcommittee on Telecommunications and the Internet House of
Representatives

Subject: Digital Television Transition: Questions on Administrative Costs
of an Equipment Subsidy Program

On May 26, 2005, I testified before the Subcommittee on Telecommunications
and the Internet on a staff discussion draft of the DTV Transition Act of
2005.1 At that time, I discussed several challenges to administering a
program for subsidizing the purchase of digital converter boxes to advance
the DTV transition. This letter responds to your June 9, 2005 letter
requesting that we provide information on the approximate cost of various
administrative steps that might be necessary to administer such a subsidy
program. Specifically, your letter identifies a number of administrative
steps that might be required to administer a rebate program targeted to
low-income households that rely solely on over-the-air television signals,
and asks us to estimate the costs of specific administrative steps. As I
indicated at the hearing, estimating the specific costs of these
administrative steps is difficult because of the substantial uncertainty
about exactly what would be required to implement them. Your letter also
notes that the administrative costs for the rebate and voucher programs
that we reviewed ranged from 10 percent to 39 percent. However, as we
noted in our written statement, due to differences in the scope of the
rebate and voucher programs we reviewed and a potential DTV subsidy, it is
not clear how applicable the administrative costs of these programs are to
estimating the costs of a DTV subsidy.

We recognize that the Committee desires a clear understanding of the
administrative costs associated with implementing a converter box subsidy
program in considering legislation to end the DTV transition on a date
certain. As your letter suggests, several administrative steps would
likely be taken to establish a rebate program targeting low-income
households that rely solely on over-the-air television signals. Costs
would be incurred to complete these administrative steps. For example,
during our review, we heard from a rebate clearinghouse that it usually
charges between

1GAO, Digital Broadcast Television Transition: Several Challenges Could
Arise in Administering a Subsidy Program for DTV Equipment, GAO-05-623T
(Washington, D.C.: May 26, 2005).

GAO-05-837R Subsidy Administration Issues Related to the DTV Transition

$0.30 and $0.45 per redeemed rebate to cover the processing costs, with an
additional
cost of $0.37 for first class postage to mail the rebate check to the
recipient. We
believe that this estimate might not reflect all of the rebate
clearinghouse costs for
the rebate program you describe because a DTV subsidy program requires the
clearinghouse to complete more steps than would be typical for most
manufacturer
or retailer rebates. This program step is just one small element of the
overall subsidy
program.

Regarding other costs, the various uncertainties surrounding a
hypothetical subsidy
complicate measuring or approximating the administrative costs of such a
program.
For example, it is unclear what approach would be most efficient to
identify over-the
air households. As we indicated in our written statement, determining
over-the-air
households could be accomplished through different, albeit highly
challenging,
approaches. The tasks necessary to attain a list of over-the-air
households and the
associated administrative costs of doing so could vary depending on how
this is done
and until it is clearer what would need to be accomplished to develop this
list, the
cost of its derivation is unknown. Restricting eligibility further by
requiring an
income means test adds more uncertainty to the administrative costs of a
potential
DTV subsidy program. We noted in our written statement that one possible
approach
to identify low-income households would be to use receipt of an existing
social
service program as eligibility criteria for the DTV subsidy. However, the
program
could be set up in different ways depending on which social service
programs are
included as criteria for identifying low-income households. These
differences would
have implications for administrative costs, as would the unknown burdens
placed on
local social service agencies that oversee those programs.

In addition, your letter asks us to determine the total administrative
costs for a DTV
subsidy program given two hypothetical funding levels. Your letter
subsequently asks
us to determine the number of households that would be able to receive a
rebate
under various scenarios, given the administrative costs that would be
subtracted
from the total funding level. Because we are unable to determine the
subsidy
program's administrative costs, we cannot address these questions.

For additional information on our work on the DTV transition, please
contact me or
Amy Abramowitz on (202) 512-2834 or [email protected] or
[email protected].

Mark L. Goldstein
Director, Physical Infrastructure Issues

(543139)

 Page 2 GAO-05-837R Subsidy Administration Issues Related to the DTV Transition

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