Digital Television Transition: Information on the Implementation 
of the Converter Box Subsidy Program and Consumer Participation  
in the Program (16-SEP-08, GAO-08-1161T).			 
                                                                 
The Digital Television Transition and Public Safety Act of 2005  
requires all full-power television stations in the United States 
to cease analog broadcasting after February 17, 2009, known as	 
the digital television (DTV) transition. The National		 
Telecommunications and Information Administration (NTIA) is	 
responsible for implementing a subsidy program to provide	 
households with up to two $40 coupons toward the purchase of	 
converter boxes. In this testimony, which is principally based on
a report being issued today, GAO examines (1) what consumer	 
education efforts have been undertaken by private and federal	 
stakeholders and (2) how effective NTIA has been in implementing 
the converter box subsidy program, and to what extent consumers  
are participating in the program. To address these issues, GAO	 
analyzed data from NTIA and reviewed legal, agency, and industry 
documents. Also, GAO interviewed a variety of stakeholders	 
involved with the DTV transition.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-1161T					        
    ACCNO:   A84205						        
  TITLE:     Digital Television Transition: Information on the	      
Implementation of the Converter Box Subsidy Program and Consumer 
Participation in the Program					 
     DATE:   09/16/2008 
  SUBJECT:   Broadcasting					 
	     Broadcasting standards				 
	     Cable television					 
	     Comparative analysis				 
	     Consumer education 				 
	     Digital broadcasting				 
	     Digital television 				 
	     Economically depressed areas			 
	     Elderly persons					 
	     Minorities 					 
	     Private sector					 
	     Program evaluation 				 
	     Program management 				 
	     Subsidies						 
	     Surveys						 
	     Telecommunications 				 
	     Telecommunications equipment			 
	     Television 					 
	     Television broadcasting				 
	     Program implementation				 
	     NTIA Converter Box Subsidy Program 		 

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GAO-08-1161T

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Testimony: 

Before the House Subcommittee on Telecommunications and the Internet: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 9:30 a.m. EDT:
Tuesday, September 16, 2008: 

Digital Television Transition: 

Information on the Implementation of the Converter Box Subsidy Program 
and Consumer Participation in the Program: 

Statement of Mark L. Goldstein, Director: 
Physical Infrastructure: 

GAO-08-1161T: 

GAO Highlights: 

Highlights of GAO-08-1161T, a testimony before the House Subcommittee 
on Telecommunications and the Internet. 

Why GAO Did This Study: 

The Digital Television Transition and Public Safety Act of 2005 
requires all full-power television stations in the United States to 
cease analog broadcasting after February 17, 2009, known as the digital 
television (DTV) transition. The National Telecommunications and 
Information Administration (NTIA) is responsible for implementing a 
subsidy program to provide households with up to two $40 coupons toward 
the purchase of converter boxes. In this testimony, which is 
principally based on a report being issued today, GAO examines (1) what 
consumer education efforts have been undertaken by private and federal 
stakeholders and (2) how effective NTIA has been in implementing the 
converter box subsidy program, and to what extent consumers are 
participating in the program. To address these issues, GAO analyzed 
data from NTIA and reviewed legal, agency, and industry documents. 
Also, GAO interviewed a variety of stakeholders involved with the DTV 
transition. 

What GAO Found: 

Private sector and federal stakeholders have undertaken various 
consumer education efforts to raise awareness about the DTV transition. 
For example, the National Association of Broadcasters and the National 
Cable and Telecommunications Association have committed over $1.4 
billion to educate consumers about the transition. This funding has 
supported the development of public service announcements, education 
programs for broadcast, Web sites, and other activities. The Federal 
Communications Commission (FCC) and NTIA have consumer education plans 
that target those populations most likely to be affected by the DTV 
transition. Specifically, they identified 45 areas of the country as 
high risk that included areas with at least 1 of the following 
population groups: (1) more than 150,000 over-the-air households, (2) 
more than 20 percent of all households relying on over-the-air 
broadcasts, or (3) a top 10 city of residence for the largest target 
demographic groups. The target demographic groups include seniors, low-
income, minority and non-English speaking, rural households, and 
persons with disabilities. In addition to targeting these 45 areas of 
the country, FCC and NTIA developed partnerships with organizations 
that serve these hard-to-reach populations. 

NTIA is effectively implementing the converter box subsidy program, but 
its plans to address the likely increase in coupon demand as the 
transition nears remain unclear. As of August 31, 2008, NTIA had issued 
almost 24 million coupons and as of that date approximately 13 percent 
of U.S. households had requested coupons. As found in GAOï¿½s recent 
consumer survey, up to 35 percent of U.S. households could be affected 
by the transition because they have at least one television not 
connected to a subscription service, such as cable or satellite. In 
U.S. households relying solely on over-the-air broadcasts 
(approximately 15 percent), of those who intend to purchase a converter 
box, 100 percent of survey respondents said they were likely to request 
a coupon. With a spike in demand likely as the transition date nears, 
NTIA has no specific plans to address an increase in demand; therefore, 
consumers might incur significant wait time to receive their coupons 
and might lose television service if their wait time lasts beyond 
February 17, 2009. In terms of participation in the converter box 
subsidy program, GAO analyzed coupon data in areas of the country 
comprising predominantly minority and senior populations and found that 
households in both predominantly black and Hispanic or Latino areas 
were less likely to redeem their coupons compared with households 
outside these areas. Additionally, GAO analyzed participation in the 
converter box subsidy program in the 45 areas of the country on which 
NTIA and FCC focused their consumer education efforts and found coupon 
requests to be roughly the same for zip codes within the 45 targeted 
areas compared with areas that were not targeted. Retailers play an 
integral role in the converter box subsidy program by selling the 
converter boxes and helping to inform their customers about the DTV 
transition. GAO visited 132 randomly selected retail stores in 12 
cities. Store representatives at a majority of the retailers GAO 
visited were able to correctly state that the DTV transition would 
occur in February 2009 and how to apply for a converter box coupon. 

What GAO Recommends: 

In the report released today, GAO recommends that the Secretary of 
Commerce direct NTIA to develop a plan to manage coupon requests in the 
lead up to the transition. In commenting on a draft of the report, the 
Department of Commerce did not state whether it agreed or disagreed 
with GAOï¿½s recommendation, but stated its concern about an increase in 
coupon demand as the transition nears. FCC noted consumer outreach 
efforts it has taken. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-1161T]. For more 
information, contact Mark L. Goldstein at (202) 512-2834 or 
[email protected]. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss our report being issued today 
on the National Telecommunications and Information Administration's 
(NTIA) implementation of the mandated converter box subsidy program. 
[Footnote 1] 

Federal law requires all full power television stations in the United 
States to cease analog broadcasting and broadcast digital-only 
transmissions after February 17, 2009--often referred to as the digital 
television (DTV) transition. Currently, most television broadcasters 
transmit over-the-air signals in both an analog and digital format to 
television households. After the transition, consumers who rely 
exclusively on over-the-air television signals viewed on analog sets 
will not be able to view broadcast programming, which could include 
important news information or emergency alerts, unless they take 
action. In particular, these consumers could (1) purchase a television 
capable of processing digital signals, (2) purchase a digital-to-analog 
converter box that converts the digital signals to analog signals and 
enables their display on an analog set, or (3) subscribe to cable, 
satellite, or other service. 

The federal government and the private sector have taken several steps 
to prepare for the DTV transition. NTIA, a bureau within the U.S. 
Department of Commerce, created and implemented a digital-to-analog 
converter box subsidy program to provide households with up to two $40 
coupons toward the purchase of converter boxes that allow consumers to 
continue viewing over-the-air signals on analog television sets. 
[Footnote 2] Additionally, the government, television broadcast 
industry, cable and satellite providers, and other carriers of 
broadcast signals have established several educational efforts 
informing consumers about the DTV transition and the subsidy program. 
However, the success of the DTV transition and the subsidy program 
requires consumers' understanding about the transition and the steps 
needed to continue receiving a television signal. In addition, 
consumers will rely on retailers to provide information, as well as 
supply eligible converter boxes, for the subsidy program. 

In my testimony today, I will discuss (1) what consumer education 
efforts have been undertaken by private and federal stakeholders and 
(2) how effective NTIA has been in implementing the converter box 
subsidy program and to what extent consumers are participating in the 
program. 

To meet these objectives, we interviewed agency officials from the 
Federal Communications Commission (FCC) and NTIA and reviewed their 
consumer education documents, orders, rules and proposed rules. We also 
interviewed private sector stakeholders representing the broadcasting, 
retailer, manufacturing, and cable industries and reviewed publicly 
available information on their consumer education planning. Further, we 
discussed the effectiveness of consumer education efforts with various 
advocacy groups identified as NTIA partners that represent hard-to- 
reach populations. We also analyzed date-specific data from NTIA on 
coupon requests, issuance, redemptions, and expirations, and examined 
NTIA timeliness in issuing coupons from the beginning of the converter 
box subsidy program in January through August 2008. Due to report 
processing constraints the report this testimony is primarily based on 
only analyzed data from January through June 2008. We conducted data 
reliability testing and determined that the data used in this report 
were sufficiently reliable for our purposes. We conducted a "mystery 
shopper" study--i.e., discussing the transition with randomly selected 
retailers without identifying ourselves as government employees--to 
determine retailer preparedness for the converter box subsidy program 
including the level of retailer knowledge about the program and 
availability of converter boxes. The study, in which we visited 132 
store locations in 12 cities, was conducted from April to early May 
2008. We performed our review from February to September 2008 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our review objectives. We believe 
that the evidence obtained provides a reasonable basis for our findings 
and conclusions based on our audit objectives. 

Summary: 

* Private sector and federal stakeholders have undertaken various 
consumer education efforts to raise awareness about the DTV transition. 
For example, the National Association of Broadcasters (NAB) and the 
National Cable and Telecommunications Association have committed over 
$1.4 billion to educate consumers about the transition. This funding 
has supported the development of public service announcements, 
education programs for broadcast, Web sites, and other activities. In 
addition, most national retailers participating in the converter box 
subsidy program have developed consumer education campaigns to raise 
awareness of the DTV transition and the subsidy program. Federal 
stakeholders (FCC and NTIA) have developed consumer education plans 
that target those populations most likely to be affected by the DTV 
transition. In particular, they focused their outreach efforts on 
certain demographic groups, including seniors, low-income, minority and 
non-English speaking, rural households, and persons with disabilities. 

* NTIA is effectively implementing the converter box subsidy program, 
but plans to address the likely increase in coupon demand as the 
transition nears remain unclear. As of August 31, 2008, NTIA had issued 
approximately 24 million coupons and as of that date approximately 13 
percent of U.S. households had requested coupons. As found in our 
consumer survey, up to 35 percent of U.S. households could be affected 
by the transition because they have at least one television not 
connected to a subscription service, such as cable or satellite. 
[Footnote 3] In U.S. households relying solely on over-the-air 
broadcasts (approximately 15 percent), of those who intend to purchase 
a converter box, 100 percent of survey respondents said they were 
likely to request a coupon. Therefore, a spike in demand for converter 
box coupons is likely as the transition date nears. According to NTIA, 
an increase in requests around the transition date may cause a delay in 
issuing coupons. However, we found NTIA has no specific plans to 
address an increase in demand and that it has encountered challenges in 
issuing coupons within its requirement of 10 to 15 days from the date 
the coupon application was approved. Given the challenges to meet this 
requirement and its lack of a clear plan to address a potential spike 
in demand, consumers might incur significant wait time to receive their 
coupons and might lose television service if their wait time lasts 
beyond February 17, 2009. In terms of participation in the converter 
box subsidy program, we analyzed coupon data in areas of the country 
comprised of predominantly minority and senior populations and found 
that participation varies. For example, we found that zip codes with a 
high concentration of Latino or Hispanic households had noticeably 
higher coupon request rates (28 percent) when compared to areas with 
predominantly non-Latino or non-Hispanic households (12 percent). We 
also found households in both predominantly black and Hispanic or 
Latino areas were less likely, compared to households outside these 
areas, to redeem their coupons once they received them. Additionally, 
we analyzed participation in the converter box subsidy program in the 
45 areas of the country on which NTIA and FCC focused their consumer 
education efforts and found coupon requests to be roughly the same for 
zip codes within the 45 targeted areas compared with areas that were 
not targeted. 

Background: 

The DTV transition will require citizens to understand the transition 
and the actions that some might have to take to maintain television 
service. For those households with subscription video service on all 
televisions or with all televisions capable of processing a digital 
signal, no action is required. However, households with analog 
televisions that rely solely on over-the-air television signals 
received through rooftop or indoor antennas must take action to be able 
to view digital broadcast signals after analog broadcasting ceases. The 
Digital Television Transition and Public Safety Act of 2005 addresses 
the responsibilities of two federal agencies--FCC and NTIA--related to 
the DTV transition. The act directs FCC to require full-power 
television stations to cease analog broadcasting by February 17, 2009. 
The act also directed NTIA to establish a $1.5 billion subsidy program 
through which households can obtain coupons towards the purchase of 
digital-to-analog converter boxes. In August 2007, NTIA selected 
International Business Machines Corporation (IBM) as the contractor to 
provide certain services for the program. On January 1, 2008, NTIA, in 
conjunction with IBM and in accordance with the act, began accepting 
applications for up to two $40 coupons per household that can apply 
toward the purchase of eligible digital-to-analog converter boxes and, 
in mid-February 2008, began mailing the coupons. Initially, during the 
first phase of the program any household is eligible to request and 
receive the coupons, but once $890 million worth of coupons has been 
redeemed, and issued but not expired, NTIA must certify to Congress 
that the program's initial allocation of funds is insufficient to 
fulfill coupon requests. NTIA will then receive $510 million in 
additional program funds, but households requesting coupons during this 
second phase must certify that they do not receive cable, satellite, or 
any other pay television service. As of June 24, 2008, in response to 
NTIA's statement certifying that the initial allocation of funds would 
be insufficient, all appropriated coupon funds were made available to 
the program.[Footnote 4] Consumers can request coupons up to March 31, 
2009, and coupons can be redeemed through July 9, 2009. As required by 
law, all coupons expire 90 days after issuance. As unredeemed coupons 
expire, the funds obligated for those coupons are returned to the 
converter box subsidy program. 

Retailer participation in the converter box subsidy program is 
voluntary, but participating retailers are required to follow specific 
program rules to ensure the proper use and processing of converter box 
coupons. Retailers are obligated to, among other things, establish 
systems capable of electronically processing coupons for redemption and 
payment and tracking transactions. Retailers must also train their 
employees on the purpose and operation of the subsidy program. 
According to NTIA officials, NTIA initially explored the idea of 
setting requirements for training content, but decided to allow 
retailers the flexibility of developing their own training programs and 
provided retailers with sample training materials. Certification 
requires retailers to have completed an application form by March 31, 
2008, and to attest that they have been engaged in the consumer 
electronics retail business for at least 1 year. Retailers must also 
register in the government's Central Contractor Registration database, 
have systems or procedures that can be easily audited and that can 
provide adequate data to minimize fraud and abuse, agree to be audited 
at any time, and provide data tracking each coupon with a corresponding 
converter box purchase. NTIA may revoke retailers' certification if 
they fail to comply with these regulations or if any of their actions 
are deemed inconsistent with the subsidy program. Converter boxes can 
also be purchased by telephone or online and be shipped directly to a 
customer's home from participating retailers. At the time of our 
review, 29 online retailers were participating in the converter box 
subsidy program. Additionally, 13 telephone retailers were listed as 
participating in the program, 2 of which are associated with national 
retailers. 

Private and Federal Stakeholders Have Undertaken a Myriad of Activities 
Aimed at Increasing the Public's Awareness of the Transition: 

Private sector stakeholders, such as broadcasters and cable providers, 
have undertaken various education efforts to increase public awareness 
about the DTV transition. The NAB and the National Cable and 
Telecommunications Association initiated DTV transition consumer 
education campaigns in late 2007 at an estimated value of $1.4 billion 
combined. NAB has produced six versions of a public service 
announcement, including 15-second and 30-second versions in both 
English and Spanish and close-captioned versions. Private sector 
stakeholders have also produced DTV transition educational programs for 
broadcast and distribution, developed Web sites that provide 
information on the transition, and engaged in various other forms of 
outreach to raise awareness. Additionally, most of the national 
retailers participating in the NTIA converter box subsidy program are 
providing materials to help inform their customers of the DTV 
transition and the subsidy program. Examples of these materials include 
informational brochures in English and Spanish, educational videos and 
in-store displays in English and Spanish, informational content on 
retailer Web sites, and information provided in retailer advertising in 
Sunday circulars. 

FCC and NTIA also have ongoing DTV consumer education efforts, which 
target populations most likely to be affected by the DTV transition. 
Specifically, they focused their efforts on 45 areas of the country 
that have at least 1 of the following population groups: (1) more than 
150,000 over-the-air households, (2) more than 20 percent of all 
households relying on over-the-air broadcasts, or (3) a top 10 city of 
residence for the largest target demographic groups. The target 
demographic groups include seniors, low-income, minority and non- 
English speaking, rural households, and persons with disabilities. 
According to NTIA, its consumer education efforts will specifically 
target these 45 areas by leveraging partnerships and earned media spots 
(such as news stories or opinion editorials) to better reach the 
targeted populations. FCC indicated that while its outreach efforts 
focus on the targeted hard-to-reach populations, the only effort 
specifically targeting the 45 locations has been to place billboards in 
these communities. According to FCC, contracts exist for billboards in 
26 of the 45 markets, and it is working to place billboards in the 
other 19 markets. Furthermore, FCC and NTIA have developed partnerships 
with some federal, state, and local organizations that serve the 
targeted hard-to-reach populations. 

NTIA is Effectively Implementing the Converter Box Subsidy Program, But 
Concerns Exist about NTIA's Ability to Manage a Potential Spike in 
Demand: 

NTIA has processed and issued coupons to millions of consumers, but a 
sharp increase in demand might affect NTIA's ability to respond to 
coupon requests in a timely manner. NTIA and its contractors have 
implemented systems (1) to process coupon applications, (2) to produce 
and distribute coupons to consumers, and (3) for retailers to process 
coupons and receive reimbursement for the coupons from the government. 
Millions of consumers have requested converter box coupons and most of 
the requested coupons have been issued. Through August 2008, households 
had requested approximately 26 million coupons. NTIA had issued over 94 
percent of all coupon requests, for more than 24million coupons. Of 
those coupons issued, about 9.5 million (39 percent) had been redeemed 
and 31 percent had expired.[Footnote 5] After an initial spike at the 
beginning of the program, coupon requests have remained steady and have 
averaged over 105,000 requests per day. Coupon redemptions, since 
coupons were first issued in February 2008, have averaged over 48,000 
per day. 

In our consumer survey, we found that 35 percent of U.S. households are 
at risk of losing some television service because they have at least 
one television not connected to a subscription service, such as cable 
or satellite. However, through August 2008, only 13 percent of U.S. 
households had requested converter box coupons, and less than 5 percent 
had redeemed these coupons. As the transition date nears, there is the 
potential that many affected households that have not taken action 
might begin requesting coupons. Our consumer survey found that of those 
at risk of losing some television service and intending to purchase a 
converter box, most will likely request a coupon. In fact, in 
households relying solely on over-the-air broadcasts (approximately 15 
percent), of those who intend to purchase a converter box, 100 percent 
of survey respondents said they were likely to request a coupon. 

Consumers have incurred significant wait times in the processing of 
their coupon requests, but the processing time from receiving requests 
to issuing coupons is improving. NTIA requires that 98 percent of all 
coupon requests be issued within 10 days, and the remainder be issued 
within 15 days. From February 17 through August 31, 2008, our analysis 
shows that the average duration between coupon request and issuance was 
over 16 days.[Footnote 6] In aggregate, 53 percent of all coupon 
requests had been issued within 10 days, and 39 percent of all coupon 
requests had been issued more than 15 days after being requested. From 
May 1 through August 31, 2008, the average processing time from coupon 
request to issuance was 9 days. 

Given the processing time required in issuing coupons, NTIA's 
preparedness to handle volatility in coupon demand is unclear. 
Fluctuation in coupon requests, including the potential for a spike in 
requests as the transition date approaches, could adversely affect 
consumers. When NTIA faced a deluge of coupon requests in the early 
days of the converter box subsidy program, it took weeks to bring down 
the deficit of coupons issued to coupons requested. According to NTIA, 
it expects a similar increase in requests around the transition date, 
and such an increase may cause a delay in issuing coupons. As a result, 
consumers might incur significant wait time before they receive their 
coupons and might lose television service during the time they are 
waiting for the coupons. While NTIA and its contractors have 
demonstrated the capacity to process and issue large numbers of coupon 
requests over short periods, they have yet to establish specific plans 
to manage a potential spike or a sustained increase in demand leading 
up to the transition. 

We analyzed data to compare areas of the country that comprise 
predominantly minority and elderly populations with the rest of the 
U.S. population and found some differences in the coupon request, 
redemption, and expiration rates for Hispanic, black, and senior 
households compared with the rest of the U.S. population. For example, 
zip codes with a high concentration of Latino or Hispanic households 
had noticeably higher request rates (28 percent) when compared with non-
Latino or non-Hispanic zip codes (12 percent). However, households in 
predominantly black and Latino or Hispanic zip codes were less likely, 
compared with households outside these areas, to redeem their coupons 
once they received them. As shown in table 1, the overall rate of 
redemption for the converter box subsidy program is 39 percent. 
Approximately 37 percent of coupons have been redeemed in predominantly 
Latino or Hispanic areas. In predominantly black areas, 32 percent of 
coupons have been redeemed. We found that in areas of the country with 
a high concentration of seniors, fewer coupons were requested (9 
percent) compared with areas of the country that did not have a high 
concentration of seniors (13 percent). Redemption rates for the senior 
population were lower than the redemption rates in the rest of the 
country. Regarding coupon expirations, we found that the areas 
comprising Latino or Hispanic households allowed 27 percent of their 
coupons to expire, while areas with predominantly senior populations 
allowed 43 percent of their coupons to expire. 

Table 1: Request, Redemption, and Expiration Rates of Converter Box 
Coupons through August 2008: 

U.S. population; 
Request rate: 12.5; 
Redemption rate: 39.0; 
Expiration rate: 30.5. 

Latino or Hispanic; 
Request rate: 27.5; 
Redemption rate: 36.6; 
Expiration rate: 26.8. 

Black; 
Request rate: 13.4; 
Redemption rate: 31.5; 
Expiration rate: 30.3. 

Seniors; 
Request rate: 8.7; 
Redemption rate: 34.0; 
Expiration rate: 43.2. 

Source: GAO analysis of NTIA data. 

[End of table] 

To determine participation in the converter box subsidy program in the 
45 areas of the country receiving targeted outreach by NTIA and FCC, we 
analyzed NTIA coupon data (including requests, redemptions, and 
expirations) in the 45 areas compared to the rest of the country not 
targeted by NTIA and FCC. We found participation levels were about the 
same in the targeted areas when compared to the rest of the country. 
For example, we found in the 45 targeted areas, 12.2 percent of 
households have requested coupons compared with 12.8 percent for the 
rest of the country not targeted by NTIA and FCC. According to NTIA, 
similarities in request, redemption, and expiration rates between the 
45 targeted areas and the rest of the country is viewed as a success. 

As the sellers of the converter boxes, retailers play a crucial role in 
the converter box subsidy program and are counted on to inform 
consumers about it. At the time of our review, seven national retailers 
were certified to participate in the subsidy program. Participating 
retailers are obligated to, among other things, train employees on the 
purpose and operation of the subsidy program. All of the retailers with 
whom we spoke told us they were training employees on the DTV 
transition and the subsidy program, although the retailers varied in 
which staff must complete training. 

As part of our work, we conducted a "mystery shopper" study by visiting 
132 randomly selected retail locations in 12 cities across the United 
States that were listed as participating in the converter box subsidy 
program. We did not alert retailers that we were visiting their stores 
or identify ourselves as government employees. During our visits, we 
engaged the retailers in conversation about the DTV transition and the 
subsidy program to determine whether the information they were 
providing to customers was accurate and whether individual stores had 
coupon-eligible converter boxes available. While not required to do so, 
some stores we visited had informational material available and others 
had signs describing the DTV transition and the subsidy program. We 
also determined whether the information that retailers were providing 
to customers was accurate and whether individual stores had coupon- 
eligible converter boxes available. At most retailers (118) we visited, 
a representative was able to correctly identify that the DTV transition 
would occur in February 2009. Additionally, nearly all (126) retailers 
identified a coupon-eligible converter box as an option available to 
consumers to continue watching television after the transition. Besides 
coupon eligible converter boxes, representatives identified other 
options to continue viewing television after the transition, including 
purchasing a digital television (67) or subscribing to cable or 
satellite service (77). However, in rare instances, we heard erroneous 
information from the retailers, including one representative who told 
us that an option for continuing to watch television after the 
transition was to obtain a "cable converter box" from a cable company 
and another representative who recommended buying an "HD tuner." Since 
participating retailers are obligated to train their employees on the 
purpose and operation of the subsidy program, we observed whether the 
representative was able to explain various aspects about the subsidy 
program. A vast majority of the representatives were able to explain 
how to receive or apply for a coupon and the value of the coupon. 

Although we could obtain information from the majority of the stores 
that we visited and that were listed as participating in the subsidy 
program, in a few instances, we were not able to ask questions and 
observe whether the information provided was accurate. In two 
instances, there was no retailer at the store location listed as a 
participating retailer on NTIA's Web site [hyperlink, 
https://www.dtv2009.gov/VendorSearch.aspx]. In another instance, the 
location listed was under construction and had not yet opened. In two 
additional instances, the locations listed were private residences--one 
was an in-home electronics store, and the other was a satellite 
television installer working from a house. We asked NTIA how it ensured 
the accuracy of the list of participating retailers on its Web site, 
and according to NTIA, ensuring the accuracy of the list is the 
responsibility of the retailers. NTIA said it provides a list of 
locations to each retailer prior to placing the list on the Web site, 
and retailers can update addresses or add new listings as warranted. 

Conclusions and Recommendation: 

NTIA estimates that it will see a large increase in the number of 
coupon requests in the first quarter of 2009 and our analysis confirms 
that, as the transition nears, a spike in coupon requests is likely. 
However, NTIA has not developed a plan for managing that potential 
spike or sustained increase in coupon demand. The time required for 
processing coupons has improved since consumers incurred significant 
wait times to receive their coupons at the beginning of the program, 
but until recently NTIA fell short of its requirement for processing 
coupons within 10 to 15 days. Given the relatively low participation 
rates to date and the amount of time it took to process the spike in 
coupon requests in the early days of the program, NTIA's ability to 
handle volatility in coupon demand without a plan is uncertain. 
Consequently, consumers face potential risks that they might not 
receive their coupons before the transition and might lose their 
television service. 

To help NTIA prepare for a potential increase in demand for converter 
box coupons and so that consumers are not left waiting a lengthy amount 
of time for requested coupons, the report we are releasing today 
recommends that the Secretary of Commerce direct the Administrator of 
the NTIA to develop a plan to manage volatility in coupon requests so 
that coupons will be processed and mailed within 10-15 days from the 
day the coupon applications are approved, per NTIA's stated 
requirement. 

In reviewing a draft of the report, the Department of Commerce (which 
contains NTIA) did not state whether it agreed or disagreed with our 
recommendation, but did say the Department shares our concern about an 
increase in coupon demand as the transition nears. Further, its letter 
stated it is committed to doing all that it can within its statutory 
authority and existing resources to ensure that all Americans are ready 
for the DTV transition. In its letter, FCC noted consumer outreach 
efforts it has taken related to the DTV transition. 

Mr. Chairman, this concludes my prepared statement. I would be happy to 
respond to any questions you or other Members of the Subcommittee may 
have at this time. 

GAO Contact and Staff Acknowledgments: 

For further information about this testimony, please contact Mark L. 
Goldstein at (202) 512-2834. Individuals making key contributions to 
this testimony included Colin Fallon, Simon Galed, Eric Hudson, Bert 
Japikse, Aaron Kaminsky, Sally Moino, Michael Pose, and Andrew 
Stavisky. 

[End of section] 

Footnotes: 

[1] GAO, Digital Television Transition: Implementation of the Converter 
Box Subsidy Program Is Under Way, but Preparedness to Manage an 
Increase in Subsidy Demand Is Unclear. [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-08-1040] (Washington, D.C.: 
September 16, 2008). 

[2] Eligible converter boxes range in price from $40 to over $90. 

[3] GAO, Digital Television Transition: Broadcasters' Transition 
Status, Low-Power Station Issues, and Information on Consumer Awareness 
of the DTV Transition, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-08-881T] (Washington, D.C.: June 10, 2008). 

[4] With the additional $510 million, total program funding is $1.5 
billion, which includes up to $1.34 billion in coupon funds and up to 
$160 million in administrative funds. 

[5] Our redemption rate was calculated by dividing the number of 
redeemed coupons by the total number of issued coupons as of August 31, 
2008. The total number of issued coupons includes coupons which had 
been redeemed, had expired, and had not yet expired as of that date. 

[6] For the purposes of our analysis, we assumed that all coupons were 
issued in the order they were received. According to NTIA, coupon 
issuance was to begin 1 year from the transition. Therefore the 
processing time between coupon requests and issuance was calculated 
beginning on February 17, 2008. 

[End of section] 

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