News

Dems Fret Over Coupon Funding

7/18/2008 8:00 PM Eastern

Two key House Democrats are concerned that the Bush administration has mismanaged administrative funds for the $1.5 billion program designed to subsidize consumer acquisition of digital-to-analog converter boxes.

Concern about the program came in a July 10 letter signed by House Energy and Commerce Committee chairman John Dingell (D-Mich.) and Telecommunications and the Internet Subcommittee chairman Edward Markey (D-Mass.).

The program includes $160 million for administrative needs, which covers IBM’s $120 million contract to run the program. The law set aside $1.34 billion to fund 33.5 million converter-box coupons worth $40 each. Every household is entitled to apply for two coupons.

The converter boxes are designed to allow consumers to view over-the-air TV signals on their old analog sets after local stations convert to all-digital broadcasting on Feb., 17, 2009. Estimates of broadcast-only homes range between 11 million and 19 million. About 10.4 million households have applied for coupons.

Dingell and Markey claimed that the program as crafted by the Commerce Department’s National Telecommunications and Information Administration (NTIA) will use up the $160 million before consumers have utilized all 33.5 million coupons.

In the letter, Dingell and Markey told NTIA director Meredith Attwell Baker that they oppose reliance on coupon money to make up the deficit in administrative funding. “We do not support reallocating funds that Congress set aside by statute to make 33.5 million [coupons] available to American households to cover these additional administrative expenses,” the lawmakers said.

NTIA’s began accepting applications on Jan. 1 and began mailing coupons on Feb. 23. By law, coupons expire within 90 days. About 18.3 million coupons have been mailed, 5.4 million have been redeemed, and 2.9 million have expired. The fate of millions more will be known as they expire in the weeks and months ahead.

Based on NTIA data, the coupon program won’t need additional funding by Congress if current trends continue.

Through the first half of 2008, only 44% of coupons were redeemed. The majority of the coupons expired or were lost or stolen.

For example, in the week ended April 5, NTIA issued 1.05 million coupons with a July 4 expiration date. About 491,000 were used to purchase converter boxes while about 568,000 went unused.

If that pattern holds, NTIA can expect to spend about $576 million to subsidize about 14.4 million converter boxes.

Still, Dingell and Markey are concerned that, without additional congressional funding, NTIA will need to dip into program money to cover mailing costs to send out coupons that came back to the program unused..

NTIA director Baker said in a statement that the IBM contract included funding to redistribute expired coupons.

“The contract with IBM does address recycled coupons. We anticipated coupons would be recycled and prepared for it. To meet the high public demand for coupons,” she said, “NTIA is exercising the clause under which we will distribute additional coupons beyond 33.5 million coupons.”

Dingell and Markey’s letters stressed that they do not want administrative costs to rob funds intended for consumers and that, if the program needs additional funds to mail out expired coupons, the administration should seek those funds now. The coupon program ends March 31, 2009.

“We are eager to learn how NTIA plans to remedy this error in planning contracting,” the House Democrats said. “As NTIA and the administration develop a plan to do so, we reiterate our firm view that no consumer should be left unprepared for the DTV transition.”

September