NTIA Fashioning $1.5B Box Program

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The U.S. Commerce Department is several weeks away from soliciting public comment on a $1.5 billion subsidy program to help consumers purchase converter boxes to run analog-television sets after the cessation of analog-TV broadcasting in early 2009.

Congress has ordered Commerce’s National Telecommunications and Information Administration to supervise the program, but lawmakers gave NTIA director John Kneuer just a few instructions on how to allocate the money and how to limit ways consumer may use it.

As a result, the NTIA is planning to issue “by late July” a notice of inquiry that would seek public input on program details, NTIA spokesman Ranjit De Silva said Monday. The Office of Management and Budget has the document under review, he added.

Under old law, TV stations were allowed to keep their analog licenses until 85% of households in a market had digital-reception equipment. But Congress decided to scrap the penetration test and impose a firm deadline in order to free up TV spectrum for broadband-wireless companies and public-safety organizations.

Thus, all 1,749 full-power TV stations in the country are required to cease analog broadcasting Feb. 17, 2009, and rely solely on digital transmission. Some stations are eager for the deadline because they would no longer need to bear the cost of beaming analog and digital signals.

Along with the firm deadline, Congress also established a converter-subsidy program in an effort to mitigate the effects of the digital transition on millions of consumers who, according to the National Association of Broadcasters, possess 73 million analog-TV sets not connected to cable or satellite.

The NAB claimed that 20.5 million households rely exclusively on free, over-the-air broadcasting and own 45 million TV sets that will go dark in 2009 without digital-to-analog converters. Cable and satellite homes, the trade group added, have another 28 million analog-TV sets not connected to either pay TV service.

In the new law, Congress provided $990 million for the converter-box program, although the NTIA may seek up to $1.5 billion if the lesser amount is deemed insufficient. Funding is to come from the auction of 60 megahertz of analog-TV spectrum that the Federal Communications Commission gets back from TV stations without charge. Congress is expecting $10 billion from the sale.

With regard to subsidy eligibility, the law is broad, stating that “a household may obtain” two $40 coupons for the purchase of converter boxes, except that two coupons may not be combined to buy just one box.”

The NTIA is to deliver the coupons via the U.S. Postal Service. Coupons -- which must be obtained from Jan. 1, 2008-March 31, 2009 -- expire three months after issuance.

The law is silent on whether consumers must redeem coupons at major electronics stores, such as Best Buy Co. Inc. or Circuit City Stores Inc., or whether they can complete transactions on craigslist Inc. (www.craigslist.org), eBay Inc. (www.ebay.com) or some other popular Internet site.

A coupon program without eligibility criteria could threaten to exhaust the $1.5 billion fund and force millions of low-income consumers either to fund 100% of their converter-box costs or shop for TV sets equipped with over-the-air digital tuners.

According to the U.S. Census Bureau, the United States has 105 million occupied housing units. If each one sought to redeem two $40 coupons, the box program would cost $8.4 billion. The program would cost $1.6 billion if the NTIA were to restrict eligibility to just the 20.5 million households that are broadcast-only. The NTIA could cut the cost even more if only broadcast-only homes that met an income test were eligible.

Congress probably assumed that cable subscribers could connect their analog TVs to digital boxes to maintain access to local TV stations. Nor would cable subscribers need any additional equipment if cable operators that transmit digital-TV signals are also allowed to offer those same signals in analog from the headend. Meanwhile, satellite customers could rely on additional digital set-tops to utilize their analog TVs.

The NTIA has not decided whether to exclude pay TV homes from the coupon program. “We haven’t come to that stage yet,” De Silva said.

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