DTV coupon program could run out of cash

by Bob Williams, Hear Us Now

For months now the Commerce Department office in charge of the government’s digital television conversion box coupon program has been insisting it has enough money to make sure everyone who wants to get two of the $40 coupons will be able to do so.

But now the head of the Federal Communications Commission says he is seriously worried the coupon program might run out of money as millions of consumers rush to prepare for the February 2009 national transition from analog to digital broadcasting. That could mean millions of consumers who depend on free, over-the-air television won't be able to get the government coupons.

That clashes sharply with recent testimony before the House Energy and Commerce Committee by Meredith Atwell Baker, director of the National Telecommunications and Information Administration, the arm of the Commerce Department charged with running the $1.5 billion DTV converter box program.

Rather than running out of money, Baker told lawmakers she thought the coupon program might be in a position to return as much as $300 million to the U.S. Treasury.

FCC Chairman Kevin Martin says he has serious doubts about Baker’s fiscal assurances, however.

"While I do not have access to NTIA's projections and detailed analyses, I am concerned that the total funding required to satisfy demand may prove to be insufficient," Martin wrote in a letter sent to House Energy and Commerce Chairman John Dingell this week.

At the heart of Martin’s doubts are findings from the early switchover to digital that took place in the Wilmington, NC television market last month.

For example, Martin says the number of households relying exclusively over-the-air broadcasting which requested coupons in Wilmington was 39 percent higher than NTIA’s estimates. Extrapolated nationally, that would mean there are about 19 million households that rely exclusively on over-the-air broadcasting, about 5 million more than the 14 million estimate used by NTIA.

Martin also says NTIA has likely underestimated redemption rates for the coupons because its calculations are based on the first few weeks of the program earlier this year. As the February national switchover nears, Martin says the redemption rates are likely to jump sharply.

Martin also notes that NTIA has recently announced a new consumer education campaign called “apply, buy and try” which encourages consumers to redeem their coupons sooner rather than later in order to test their converter boxes. “If this program proves to be successful, we could see a continued acceleration in redemption rates,” Martin warned in his letter.

In addition, Martin warns that NTIA’s estimates do not account for recent changes in the program to allow people living in nursing homes and those using post office boxes to apply for and receive coupons.

“Given these factors, it is difficult to predict whether the coupon program is adequately funded,” wrote Martin. ”Accordingly, I am becoming increasingly concerned about the funding of this program.”

In other words, Martin is saying the estimates NTIA is using to make its funding calculations are not only wrong, but likely very wrong. And NTIA is using those lowball estimates and calculations to assure Congress the coupon program is not only adequately funded, but will likely have a surplus of more than $300 million when all is said and done.

No matter how you calculate it, it’s long past time for NTIA to get real about the numbers underpinning its optimistic assurances to Congress about funding for the converter box coupon program.

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