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Funds for Digital TV Switch Coupon Program May Run Short

In the clearest sign yet that the switch to digital television signals won't go off seamlessly, the Department of Commerce said the coupon program that funds signal converter boxes for consumers needs more money.

At the current pace of redemption, the $1.5 billion the government set aside to fund $40 discount coupons may run $250 million to $330 million short, Acting Assistant Secretary of Commerce Meredith Attwell Baker said in a letter last week to a congressional committee with oversight of the transition.

U.S. Rep. Ed Markey, D-Mass., who chairs the House Energy & Commerce Committee's telecom committee, had sought from Ms. Baker and Federal Communications Commission Chairman Kevin Martin an appraisal of how preparation for the Feb. 17 switch is going.

Rep. Markey said it is apparent Congress will have to provide additional money for the changeover.

“The challenge posed by the DTV switch cannot be underestimated,” he said.

While both Ms. Baker and Mr. Martin said the switch overall is going smoothly, the coupon program came to the fore as a problem area. Different markets around the country have experimented with early switchovers to digital signals, bringing to light some of the issues that may mushroom when the whole country switches in February.

Given the novelty of the process, demand for coupons is difficult to predict, said Ms. Baker, who also serves as head of the National Telecommunications and Information Administration, which runs the coupon program.

“In this novel program and under changing circumstances, it is not possible to predict consumer demand for coupons with a high degree of certainty,” she said last week in the letter to Rep. Markey.

Without $250 million more, the agency could have to wait to issue new coupons until old coupons expire unredeemed, she said.

At the current rate of requests, a total of 60 million coupons could be sought by consumers by March 31, according to Ms. Baker. The $1.5 billion currently alloted would allow distribution of a maximum of only 56.5 million coupons. The coupons expire after 90 days.

Mr. Martin, in his response to Rep. Markey, also expressed concern that the number of coupons available wouldn’t be sufficient.

“I remain concerned that total funding for coupon redemptions may prove to be insufficient,” he said. He said that between Dec. 10 and Dec. 16, the average number of coupon requests per day was 227,714, compared with 118,000 for the year-to-date average.

“With increased outreach and soft tests as we approach Feb. 17, the number of daily coupon requests will continue to grow,” Mr. Martin warned. “The redemption rate is also increasing.”

Ms. Baker said that based on examination of “especially vulnerable populations that disproportionately rely on over-the-air reception of TV,” the coupon program has successfully distributed nearly 43 million coupons to more than 22 million households. Approximately 77% of all over-the-air households have requested a coupon, she said..

“NTIA views this as highly successful,” she said.

She said the availability of 80 different converter boxes and the participation of more than 300 partners in the converter box program are other signs of success.

“NTIA believes the Digital Television Transition and Public Safety Act [of 2005] as a whole has been a success,” she wrote.

Mr. Martin said the FCC intends “to take whatever actions are necessary to minimize the potential burden the digital transition could impose on consumers and maximize their ability to benefit from it.”

Rep. Markey highlighted some of the potential problems coming with the DTV switch.

“The expected surge in consumer demand for converter box coupons is occurring, and the fact that NTIA now projects it will have to delay or possibly deny the issuance of converter box coupons to consumers without additional funding is of great concern," Rep. Markey wrote. "Moreover, lingering consumer confusion over aspects of the transition and an apparent lack of converter box availability and call center capability pose additional threats to the success of the transition."

Those problems require dedication of more resources to the switch, he said.

"It is becoming increasingly clear that at minimum Congress may need to quickly pass additional funding for the converter box program in early January to prevent any delay in coupon availability or issuance,” Rep. Markey said.

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