Before the\
National Telecommunications and Information Administration

Washington, D.C. 20230

In the Matter of )

)

Implementation and Administration of a Coupon ) Docket No.
060512129-6129-01

Program for Digital-to-Analog Converter )

Boxes ) RIN 0660-AA16

)

Comments Of

The Consumer Electronics Retailers Coalition

Marc A. Pearl

Executive Director

Consumer Electronics Retailers Coalition

# 919 18^th^ Street, NW, Suite 925 

Washington, DC 20006

202 263-2585

*Of Counsel:*

Robert S. Schwartz

Mitchell Stoltz\*

Constantine Cannon, P.C.

1627 Eye Street, N.W.

Washington, D.C. 20006

202 204-3508

September 25, 2006

\*Bar admission pending.

Before the\
National Telecommunications and Information Administration

Washington, D.C. 20554

In the Matter of )

)

Implementation and Administration of a Coupon ) Docket No.
060512129-6129-01

Program for Digital-to-Analog Converter )

Boxes ) RIN 0660-AA16

)

Comments Of

The Consumer Electronics Retailers Coalition

The Consumer Electronics Retailers Coalition ("CERC") respectfully
submits these Comments in response to the National Telecommunications
and Information Administration ("NTIA") Notice of Proposed Rulemaking
and Request for Comment in the above referenced matter.[^1] CERC members
include specialist retailers Best Buy Co., Inc., Circuit City Stores,
Inc., and RadioShack Corporation; general retailers Target Corporation
and Wal-Mart Stores, Inc.; online retailer Amazon.com; and the North
American Retailer Dealers Association (NARDA), the National Retail
Federation (NRF), and the Retail Industry Leaders Association (RILA).
NTIA's proceeding is conducted pursuant to the assignment of certain
responsibilities to NTIA in the Digital Television Transition and Public
Safety Act of 2005, enacted as Title III of the Deficit Reduction Act of
2005 ("DRA").[^2]

I.  Introduction, summary, AND OVERVIEW.

NTIA's rulemaking, as required and circumscribed by the terms of the
DRA, relies exclusively on the efforts of consumer electronics and
general retailers, in storefronts and on-line, to fulfill the objectives
of a program for which up to \$1.5 billion has been set aside. Yet this
program, as outlined by the Congress and proposed by NTIA, poses very
daunting challenges for any participating retailer and its vendors:

-   The level of demand for the subsidized converter box product
    ("Converter") as described in the NPRM has been controversial and
    remains uncertain.

-   Even with the best public education efforts, the actual level of
    demand may emerge suddenly and late in the program's life. This
    danger is aggravated by the statutory requirement that any coupon
    must be used within 90 days of issuance. If, as is often the case
    with consumer electronics products, the subsidized prices of initial
    Converters are perceived by the press and consumers as likely to
    come down later, consumers may be reluctant to order their allotted
    coupons sufficiently early in the program \-- fearing that their
    coupons would expire while prices remain high.

-   Demand for Converters seems likely to vanish *even more suddenly*
    than it emerges, when the last subsidy coupon expires in mid-2009.

-   Any program for handling coupons that will be both efficient and
    free of fraud seems likely to require participating retailers to
    make expenditures, including sunk costs, applying only to a single
    product, that can be recovered only during the extraordinarily short
    period between the emergence of the demand for the subsidized
    Converters, and the drop back toward zero, perhaps only months
    later.

-   These circumstances are daunting, as well, for Converter vendors to
    retailers, and for their own component suppliers, who must attempt
    to predict the breadth and timing of this demand well in advance of
    manufacturing and retail delivery dates.

-   There is no analog or direct precedent for this program in any past
    or present commercial retail practice of which CERC members are
    aware.

-   CERC also requests an opportunity for additional input once there is
    public information as to the tools potentially available to the NTIA
    from vendors, the specific costs and requirements for any such
    tools, and how and by whom these costs might be absorbed. Without
    specific awareness of the available tools, no set of comments,
    including ours, can be considered authoritative.

CERC recognizes that the Congress faced difficult choices in agreeing on
and designing this program, and that the NTIA now faces very difficult
questions, to which there are no perfect answers, in administering this
program in a way that is both efficient and fair to all. CERC's comments
and proposals are not intended to be critical of the NTIA or its NPRM,
or of the Congress.[^3] Rather, we seek to share perceptions and
concerns about the challenges that are likely to face those who do
choose to participate. We recommend solutions with an eye toward
attracting the broadest possible spectrum of consumer electronics retail
participants.[^4]

CERC's principal recommendations, as explained and amplified in its
answers to the specific questions posed in the NPRM, are:

**(1)** **[The subsidy coupons should be Electronic Coupon Cards
("ECCs") for one-time use per Converter purchase, that include features
common to debit cards, gift cards, and / or credit cards]{.underline}.**
A paper coupon cannot perform the matching and database management tasks
necessary to a viable program, cannot support both storefront and
on-line selling, cannot adequately resist fraud, cannot pay the retailer
promptly, and cannot avoid severe paper storage, accounting, and
verification challenges. The Electronic Coupon Cards should contain a
unique serial number, in both machine-readable and human-readable form,
so as to enable both in-store and on-line transactions.

**(2)** **[Codes for Converter models eligible for subsidy should be
matched electronically to data on the ECCs]{.underline}.** In no other
way can mistakes, confusion, and consumer unhappiness be minimized.
Retailers should be encouraged to indicate to consumers which Converters
are eligible for the subsidy, but should not be legally sanctioned for
mistakes or inaccurate information on the part of their sales associates
or Converter vendors.

**(3) [The 90-day expiration of ECCs should occur electronically and
automatically, and the expiration date should be evident on the face of
the ECC as well]{.underline}**. Any mismatch between the facial
expiration date and its electronic expiration would cause controversy
and confusion.

**(4) [Retailers (and their vendors) should not be subject to sanction
for an inability to predict or meet demand]{.underline}.** Few retailers
or vendors have experience with products the demand for which can be
expected to peak in the millions and then drop toward zero, all within a
period as short as 90 days. In no such case would commercial vendors be
legally sanctioned for failing to meet demand. At the end of the subsidy
period, any excess inventory may be unsellable at any price, either by
the retailer or any of its vendors. Under such circumstances, the goal
of "honor\[ing\] all valid coupons" cannot reasonably, and should not
be, one to which any legal sanction applies if it implies providing
Converters that are not reasonably available.

**(5) [All legal obligations imposed on participating retailers should
be clearly spelled out in advance]{.underline}.** The NPRM's formulation
as to the potential legal liability that might be incurred by those
retailers who come forward to participate in the subsidy program is too
broad and vague to allow retailers adequately to assess the legal risk
that participation would pose.

**(6) [The eligibility of any person to obtain or use a coupon should
not be left to the retailer to determine, assess, or
ascertain]{.underline}.** Retailers cannot feasibly make judgments on
consumer qualification or eligibility, nor should they be asked to do
so.

**(7) [Different categories of retailers should be treated equitably
with respect to opportunities to participate and the costs of doing
so]{.underline}.** There should be no inherent advantages, apart from
normal commercial considerations, based on size, or storefront vs.
on-line status; or additional charges or fees based on size or status.

**(8) [Non-confidential information in proposals submitted by potential
vendors who have responded to the "RFI" should be made public by NTIA as
expeditiously as is possible and further expeditious public input should
then be requested]{.underline}.** No potential retail participant can
make authoritative comments on this program without knowing what systems
or technologies might be used to implement the program. As this
undertaking is without commercial precedent, CERC and others need to be
aware of the vendor tools available to NTIA, and the potential costs to
qualified retail participants or the public of deploying such tools,
before these or any other comments or proposals should be considered
authoritative or final.

**(9)** **[Conversely, NTIA's final regulations and systems need to be
in place on a more ambitious schedule than the one predicted to RFI
participants, so necessary retail hardware, software, and systems can be
installed and tested *before* the holiday shopping season begins in
September, 2007]{.underline}.** Once into the holiday shopping season,
it would be very difficult for retailers to modify their point of sale
and other hardware and software systems so as to be ready by January 1,
2008.

II. interest of cerc and its members.

CERC includes the most prominent specialty merchants of consumer
electronics products, the most prominent general merchants that sell
consumer electronics, and one of the most prominent on-line merchants.
CERC members have expertise in accepting virtually all forms of non-cash
payment for goods, including debit cards, credit cards, stored value
cards (including but not limited to their own gift cards), paper
coupons, checks, and food stamps. They have experience in dealing with
the vendors who design and maintain the support systems for these means
of payment, and with the associated databases, bookkeeping, and fraud
prevention tools. On the product side, they have experience in ordering,
managing, and merchandizing their product inventories.

Despite the comprehensive commercial experience of CERC's members with
every current means of merchandizing and selling consumer electronics,
neither they nor anyone else can claim any experience, on either the
product or fulfillment sides, with the specific product inventory and
Point of Sale requirements that appear to be posed by a program such as
the one outlined by the Congress and now being planned by the NTIA. Nor
do CERC members or any other retailers have access at this writing to
the suite of vendor proposals that were due to be received by the NTIA
as of September 15.[^5] Accordingly, while CERC attempts to make its
comments as specifically advisory as possible, CERC also must request an
opportunity for additional input once there is public information as to
the tools potentially available to the NTIA from vendors, the specific
costs and requirements for any such tools, and how and by whom these
costs might be absorbed.

CERC assumes that the NTIA will adopt retailer qualification provisions
capable of being met not only by CERC's corporate members, but also by
large numbers of other specialist and general retailers that form the
constituency of CERC's association members. The number and nature of
those who step forward to participate in NTIA's Converter subsidy
program is likely to depend, as in the case of any business, on the
potential costs and benefits of so doing. Therefore, on behalf of all of
its members, CERC urges the NTIA to keep this calculus in mind. We urge
NTIA not to settle on a program that poses long-term fixed costs and
potential legal expense, for a single product, to be weighed against
short term and questionable benefits. We do not believe such an approach
would serve either public policy or the consuming public.

In these Comments, CERC hopes to apply its members' experience and
expertise so as to assist NTIA in formulating a program with long-term
public benefits and only short-term costs to those who participate. To
achieve this result, we advise the NTIA to make maximum use of the
electronic commercial channels and techniques that today are open to
virtually all retailers who stock and sell consumer electronics products
through storefronts or on-line. In addition to maximizing efficiency
(hence, we would hope, participation), an approach that integrates these
tools will also serve as a reasonable and non-discriminatory
qualification metric for establishing the qualifications to participate
of those merchants who are interested.

III. Comments on Specific prOvisions.

CERC's recommendations for the specific integration of tools and
techniques are spelled out in its answers to the questions posed in the
NPRM.

A.  Eligible U.S. Households.

**Consumer Eligibility.** NTIA proposes that consumer eligibility to
receive subsidy coupons be constrained to only those consumers who
presently rely exclusively, in their entire households, on over-the-air
television signals received through an antenna. CERC is opposed to such
an interpretation as inconsistent with the plain terms of the DRA. Even
though a metric such as NTIA proposes might turn out to be an
appropriate measure of potential demand,[^6] CERC cannot find anything
in the DRA or its legislative history that would support or justify
NTIA's imposition of such a constraint on the availability of coupons or
the participation of citizens. CERC is concerned that, if such a
constraint were to be imposed by NTIA as a regulatory measure, legal
challenges could emerge creating an aura of uncertainty over the entire
program, which would not be conducive to market planning by any
participants. Accordingly, CERC opposes any such interpretation of the
DRA by the NTIA, and similarly would oppose any further innovation, not
agreed to or instructed by the Congress, such as means testing or
on-the-fly adjustment of eligibility requirements.

In addition to appearing to CERC to be contrary to the DRA, the
imposition of eligibility factors would seem impractical and inherently
unfair. Would a member of a household become ineligible to subscribe to
a cable or satellite service the day after another member of the
household requested a coupon? Would citizens requesting coupons have to
pledge not to decide to subscribe to an MVPD service, and if so, for how
long? Would MVPD services be required to assure themselves that new
subscribers have not requested coupons?

Leaving such issues to the marketplace, by letting those citizens who
believe that they need a Converter apply for a coupon to get one (unless
their statutory two-coupon eligibility has been fulfilled) seems a
vastly superior approach.[^7] Similarly, coupons should not be tied on
their face or electronically to personal or household identity.[^8]
Relatives and friends, for example, should be able to help the elderly
or infirm, or people with disabilities, to obtain Converters without
having to pretend they reside in the same household. The objective
should be to avoid adding complication, bureaucracy, confusion, and
expense to the process.

**NTIA responsibility.** Whatever NTIA decides with respect to consumer
eligibility:

-   NTIA's decision needs to be clear;

-   NTIA needs to assume sole responsibility for determining who may
    receive and use coupons; and

-   Retailers or other third parties should not be required to determine
    or assess the eligibility of any person who presents a valid coupon
    for purchase of a covered Converter.

In this area as well as others, unless the coupon can be processed by
solely electronic means, the program will be doomed to failure. Asking
sales associates with other responsibilities to quiz consumers over
their eligibility to possess and use coupons is a recipe for confusion,
controversy, and ultimate failure.

A.  Coupon Value and Use Restrictions.

CERC agrees with NTIA's perception that the tracking and validation of
coupons requires their serialization. CERC also agrees that, consistent
with the DRA and its objectives, coupons should not be able to be
combined for the purchase of Converters, and should not be refundable
for cash or exchangeable for a product other than a Converter. The
mechanics of the acceptance and use of coupons, and of dealing with
consumers equitably and in line with their expectations, is vital to the
program's credibility and success, and to the good will of those who
choose to participate. Therefore, as CERC has noted, it is vital that
potential participants have an opportunity to discuss the particular
"toolkits" potentially available to NTIA.

**Electronic Coupon Cards.** Most fundamentally, CERC believes that a
viable coupon program needs to be executed via coupons with the
following basic attributes:

-   Based on currently available information, CERC recommends that the
    "coupon" should be an electronic card via which value is stored (an
    Electronic Coupon Card, or "ECC"), the \$40 per value per
    transaction of which is both entirely conveyed and entirely
    exhausted upon use.

-   The \$40 coupon value (or, if requested and feasible, the value for
    two separate \$40 coupon transactions) should be stored on the ECC.

-   The ECC should bear a "use by" date on its surface, and should be
    coded to expire after the time indicated on its surface, at which
    time its value reduces to zero, so that an expired card will not be
    successfully submitted for verification.

-   The ECC should carry a unique serialized number that can be
    transmitted to a central database immediately upon submission for
    on-line verification, so that any subsequent transaction involving
    the same number will not be verified by the database. The number
    should be both encoded in a magnetic strip *and* printed in
    human-readable form on the card, to facilitate on-line transactions
    in which the card cannot be "swiped" by a retail merchant.

-   When the ECC is processed by a storefront or an on-line retailer,
    the "SKU" and model number in the retailer's own system should be
    matched electronically to the list of certified model numbers and
    SKUs as maintained in the central database, to ensure that the ECC
    is not applied to the purchase of an ineligible product.

-   As it has been assumed by the Congress and otherwise that the retail
    price of the Converters is likely to exceed the value of the ECC,
    [^9] there will also need to be some means to identify
    electronically, to the POS systems maintained by an on-line retailer
    as well as a storefront retailer, (1) that the payment conveyed is
    from an ECC, (2) that such payment is not tendered as the entire
    payment for the Converter, and (3) that a supplemental payment will
    be made by other means. Existing commercial systems now supported by
    commonly used payment regimes and software are not configured to
    convey such information and cannot be expected to do so unless new
    hardware and /or software applications are added, possibly at
    considerable expense. Again, it is difficult to assess system needs
    and costs without knowing who the potential service providers are
    and the particulars of their systems.

-   While this particular program poses unique challenges, the essential
    tools are likely to be found as "off the shelf" items from some
    vendors. CERC believes that the program will have the best chance of
    success if NTIA chooses systems that are most closely related to
    those in use in existing consumer electronics channels of commerce,
    and vendors that have specific experience in working with retailers
    on and over such channels.

**Novel nature of enterprise.** CERC members, who include the nation's
most prominent general and specialist retailers, have sufficient
experience with ECCs, their uses, and their vendors, to know that while
detailed questions with respect to cost and implementation need to be
answered, these basic requirements are both feasible and essential. CERC
members do not have experience with any paper-based system with such
attributes, or that could meet the goals identified in the NPRM.

The appeal of a paper coupon is superficial at best, and its drawbacks
manifold. Even if a storefront retailer were to confiscate a simple
paper coupon upon use, there is no way to know -- without the same
extensive electronic database system required by use of an ECC \-- that
it has not already been presented to and accepted by an on-line
retailer. Moreover, such coupons are likely to be subject to easy
physical duplication. There is also no feasible way to store value on
such a coupon *and* have that value expire upon use rather than upon a
printed date. Accordingly, it seems likely that a "paper" regime would
involve extensive storage, warehousing, and auditing of potentially
millions of pieces of paper, scattered over thousands of locations,
before a retailer can reliably expect to be reimbursed for Converters it
has already bought from vendors. This makes a sale via this program both
more costly and more risky than a sale in the open market.

**Use of existing electronic tools.** By contrast, an ECC may be
comparable in initial expense[^10] to a serialized paper coupon that has
any protection against fraud, but the ECC has several advantages. ECCs
are better tied into the relevant retail tender acceptance systems than
are paper coupons. Although both an ECC and a serialized paper coupon
could be verified and exhausted of value (when a retailer "swipes" the
card in a terminal or when the consumer in an on-line sale or a retail
sales associate punches in the card identification number -- a
time-consuming and error-prone process), CERC hopes that a transaction
involving an ECC can automatically match the "coupon" to the product
identifiers in the central database, as well as being more durable,
harder to duplicate physically, and more efficiently processed at the
register.

**Burden on participating retailers.** Whether an ECC system, or any
system, will be affordable for a participating retailer to implement,
given the projected short lifetime for this program, will depend on (1)
the tools available to NTIA, and (2) whether NTIA will, out of the funds
allocated for the program or for its administration, pay its vendor for
the provision of the necessary software or system to participating
retailers, rather than expecting the retailers to make an investment in
one-time, special purpose software and systems usable for only one of
their thousands or tens of thousands of products.

**Equitable treatment of consumers.** For understandable reasons related
to potential abuse and system simplicity, NTIA posits that, once
purchased, Converters should be exchangeable via even exchange only for
the identical product. While such a limitation might be necessary in a
paper coupon environment, CERC believes that some additional flexibility
may (depending on the specifics of vendor proposals) be possible, so as
to avoid disappointing consumers in a number of circumstances.
Therefore, consistent with its favored ECC approach, CERC suggests that
the following more customer-friendly rules may prove feasible:

-   It should be possible for a purchased Converter model to be
    exchanged for another Converter model.[^11]

-   In the event that the retailer that originally sold the Converter
    does not carry the model now sought by the consumer, a refund may be
    feasible by (1) refunding to the consumer any amount he or she paid
    in excess of the ECC, and (2) "re-loading" the \$40 value onto the
    ECC and updating the central database so that this amount is again
    available for one-time use via the same ECC.[^12]

-   Whatever NTIA finally decides to be the rule governing customer
    returns and exchanges, the rules should be spelled out clearly and
    succinctly to consumers on the ECC "card carrier" or other materials
    provided with the card and, preferably, ***on the card itself***.
    Avoiding consumer frustration and disappointment is likely to be a
    key consideration for any retailer considering participating in the
    program.

    A.  Application Process.

CERC believes that the approach taken in the NPRM adds more requirements
than are called for by the DRA. This level of constraint, even if
allowable, is not advisable.

**Consumer certifications.** CERC believes that requiring a
certification by a consumer that a household receives only over-the-air
television signals and no-one else in the household will apply is
neither consistent with the DRA nor practical or fair. Nor should there
be any ancillary requirement, such as that there must be only one (or
indeed, any) NTSC-only television in the house.

**Other procedures.** CERC has no disagreement with the other
procedures, involving electronic requests and fulfillment by U.S. mail,
as laid out in the NPRM. CERC notes, however, that the potential for
fraud and abuse in obtaining coupons will be greatly minimized in the
absence of artificial filters such as a certification of non-MVPD
subscription. The one control that *is* mandated by the DRA \-- the two
per household limit -- can be complied with by the simple electronic
means of not allowing the system to allocate more than two coupons to
any specific household address. Any additional measure, such as
requiring a consumer certification, is likely to be puzzling to the
consumer and therefore commonly made falsely via mistake or
misunderstanding. Hence it will add little or nothing, except possibly
confusion, to the administration of the program.

B.  Coupon Expiration.

As is indicated above, CERC agrees that an "invalid after" date must be
printed on the surface of each ECC, and believes that this date must
*also* be self-executing electronically. While CERC believes that the
90-day limit on coupon use is counter-productive, this limit is mandated
by the DRA so must be implemented. If it proves too difficult to date
and mail these ECCs daily, NTIA or its vendor might issue them in weekly
batches all bearing the same physical and electronic "invalid after"
date. CERC believes that congressional intent would best be served by
factoring a reasonable mail delivery period into the calculation of the
"invalid after" date.

C.  Digital-to-Analog Converter.

    Product features. NTIA, consistent with the terms of the DRA,
    defines a Converter as a device that should be able to receive,
    render and display usable (standard definition) pictures from HDTV
    as well as standard definition digital sources, accompanied by high
    quality sound. NTIA cites these as essential functions:

> \(i\) appropriately processes all ATSC radio frequency (RF) signals
> provided to the antenna-only input and then provides output signals in
> standard definition video for display on an NTSC television
> receiver/monitor;
>
> \(ii\) delivers NTSC composite video and stereo audio to drive NTSC
> monitors;
>
> \(iii\) delivers Channel 3 or 4 switchable (NTSC) RF output for
> television receivers;
>
> \(iv\) complies with FCC requirements for Closed Captioned, Emergency
> Alert System (EAS) and the required parental controls;
>
> \(v\) is operable by and includes a remote control; and
>
> \(vi\) tunes to all television channels 2-69.

NTIA would specify that the Converter have only one input, an "F"
connector for an external antenna. CERC suggests that, additionally, an
option for a SMART antenna be allowed, so as to better allow consumers
to adjust for propagation characteristics and set capabilities. This may
minimize consumer disappointment and post-sale product exchanges.

NTIA should also consider approving Converters that have, as optional
features, program guides and the capability to process PSIP data. Such
features may be of assistance to consumers that are inexperienced in
finding and tuning digital channels, and might efficiently be included
because the components and software are commonly included in the
manufacture of televisions.

As to outputs, while analog TVs do by definition all receive channels 3
& 4, most also have composite video inputs. Therefore, it might save
expense for the "RF modulator" component to be an optional rather than
necessary feature on certified Converters.

Retailers should *not* have any legal requirement to inform consumers
which Converters are eligible via displays or advertising. Such a
requirement would place retailers in an impossible crossfire in the
event that a manufacturer's assertion is not matched by an actual
certification, or in the event of a vendor's failure to inform a
retailer about a Converter that *has* been certified.[^13] It is far
better and less confusing to have a *single*, hence unambiguous,
indicator in this respect: the electronic verification of the
transaction at retail.

**Product certification.** With respect to the conformance certification
of Converters, CERC expects that a self-verification program that
includes conformity assessment by the Federal Communications Commission
will be recommended by other Commenters, including the Consumer
Electronics Association (CEA), and it joins in this recommendation.

**Energy consumption.** CERC believes that a single and beneficial
national standard with respect to Converter energy consumption is
essential, and that this standard should prevail over any state or local
regulation. In this respect CERC also endorses the position taken by
CEA.

D.  Retailer Certification.

**Initial qualification.** CERC agrees that retailer participation must
be voluntary. CERC agrees that there should be a certification process
for participating retailers and that this should entail representations
by such retailers that they have "established production and
distribution channels and who have demonstrated that they can redeem
coupons expeditiously and efficiently." CERC believes that any such
demonstration, however, to be meaningful and predictive, must be in the
specific context of a program that relies on the use of ECCs as is
outlined herein. Additional reference to ordinary metrics as to staff,
training, capacity to carry inventory and to order and take delivery of
Converters through ordinary commercial channels is also important.

**Compensation for costs of participation.** CERC disagrees with NTIA's
proposal that retailers "not be compensated by NTIA" for the costs
entailed in participating in this program. As CERC noted at the outset,
the Converter is a unique, limited occasion product that is likely to be
subject to unique laws of supply, demand, and subsidy. As a matter of
public policy, there are simply too many novel costs and risk factors,
and imponderables, for NTIA to place these investments, expenses, and
risks solely on the backs of retail vendors who come forward to
participate in this program:

-   Any system, even if an Electronic Coupon Card as CERC recommends, is
    almost certain to require an investment in point of purchase
    hardware, software, personnel, and training in order for a
    storefront or on-line retailer to participate.

-   It seems unlikely that any participating retailer will be able to
    derive any benefit from these investments other than for this one
    product, out of thousands or tens of thousands of products, and only
    during the relatively brief period during which coupons can be
    applied to Converter purchases. Nor can the degree of benefit be
    weighed against sunk costs and expenses via any means by which
    retailers presently have commercial experience.

More specifically, it appears to CERC that, whether the coupon is
electronic, paper, or otherwise, present commercial channels cannot
support all of the functions necessary for this program to be fair,
efficient, and free of fraud.[^14] It appears that, based on one or more
of the proposals received from its vendors, NTIA will have to select a
system that will require specific investments by retail participants and
others, to add unique and specific capabilities. Therefore, it appears
to CERC that, unless anticipated and accounted for in the process by
which NTIA's vendors are funded, *any* otherwise acceptable solution
would impose very significant fixed and variable costs on retailers. In
view of the very limited product scope, time period, and purpose for
which these costs would be occasioned, it seems unrealistic to impose
them on program participants. Indeed -- although CERC cannot know and
thus cannot and will not make any prediction or indication as to who can
or might participate -- the imposition of such costs alone might become
a gating factor working against participation.

The DRA sets aside \$100,000,000 for "administration" of the Converter
program, and also provides up to an ultimate \$1.5 billion dollars for
its overall fulfillment. CERC believes that it would be a prudent use of
these funds for the NTIA's contract(s) with its vendor(s) to provide --
in light of the apparent inadequacy of existing commercial channels \--
for the distribution of the necessary software and other system support
to participating retailers as an included cost of the program.

**Obligation to honor coupons.** NTIA suggests that as part of a
retailer certification program, retailers must accept "obligations to
honor all valid coupons that are tendered in the authorized manner."
CERC strongly opposes any such provision *if* it is interpreted as
including an obligation to acquire, keep in inventory, or sell a
Converter to any customer who presents a coupon, even if the retailer is
out of stock or inventory. In other words, any such provision should be
understood as obliging a qualified retailer to honor any valid coupon
***if the retailer is offering subsidized Converters for sale at the
time the coupon is presented by the consumer***.

While honoring coupons on some other basis may or may not be feasible at
some points during the program, it is unlikely to be feasible toward its
onset and toward its end. Toward the onset, vendors may encounter delays
in manufacturing and shipping Converters, yet consumers will be showing
up in stores or on-line with coupons that are about to expire. Moreover,
at any time during the program, it will also be extremely difficult for
vendors, and for their own third party suppliers of components, to
calculate, months in advance, what the final demand for this product
will be before it starts quickly trending toward zero.[^15] Converter
vendors to retailers , and their own component suppliers, might
therefore be expected to be cautious in their decisions. To expect a
retailer to promise to offer to sell a product that might no longer be
in its own inventory or in the inventory of any of its vendors is
unrealistic, and again could become a gating factor on participation or
even on the ability of *any* retailer, no matter how resourceful, to
assert, subject to sanction, that it is "qualified."

**Threat of legal sanctions against voluntary participants.** The
open-ended statements in the NPRM with respect to prospective "rights
and responsibilities" need to be clarified and made specific as to the
potential for legal sanction against any participating retailer. Any
interested retailer would reasonably want to be fully aware of the
potential for liability, to third parties as well as to the government,
before agreeing to participate. As these are predicted but not spelled
out in the NPRM, CERC believes there should be a further opportunity to
comment before retailers are presented with a binary choice of accepting
or not accepting such risks. CERC and its members are concerned about
formulations such as an obligation to "advise" consumers about the
program "subject to penalty of perjury" as insufficiently vague to offer
guidance yet daunting in their possible consequence. ***Any obligation
with potential criminal or civil consequences for participants needs to
be stated much more clearly and succinctly. If the resulting rule is not
reasonable or is not enforceable on a consistent basis, the obligation
should be stricken.***

**Protection of sales data.** CERC believes that an efficient and
workable program will be self-auditing: the record of the electronic
transactions via which Converters are sold to consumers and the
retailers are paid for Converters will be self-evident. This, in CERC's
view, is far preferable to the warehousing of coupons and transactions
for an audited matching process later.

No matter what the audit procedure, the NTIA and / or its vendor(s) will
be receiving sales data, pertaining to individual retailers and
manufacturers, that ordinarily would be held confidential by these
entities. Accordingly, it will be necessary to protect the non-aggregate
sales data of particular retailers and their vendors, as highly
confidential. This should be a core assurance given any retailer that
steps forward for voluntary qualification.

A.  Consumer Education.

CERC has long advocated voluntary public education measures and has
implemented several:

> \*\* CERC's Consumer Guide, "What You Need To Know About The February
> 17, 2009 'DTV Transition'," available at
> http://www.ceretailers.org/dtv-flyer2006.pdf, and associated
> single-page informative material and consumer notices
>
> \*\* The DTV Tip Sheet formulated and co-branded by the FCC, CEA, and
> CERC
>
> \*\* Links to these items on web sites of CERC members

CERC is a member of the Coalition for A Successful DTV Transition and a
signatory of the Coalition's letter, of this date, that pledges
cooperation in a "comprehensive, coordinated and harmonized national
consumer education effort." CERC and its members will work with other
Coalition members, the NTIA, and the FCC to help assure that the public
education effort is both wide-ranging and coherent.

III\. **[CONCLUSION]{.underline}**

The challenge given to the NTIA by the Congress is both significant and
daunting. CERC applauds the NTIA for seeking input on a broad range of
questions in this NPRM, and for seeking a broad range of tools and
proposals in its "RFI." ***CERC believes that the next step should be to
share with the public, in a way that protects the confidential
information of RFI participants, the full panoply of the potential
"toolkit" that is available, and, without delaying its scheduled
decisions and processes, to seek further informed input.*** By seeking
such input, specifically on issues of program administration, NTIA can
better avail itself of the enormous store of commercial experience and
expertise available from CERC members and other commercial entities that
wish this program to succeed.

Respectfully submitted,

![](media/image1.jpeg){width="2.25in" height="0.6208333333333333in"}

> Marc A. Pearl
>
> Executive Director
>
> Consumer Electronics Retailers Coalition

# 919 18^th^ Street, NW, Suite 925

> Washington, DC 20006
>
> 202 263-2585
>
> *Of Counsel:*
>
> Robert S. Schwartz
>
> Mitchell Stoltz\*
>
> Constantine Cannon, P.C.
>
> 1627 Eye Street, N.W.
>
> Washington, D.C. 20006
>
> 202 204-3508
>
> \*Bar admission pending.
>
> September 25, 2006

[^1]: *Implementation and Administration of a Coupon Program for
    Digital-to-Analog Converter Boxes*, Notice of Proposed Rulemaking
    and Request for Comment, 71 Fed. Reg. 42,067 (July 25, 2006)
    ("NPRM").

[^2]: *See* Title III of the Deficit Reduction Act of 2005, Pub. L.
    109-171, 120 Stat. 4, 21 (Feb. 8, 2006) ("DRA").

[^3]: In its congressional testimony CERC took no position on whether
    there should be a subsidy program or who should be eligible for one.
    We recognized that these were difficult issues with no easy
    solution.

[^4]: As an incorporated nonprofit association that includes direct
    competitors, CERC cannot and will not address whether any of its
    members, or any other commercial entity, would or will participate
    in this or any other market.

[^5]: Request for Information: Reference-Number-noaa73106, published
    July 31, 2006, entitled "REQUEST FOR INFORMATION - MARKET RESEARCH
    FOR IMPLEMENTATION OF DIGITAL TO ANALOG CONVERTER BOX COUPON
    PROGRAM." CERC has filed a Freedom of Information Act request in an
    attempt to get timely access to the nonconfidential elements of the
    vendor proposals.

[^6]: As noted, the potential demand for Converters was highly
    controversial during congressional consideration of the legislation,
    and remains so.

[^7]: Cable operators commonly report that only about half of their
    subscribers obtain set-top boxes. Therefore it seems unlikely that
    many consumers will want an additional box connected to their
    television if they don't need it.

[^8]: CERC believes that NTIA's system vendors should be able to assure,
    in the serialization process, that mistakes in inputting data will
    not result in the value of another household's coupon being
    exhausted by mistake.

[^9]: *See, [e.g.]{.underline}, The Digital Television Transition (Part
    I): Hearing Before the S. Commerce, Science and Transportation
    Committee,* 109^th^ Cong. (July 12, 2005) (Discussion between Sen.
    Allen and Mr. Edward Fritts.). CERC does not and cannot offer any
    specific predictions as to future retail prices of Converters or any
    other product.

[^10]: Again, this is an area in which non-confidential data from the
    "RFI" submissions seems essential to a fully informed comment.

[^11]: If the after-subsidy price of the second product is more
    expensive, the consumer of course should be expected to pay the
    difference, and if it is less expensive, the consumer should receive
    a refund of the difference.

[^12]: Any such return policy should also be subject to the retailer's
    customary policies with respect to product returns. The feasibility
    of this consumer benefit is one of several issues that CERC and its
    members believe could be more specifically addressed in Comments
    once the electronic suites of tools potentially available for this
    program can be assessed and commented upon publicly.

[^13]: Those retailers who have chosen to attain qualification, of
    course, can be expected to advise customers of products to which a
    subsidy applies.

[^14]: For example, as is noted above, the systems that support the
    usual commercial channels for use of debit and credit cards assume
    that the first form of payment that is tendered is intended to be
    the same as the price of the product. These systems also are not
    configured to limit the use of such cards to particular products.

[^15]: Availability from NTIA or its vendor of coupon-ordering data may
    be useful for retailers but may be too late to aid manufacturers and
    their own component vendors in production and acquisition decisions.