Before the

**Department of Commerce**

**National Telecommunications and Information Administration**

**1401 Constitution Avenue, NW, Room 4713**

**Washington, D.C. 20230**

In the matter of )

)

Request for Comment and Notice of )

Proposed Rules to Implement and Administer ) Docket No.
060512129-6129-01

A Coupon Program for Digital-to-Analog ) RIN 0660-AA16

Converter Boxes )

)

)

To: Milton Brown, Office of the Chief Counsel, NTIA

**COMMENTS OF STORED VALUE SYSTEMS, INC.**

Stored Value Systems, Inc. (SVS) of Comdata Network, Inc., a
wholly-owned subsidiary of Ceridian Corporation, a multinational
information services company, hereby submits comments in the
above-captioned proceeding.[^1] As a proven performer in government
information systems and a global leader in stored-value card solutions,
SVS believes that it is in a unique position to assist the NTIA as it
seeks to better understand the different issues, concerns and
alternative approaches in defining the regulations to best implement the
digital-to-analog converter box coupon program pursuant to the Digital
Television and Public Safety Act of 2005 (the Act). In particular, as
the NTIA compares the attributes between alternative approaches and
solutions offered in the marketplace, we believe the NTIA will clearly
come to the conclusion that [through a public-private
partnership]{.underline}, [an item-specific, stored-value card
solution]{.underline} will [best meet]{.underline} the Coupon [Program
objectives]{.underline} stipulated, cater to the needs of various
stakeholders, and mitigate the potential for waste, fraud, and abuse
(WFA) in a cost effective manner.

We would emphasize the card-based solution proposed does NOT involve a
bank-type debit card nor does it rely on retail employees to ensure a
debit value is being used for a certified eligible box. To avoid the
problems that surfaced with the cash oriented, bank-type cards after
Katrina, the value stored and systematically enabled by the SVS proposed
card is UPC item specific. Similar to the WIC (Women, Infants and
Children) item-specific nutritional prescription and new cents-off,
promotional card programs, the card and subsequent integrated scanning
of the UPC of the purchased item at the point-of-sale provides
systematic authorization to acquire only a certified, standard converter
box.

Unlike the less secure, open cash-value bank card systems, the SVS
stored-value card authorization passes over a closed loop communication
that is cheaper and more customized similar to gift and promotional
cards that still leverage retailer existing investment in magnetic
stripe readers and ECR/POS platforms, but submit the authorization
request under an ISO standard, item-specific transaction set for
centralized, on-line approval and recording. Household recipients will
not be able to use the government provided benefits to purchase anything
other than prescribed, certified converter boxes. Subsequent to the box
purchases, retailers receive funds for redeemed coupons daily through
the Federal Reserve ACH deposit system while the NTIA is able to monitor
and track all activity real-time, including requested, issued (unused)
and used coupon funds. Toward this specific program, the following
comments are organized to address the specific proposed rules in each of
the requested sections for comment.

# Eligible U.S. Households

From an end-to-end service provider's perspective, clearly defining
"U.S. household eligibility to participate" is critical in order to 1)
determine the requirements necessary to verify consumer coupon requests
for household eligibility and 2) dimension the peak service demands and
period of service for the subsidy coupon program.

First, the Act stipulates that the "Assistant Secretary shall implement
and administer a program through which households in the United States
may obtain coupons that can be applied toward the purchase of
digital-to-analog converter boxes." The Act does not appear to define
the term 'household', other than under the Program Specifications it
states that "a household may obtain coupons by making a request as
required by the regulations,"[^2] and "each requesting household
receives, via the United States Postal Service, no more than two
coupons."[^3] Referencing definitions of 'household' and 'housing unit'
used by the U.S. Census Bureau, the NTIA proposes, "a 'household'
consists of all persons who currently occupy a house, apartment, mobile
home, group of rooms, or single room that is occupied as separate living
quarters and has a separate U.S. postal address."[^4] The NTIA further
proposes, "an eligible household address shall not be a post office
box."[^5]

The proposed rules would require potential service providers to assure
that no more than two coupons be delivered to requesting households via
U.S. Mail to a separate living quarters represented by a specific mail
able, street address in the United States. The household name, under the
proposed rules, could indeed consist of multiple persons that do not
necessary share the same name. Service providers would need to
diligently screen the mail able, street address line to prevent
duplicate requests from being fulfilled to the same living quarters.
Under, Section C, the Application Process, the NTIA proposes that
applicants be required only to submit: 1) name, 2) address, 3) the
number of coupons they require, and 4) a certification that no other
member of the household has or will apply for a coupon.[^6] Despite the
latter certification, it would appear that service providers would also
need to screen requests for names that may involve the same persons, but
at separate mail able addresses. With only name and address information
submitted, service providers are hampered in their ability to prevent
duplicate requests. See further discussion under Section C, Application
Process, on the many issues presented and our suggestion on a possible
process to overcome these limitations while maintaining a balance
between added administrative burden and exposure to waste, fraud and
abuse (WFA).

One of the recognized challenges to the proposed household assistance
was whether the NTIA should consider economic need in the eligibility
requirements for coupons.[^7] In state Electronic Benefits Transfer
(EBT) programs like Food Stamps or WIC, local administered clinics will
use state software to certify eligibility and determine the proper
benefits for applicants. Clinic workers, including workers assigned to
visit applicants/recipients at their home or other place of care, will
generally meet potential applicants or their authorized representatives
face-to-face to properly identify applicants and determine and certify
their eligibility for benefits. Included are processes of documenting
and certifying eligibility requirements such as household identity,
included participant members, income, resource, or other eligibility
requirements. Once eligibility and qualifying benefits have been
determined and approved for individual households and included
participants, state clinic certification software will interface with
EBT third-party processors like SVS to set-up household and member
participant accounts for issuance of periodic benefits.

> Because state systems differ, SVS offers its own Human Interface
> System (HUI) which is PC-based for state and local workers to set-up
> and maintain household and participant accounts real-time along with
> supporting immediate issuance of access cards including recipient PIN
> selection for additional benefit usage security. However, to support a
> more seamless flow at the clinics, states will often choose to
> integrate EBT functions into their clinic certification systems. With
> fifteen (15) years of experience supporting EBT programs, SVS' EBT
> solution includes an EBT Application Program Interface (API) that will
> allow state legacy systems to more easily interface or integrate with
> SVS' EBT solutions to set-up, communicate, activate, and maintain
> recipient accounts and benefits.
>
> To the extent NTIA should choose to use the eligibility criteria of
> existing social service programs like Food Stamps, WIC or similar
> governmental assistance programs which include income-based
> eligibility criteria to define eligibility for a DTV subsidy program,
> current EBT processors like SVS have existing commercial off-the-shelf
> systems that facilitate either side-by-side, quick-get-ready-to-go
> solutions or flexible API-driven solutions to assure a more simple,
> integrated, and efficient process for state and local clinic staff. As
> noted in the GAO Testimony on May 26, 2005 addressing the challenges
> in administering a subsidy program for DTV equipment[^8], "it might be
> advantageous for the administering entity to leverage the expertise of
> state government agencies to assist with delivering the subsidy to
> low-income households." While the testimony noted that "Food and
> Nutrition Service (FNS) officials said that state agencies that
> administer food stamps could provide a DTV subsidy to their
> recipients, an agreement would most likely have to be reached with
> each state and, in their view, the states should be paid for the costs
> they incur in doing so[^9]." Upon contact of four state agencies, GAO
> testimony indicated, "three of the four states told the GAO that such
> a program would be burdensome on their limited staff resources[^10]."
>
> Tapping EBT processor commercial, off-the-shelf interface software to
> integrate and provide a DTV subsidy along with other governmental
> assistance would greatly ease the burden on clinic staff resources. As
> recently noted in feedback from staff in a Washington State
> Project[^11], "As part of its 'ready to go' EBT solution, SVS offered
> screens for entering household and participant information. All of
> this information was already available in CIMS' database. With Benefit
> Issuance integrated into CMS, CIMS/EBT added that data to the benefit
> issuance data and forwarded to the EBT Host as part of the Benefit
> Issuance event -- a much simpler and efficient process for clinic
> staff." Feedback in that project was gathered through an online survey
> and through an informal on-site interview with Washington clinic
> staff. Two of the key points identified from the clinic feedback
> included[^12], "The demonstration was a positive experience for most
> clinic staff and they felt most clients liked WIC EBT." Second, "Some
> staff felt that WIC EBT improved the clinic flow."
>
> Leveraging EBT processor commercial, off-the-shelf software to
> integrate and provide a DTV subsidy along with other governmental
> assistance will shorten required developmental time, lower
> developmental costs, and greatly reduces the deliverable risk for
> implementation of a DTV subsidy program ready to receive application
> requests by January 1, 2008. State social services certification
> systems, nevertheless, are quite complex and differ from state to
> state. Inexperienced service providers attempting to learn and develop
> interfaces or integrated solutions with state certification systems
> would be quite a daunting task and present NTIA considerable delivery
> risk and cost. Even for an experienced EBT service provider,
> performing interfaces with 50 states would prove challenging. A
> side-by-side system would be needed as a fall-back solution.
>
> As noted in the GAO testimony[^13], "by using the receipt of an
> existing program benefit that is means tested, a new program could be
> effectively implemented without developing a means test specifically
> for that program." However, as noted in that testimony, there are
> potentially several limitations or drawbacks to using existing
> programs. First, targeting households for a DTV subsidy based only to
> those already receiving other assistance might exclude intended
> households because "not all who are eligible for any particular
> program actually choose to apply for and receive benefits."[^14]
> Second, while as suggested "combining the participants of several
> programs to establish eligibility might target a higher percentage of
> needy households, privacy concerns could prove to be a limitation of
> using existing social welfare programs to develop eligibility for a
> DTV subsidy due to agency prohibition from providing the list of
> recipients to any outside entity."[^15] Third, a DTV subsidy would
> have to "take into account the high level of volatility of recipient
> rolls as people enter and leave such programs during the course of
> time to qualify for a DTV subsidy."[^16]
>
> As agents of states, EBT processor rules and agreements have been
> established for state agencies to provide and for processors to
> protect the privacy of information on recipients receiving assistance.
> Policies and procedures have also been established and authorized
> regarding EBT processor retention of account records, account active
> status, purging of inactive accounts, and maintenance of account
> history. Such rules, policies, procedures, and guidelines could
> facilitate a DTV subsidy rulemaking process and offset some of the
> limitations noted above. Note should be made that EBT processor
> agreements are generally made on a state-by-state or sometimes
> regional basis and guidelines could and do differ, although Federal
> oversight and guidelines are also administered by Health & Human
> Services (HHS) and Food & Nutrition Services (FNS) that might serve as
> a bridge.
>
> Another challenge related to eligibility noted in the afore GAO
> testimony[^17] was that "some stakeholders indicated that a DTV
> subsidy should be focused or limited to only those households that
> rely exclusively on over-the-air television." Furthermore, while
> "over-the-air households are more likely to have lower income than
> those subscribing to cable or satellite,"[^18] "family income is not
> necessarily a good predictor of over-the-air reliance[^19]." As noted
> in various related studies, determining who the over-the-air
> television households are and limiting a DTV subsidy to only those in
> reliance poses a challenging task. Reference is made to the difficulty
> of "obtaining and merging information on nearly 90 million subscribers
> from over 1,100 cable and satellite companies operating throughout the
> country."[^20] As cited, subscriber churn, privacy, legal disclosure,
> customer sensitivity, and technical logistics pose major hurdles and a
> significant undertaking to construct a list of households evidenced as
> 'not relying exclusively on over-the-air television at some agreed
> point of time'. Even if information could be released and obtained
> from the myriad of commercial cable and satellite providers,
> informational formatting poses yet another problem if indeed
> maintained and kept current in an automated state. See Section C,
> Application Process, comments regarding the challenges imposed by lack
> of address line standards.

With regard to our second concern, from released testimony, estimates on
the number of U.S. households who may rely exclusively on over-the-air
transmissions vary with legislative history indicating 14.86% of U.S.
households and GAO testimony estimating 19% of U.S. households.[^21]
Because identification of such households is difficult, the creation of
a list may prove infeasible. Changing circumstances in the marketplace
could also reduce this number substantially. As a potential
administrator or service provider, accurately sizing and determining the
parameters of the targeted coupon subsidy program are critical to
planning an effective and efficient program for delivery of such
subsidies.

> The GAO estimates that 19% or 20.8 million households having an
> average of 2.1 televisions[^22] seeking up to a maximum of two coupons
> per household may exclusively rely on over-the-air transmission and
> become eligible for coupon subsidy. In contrast, reported estimates by
> the Federal Communications Commission (FCC) are that the number will
> drop to 7% (or 7.7 million households) by 2009.[^23] In response to
> the RFI Question on "How many households is NTIA anticipating
> supporting," NTIA's Answer stated "legislation authorizes DoC to issue
> up to 22 million coupons, and possibly 37 million coupons with
> additional approval from Congress."[^24] Although family income was
> NOT necessarily found as a good predictor of over-the-air
> reliance,[^25] these numbers could be substantially affected by
> issuance in the final rules of an income- or economic needs- based
> eligibility requirement. Conversely, the additional 34.5 million
> television sets[^26] not connected to either cable or satellite, but
> possessed by households that subscribe to a multichannel television
> service, could prove both administratively and politically problematic
> when analog service is ceased. To the extent that household
> eligibility can even be legally restricted since there does not appear
> to be any reference in the limitations section of the statute to
> restrict eligibility of U.S. households[^27], it is clear that service
> will nevertheless be disrupted for the latter households. Large
> numbers of households that do not indeed meet the self-certifications
> may still self-justify their eligibility and attempt to request
> coupons.
>
> Recognizing that the number of requests for coupons may exceed the
> dollar amount provided by the Act even after the NTIA is authorized
> for additional funding, the NTIA proposed "valid coupon requests be
> fulfilled on a first-come, first-served basis until funds devoted to
> the program have been spent."[^28] Thus, not only are the parameters
> surrounding the number of households and coupons that must be serviced
> by the program difficult to dimension, but the period of service
> initially defined as eighteen months could be substantially cut short
> when funds are exhausted due to the 'first-come, first-served basis'
> proposal. Resultantly, critical "peak service demand levels" and
> "period of service performance" requirements lack necessary
> definiteness for the potential service provider to properly scope
> system performance demands.
>
> Unless rules of household eligibility, funding limitations, and the
> period for eligible households to be assured that valid requests for
> coupon subsidy be fulfilled are resolved, it would appear that the
> Program's stated objective, "that financial assistance for the
> purchase of a DTA converter box will be available to households
> relying on analog over-the-air broadcasting who will lose service
> after the digital transition,"[^29] can not be assured. Furthermore,
> interested service providers will have to carefully assess potential
> large fixed and variable costs across indefinite levels of service
> demand. Finally, assuring financial assistance for available purchase
> of DTA eligible converter boxes requires manufacturers and retailers
> to see a 'market' for voluntary participation. Presumably, both
> manufacturers and retailers will volunteer to participate if household
> demand and subsidies meet profit margin requirements. The number of
> participating retailers and individual retail locations serviced will
> prove to be another critical system parameter. To assure that
> financial assistance will be available to households under the
> proposed financial constraints appropriated for the program, program
> parameters must be sufficiently certain for manufacturers, retailers
> and service providers to reasonably gauge what will be required. SVS
> believes the program is feasible; it just needs clear definition of
> the criteria for household eligibility and retailer certification
> determination.

# Coupon Value and Use Restrictions

Under the proposed rules, NTIA invites comment on whether the NTIA
should consider using an electronic coupon card instead of a paper
coupon.[^30] Based on the proposal, it appears that the NTIA is familiar
with the common free-standing insert (FSI) paper coupon, but may be less
informed about the growing popularity of alternative forms of coupons.
First, the lines between what may be initially identified as paper and
plastic coupons have become blurred. Second, how the information
presented on a coupon is read, captured and validated upon presentment
at retail point of sale may be less reflective on whether the coupon is
paper or plastic, but more reflective on what kind of technology is used
to perform the reading, capture and validation. Third, card-based
programs are NOT constrained to bank debit card platforms, but now
involve more secure, integrated retailer applications at the
point-of-sale. Fourth, both paper and plastic based coupons may involve
electronic clearing.

For current purposes, SVS comments will focus on contrasting traditional
cents-off, paper coupons with standard coupon bar codes against
stored-value, promotional, card coupons with magnetic-stripe coded
technologies. First, today's magnetic-stripe type cards and carriers can
take a variety of creative forms quite apart from the common viewed bank
credit or debit card depending upon the targeted purpose. For example,
magnetic-stripe cards are being creatively packaged for special
occasions, holidays, gifts, rewards, promotions, or incentives ranging
from the appearance of a common, yet personalized, greeting card to
entitling the holder to a free new product sample. Graphics can include
a photo and personalized message of the giver such as a recorded message
or video, and may take the image and form of a micro-CD. Conversely,
magnetic-stripe cards and carriers can be informative or look more like
a glossy advertisement or miniature billboard. Promotional cards, for
example, are targeted to increase recipient awareness of the attributes
of a new product, guiding where the recipient can exchange the
item-specific card for the promoted product, and motivating the
recipient to quickly go out and obtain the product. Designs may feature
the card as a 'snap-out' or 'pop-out' of the carrier or portable
billboard for placement in the wallet with the original carrier
pre-printed for direct U.S. postal mailing without requiring separate
card and carrier assembling or envelope stuffing.

When presented at retail point-of-sale, instead of authorizing a
specific amount for purchase by the cardholder, the magnetic-stripe card
would seek authorization for an item-specific (UPC) or model/sub-model
purchase by the cardholder consistent with the item presented by the
consumer and scanned at the point-of-purchase retail check-out, whether
scanned by a retail cashier or self-scanned by the consumer at a
supervised, 'U-scan' counter. Thus, recipients of converter box,
magnetic-stripe coupons would be able to present and obtain
authorization for \$40 off the purchase on only specific, standard boxes
certified as eligible for DTA coupon subsidy. Furthermore, the issued
magnetic-stripe cards would only permit up to two maximum coupons to be
used per eligible household during the coupon subsidy program period.
The issued coupons could be utilized only at certified, authorized
retailers and coupon holders would be restricted from using two coupons
in combination for the purchase of a single converter box.

Systematic procedures and controls could also be implemented to prohibit
coupon holders from returning a coupon purchased box for cash refund or
credit towards the purchase of another item. However, since the eligible
determined household may still fall within his or her three-month coupon
expiration period, coupon benefits could be loaded back onto his or her
card to still allow the recipient to purchase a certified standard box.
Similarly, coupon recipients who lose or have their coupon cards stolen
could have the previous issued coupon deactivated and replaced without
adding value (additional coupon issuance cost) to the overall system.
Third, households approved for two \$40 coupons could elect to make one
eligible box purchase at one retail location and a second eligible box
purchase at another retail store a week later, as long as within the
provided expiration period and qualified eligibility.

These added attributes provided by a stored value card approach were
major positive consumer benefits when paper food stamps and WIC coupons
were transitioned to electronic stored value cards. Under the previous
paper coupons, recipients who lost or had their coupons stolen were
often out of luck. Similarly, if the individual packaged quantity
(ounces, etc.) of an item or number of items available on the retailer
shelf of a WIC prescription at a retailer was less than what was issued
and printed on the paper coupon to the recipient, the recipient lost
access to the remaining unused benefits when submitting the paper
coupon. In the electronic, stored value card world, the recipient
retained the unused quantities in their WIC balances. Thus, under the
social service programs, recipients were able to fully benefit from the
intended assistance under a stored value card. They were no longer
shorted nor prey to the limitations associated with paper coupons.

The technologies supporting card-based, item-specific coupon
authorization at retail have rapidly evolved over the past decade, and
more specifically over the past five years at the same time paper coupon
acceptance have rapidly eroded. In the early nineties, as bank credit
and debit card usage began to be accepted in the grocery industry, the
USDA experimented with card-based technologies for replacement of paper
coupons in the delivery of food stamp benefits. While such coupons could
only be used to purchased eligible food stamp items, the benefits
allotment were defined in terms of dollar value and relied on the
cashier or retailer to determine whether the items be purchased were
indeed consistent with the Programs intentions. First, despite initial
fears that the benefit population might be apprehensive to utilizing
card technology, research quickly confirmed that all stakeholders
substantially preferred use of cards to previous paper coupons. With the
preference, cost savings, enhanced audit trails, and reduce WFA, the
electronic delivery of food stamps has now rolled out across all fifty
states. Despite the many advantages obtained, the latter systems do have
some shortcomings. Since the banking industry or bank-oriented service
companies drove the systems design and delivery to utilize their own
bank debit or credit card association systems, they chose to not cater
to some of the unique needs of the government-based programs that were
not consistent with their own internal bank systems.

Early EBT programs were supported under two different card program
approaches, magnetic-stripe and chip cards. SVS was actually the pioneer
in the use of chip or smart cards for electronic delivery of food stamps
that were first demonstrated and implemented in the state of Ohio. SVS
was also the pioneer in the use of chip cards for the delivery of
item-specific nutritional benefits under the Women, Children and Infants
program commonly known as WIC for the more rural based states of Wyoming
and Nevada. Unlike food stamps, which were dollar based, WIC
prescriptions were UPC specific-based value in order to assure that
approved item purchases met the prescribed nutritional requirements.

Like the proposed DTA coupon subsidy program, recipient eligible
households were permitted to use the prescribed program benefits for
only certified eligible items up to the maximum prescribed quantity.
Eligible items were authorized as presented at the point-of-purchase
during scanning of each item's UPC during check-out. Eligible WIC items
were approved if there was sufficient item-specific coupon balance
remaining, whereas, non-eligible WIC items were denied even though the
item might have been similar in nature. For example, the eligible
household might be permitted to purchase a gallon of skim milk, but
denied the purchase of a gallon of 2% milk. Similarly, the household may
be permitted the purchase of one brand of peanut butter, but denied the
purchase of another brand because of the certified nutritional content.
Therefore, under the DTA subsidy program, an eligible household would be
permitted to use a \$40 coupon on one specific certified converter box,
but denied use of the coupon on another converter box even though the
same manufacturer made it because its features did not match the
'standard' certification criteria of NTIA.

Under the WIC program, retailers are not allowed to charge WIC
recipients more for an item than other customers shopping at the store.
However, WIC authorities establish maximum prices for each WIC item for
which they will pay a participating retailer. These maximum prices paid
will differ among retailers, and often are pegged based on the retailer
type, i.e., an urban neighborhood corner market versus a suburban
superstore or warehouse. Retailers are not permitted to charge WIC
recipients for the difference; thus, retailers may receive a lower price
after WIC reimbursement from WIC recipient purchases than the
shelf-price received from non-WIC shoppers. SVS currently handles this
in its code through use of maximum price tables. Additionally, in both
instances, the price charged must be reduced by in-store promotions or
by the presentation of manufacturer cents-off coupons. In the gift or
promotional card world, SVS will often support in its terminal code what
is known as a split tender transaction. In the latter situation, the
balance remaining or the promotional dollar off amount will be lower
than the price of the item presented for purchase. After the gift or
promotional card is presented, the terminal will then be programmed to
prompt how the shortfall will be covered, which will often involve
processing the remaining amount for payment via credit or debit card
tender, as well as by cash or check payment.

For the DTA coupon subsidy, the Act[^31] states that the value of each
coupon shall be \$40. The proposed rule acknowledges that the cost of
the converter box may be greater than \$40[^32], but does not appear to
address the situation if the cost should fall below \$40. Should the
retailer receive \$40 for redemption of the coupon regardless of what it
charges the consumer, or is the coupon good for 'up to \$40'? If the
coupon is valued strictly at \$40, would the recipient be entitled to
cash back if the standard converter box carried a shelf-price of \$35?
What if a manufacturer chose to promote a converter box near the
end-of-the-program that qualified under the program as an eligible
standard box through issuance of \$10-off coupons, could a recipient of
the \$40 coupon combine both for the purchase of a box with a listed
shelf-price of \$45? Would the recipient be entitled to \$5 cash back or
would the retailer be entitled to redeem both for a combined \$50? Will
the \$40 coupon be restricted in terms of its use or value associated
with other available promotions and how will these restrictions apply to
the consumer recipient and the redeeming retailer? Some of our
discussion with retailers suggested that boxes may well fall to the \$50
range at the beginning of the program. Faced with excess inventory at
the end of the program, we believe retailers and manufacturers could
well entertain lower pricing particularly if the number of coupon
requests unexpectedly fell well below the NTIA published forecasts. We
would therefore request that the final adopted rules specify on how to
handle each of the indicated situations.

Until last fall, item-specific authorizations under the WIC program were
performed strictly utilizing off-line technology using smart cards.
Banks have always been hesitant to address the WIC system because of the
information and item specific intensive discretion needed to properly
perform the WIC prescribed nutritional benefits authorization. Rather
than follow bank debit and credit card processes that involved
authorization strictly of a total amount after all items have been
entered at check-out, WIC required individual, item-specific
authorization on an item-by-item basis determination within the total
mixed basket purchase, and required editing individual item purchase
shelf prices against individual item maximum prices payable by the
government. Without these added edits at the item level, WIC benefit
recipients would be able to circumvent the specific nutritional and
maximum price limitations intended by the program. While governmental
authorities were willing to rely on cashiers to assure that beer was not
being purchased with food stamps, they were not willing to open up the
far more restrictive WIC nutritional requirements to cashier
non-systematic discretion. Furthermore, WIC prescribed benefits were
specific to quantities on an item-by-item basis. Thus, unlike food
stamps, which involved a total dollar value of exchangeable eligible
food item purchases, WIC benefits did not authorize recipients to
substitute the purchase of steak, or even milk, for prescribed baby
formula purchase. With grocer card-based ECR/POS investments still in
their infancy and to handle the additional transactional demands quickly
at the customer check-out, customized chip card solutions offered the
enhanced informational data and logic requirements. However, in the US,
the entrenched bankcard networks held a foothold and cost advantage, and
chip card platforms never evolved in the other payment arenas like they
did overseas. US retailers invested in magnetic-stripe card based
infrastructures and chip cards have never been able to obtain the same
economies despite the enhanced security, data storage, and multiple
program support capabilities. Magnetic stripe cards proved far more cost
effective for most payment systems, while providing adequate levels of
protection from waste, fraud and abuse.

Recognizing these cost advantages, in the fall of 2005, SVS successfully
demonstrated the use of magnetic-stripe technologies in an on-line
environment for the delivery of item-specific WIC items for the state of
Washington. SVS will soon demonstrate an integrated retail solution for
on-line delivery of WIC utilizing magnetic-stripe cards for the state of
Kentucky, as another service vendor has been approved to roll-out
on-line delivery of WIC in the state of Michigan. The significance of
these developments parallels the growing acceptance at grocery stores of
preference toward debit and credit card payment media. It was only in
2003 that Kroger disclosed that customer preference for use of debit and
credit for payment of groceries exceeded 50% of customer
transactions.[^33] Grocers have since announced that debit and credit
card usage is now accounting for 60-70% of their customer payment
transactions.[^34] Debit and credit cards in the United States are
primarily magnetic-stripe card based.

Only a decade ago, SVS was also a pioneer in introducing magnetic-stripe
cards as a replacement for paper gift certificates. Today, SVS is the
industry leader in gift cards and will produce over 500 million
magnetic-stripe gift cards in 2006 and record a billion transactions.
This same technology has expanded over to loyalty-based card programs,
to various programs for replacement of cash disbursement, and now into
various promotional programs. While not all of the various paper coupon
programs erosion are due strictly to magnetic stripe card technology,
the driving factors tend to be the same: 1) lower cost, 2) reduced waste
and fraud, 3) more timely and accurate audit trails, 4) improved program
marketing and analytical information, and 5) increased satisfaction
across various stakeholders.

As noted above, what makes magnetic stripe card technology so acceptable
and preferable over competing technologies is that it allows retailers
to leverage existing infrastructure investment in electronic cash
registers (ECR), point-of-sale scanning, display and card readers, and
communications networks. Furthermore, with the explosion of gift cards,
retailers are able to tap the closed loop settlement vehicles of gift
cards and avoid transaction authorization and settlement over high
fee-based bankcard networks. Retailers often own their equipment and are
not willing to pay the added heavy tolls associated with bankcard
networks when they are unnecessarily restrictive and do not meet their
needs. For mass merchandisers and major discounters that invested in
magnetic stripe infrastructures nearly two decades ago with their
private label card programs, these investments across multiple lanes
located throughout their stores are substantial. In many cases, stores
ECR/POS equipment have been updated in recent years to facilitate
expanded service and inventory management needs. Nevertheless, standard
bankcard transaction sets do NOT meet the informational, security and
item-specific transactional needs of the DTA subsidy coupon program,
anymore than previously described for WIC or now being targeted for
loyalty, cents-off, or other promotional, item-specific programs.

While the standards for the new item-specific authorization transaction
sets have or are just being agreed upon by the standard setting bodies,
the cost to program another transaction set utilizing essentially the
same API tools, communications connections, and audit tracking is small
compared to the hardware and overall ECR/POS platform investment,
particularly when spread out across hundreds or thousands of store
locations. Furthermore, retailers will be able to utilize these same new
transaction sets for other evolving commercial programs. Other
government agencies may also find the new transaction sets attractive to
disburse emergency program specific benefits to avoid the abuse and bad
publicity following Katrina.[^35] For example, instead of disbursing
debit cards with cash value easily transferred to the purchase of
non-intended items or services, (i.e., bad publicity associated with use
of Katrina assistance to acquire New Orleans Saints tickets, lottery
tickets, or even prostitution, etc.), agencies could disburse cards
permitting specific item purchases ranging from ice to electric
generators or flashlights and batteries.

Due to the average ticket size of consumer electronics purchases, the
majority of consumer electronics purchases already occur utilizing
magnetic stripe bankcards. Even small consumer electronics dealers and
mom & pops retailers are bankcard equipped and trained, with
communications lines, whether dial-up or Internet-based, wired at their
check-out counters. With low-cost plug-and-play terminals, some
retailers may even choose to implement a provided stand-beside solution
that SVS has commercially available off-the-shelf, rather than add the
item-specific authorization transaction set on the ECR/POS during the
short-term DTA coupon subsidy period for smaller numbers of stores or TV
department only channeled coupon acceptance. SVS is discovering that
more and more small retailers are demanding sophisticated gift card
programs, which can now be delivered to the mass market cost
effectively. Most of the consumer electronics retail communities are
therefore already wired with the major merchant service providers.
Additionally, card based programs facilitate secure Internet and mail
order based, retailer participation.

> Although paper coupons, particularly free-standing inserts (FSIs)
> commonly placed in Sunday newspapers, remain an important vehicle for
> consumer packaged goods marketers, overall manufacturer coupon
> redemption trends continue to decrease. Despite significant increases
> in distribution, actual consumer usage and redemption have steadily
> declined each year over the past five years from 4.5 billion in 2000
> down to 3.0 billion in 2005.[^36] Changing demographics and consumer
> preferences are rapidly eroding coupon's overall attractiveness for
> promoters. New coupon distribution methods are also having a major
> impact on traditional coupon redemption. While traditional proponents
> of paper coupons would argue that paper coupons still work, major
> shortcomings surrounding the costs, inefficiencies, informational
> limitations, accountability, timeliness, audibility, and overall
> subject to growing waste, fraud and abuse have left many of the
> industry's key players looking for alternatives. Burning issues among
> retailers include:[^37]

-   Coding limitations, particularly centered around the required use of
    family codes which are incomplete and difficult to maintain;

-   Chargebacks, .... Too many, inaccurate, and too many requests for
    POP (proof of purchase);

-   Current system takes too much time to process for payment;

-   Handling fees no longer cover higher processing costs;

-   Hard for retailers to detect counterfeits;

-   Growing number of coding errors from incorrect value codes and
    complex offers;

-   Handling paper needs to move toward electronic clearing.

> Manufacturers also have burning issues with current paper
> coupons:[^38]

-   Current system encourages higher cost, making couponing less
    attractive ... Fees, Fines and Postage;

-   Misredemption concern.... Too many deductions for misredeemed items,
    coupons are redeemed for items not carried at the store, coupons are
    redeemed outside the area;

-   Inadequate audit and verification trails....Manufacturer issuers
    want to know what was purchased;

-   Redemptions occur way past the expiration date;

-   Retailer lack of compliance with using as presented;

-   Retailers reproducing the coupon without consent of the
    manufacturer;

-   Current process takes way too long to clear;

-   Accuracy and timing in reporting.... Want to improve their ability
    to forecast;

-   Low % of retailers who can scan and validate paper coupons to the
    family code level;

-   Code complexity with multiple MFG ID's;

-   Bar code structure is too large and limiting;

-   Need more secure ways to deliver coupons over the internet... bar
    code is too easily created at home; and

-   Family codes do not match to specific products.

> As manufacturers expanded paper coupon usage for delivery over the
> Internet and to support rebate type programs, misredemption concerns
> skyrocketed. When manufacturers pushed back on retailers, major
> grocers and retail chains implemented policies to stop taking Internet
> coupons. The coupon industry responded by forming a special task group
> to recommend and introduce more secure and verifiable processes for
> Internet coupons. For the most part, retailers have begun accepting
> them again, but with careful scrutiny.
>
> While it is hard to pin down a number, according to the Coupon
> Information Corporation (CIC), losses due to coupon fraud exceed \$500
> million annually[^39], which on about \$3.5 billion of coupons
> redeemed this past year represents approximately 15%. Arguably,
> potential losses on a DTA \$40 coupon might be significantly higher
> than the 15% against coupons at an average of a \$1.16[^40], unless
> significant loss prevention practices were put in place. Rebate fraud
> reportedly contributes another half billion dollars of fraud
> annually.[^41] The ACP reports that rebate fraud is primarily
> committed via submission of counterfeit proofs and cash register
> receipts. Submission of non-receipt claims (e.g., consumers claiming
> they never received their rebate generating another rebate) is also
> reportedly high on the list of fraud.
>
> Recognizing the many shortcomings of coupons, the coupon industry has
> several task forces organized to address different concerns including
> one to re-engineer coupons. Essentially, the industry has set-up
> various committees through the Joint Industry Coupon Council (JICC)
> and the Uniform Code Council (UCC) to explore what needs to be 'fixed'
> about coupons.[^42] What was known as the UCC has become GS1 US, which
> as part of GS1 is a unified, more global approach to standards
> development.[^43] With a global roadmap and vision, the intent of this
> initiative is "to bring manufacturers and retailers together on a
> worldwide parity basis to simplify and enhance global commerce and
> improve consumer value in the overall retail supply chain."[^44]
>
> As the coupon industry embarks in these activities, the industry sees
> these change initiatives as an opportunity to address other needed
> improvements to reduce costs, standardize global supply chain
> management, expand promotional capabilities, and integrate electronic
> and paper technologies. More immediately, everything that has a bar
> code, including coupons, will be changing. While exciting and rapid
> changes are occurring, key manufacturers and especially retailers want
> practical and implement able solutions today. High among the demands
> is that: **["coupon issuers want to be able to offer higher-value
> promotions with more certainty that those who redeem and benefit from
> such value were those intended to receive the offer and indeed
> actually purchased the specific promoted product."]{.underline}**
>
> SVS does not believe current paper coupon, Internet delivered coupon,
> manufacturer-type rebate, nor bank debit card programs meet this
> demand. Neither does SVS believe that current paper coupon, Internet
> delivered coupon, manufacturer-type rebate, or bank debit card
> programs will meet the needs of NTIA in pursuing its charter for the
> DTA subsidy coupon program. SVS believes a stored value card approach
> offers a better solution when coupled with an automated UPC-item
> authorization against only eligible product at the retail
> point-of-sale for the reasons enumerated in our response. SVS has
> commercial, off-the-shelf system components to deliver such a solution
> within the defined time schedules.

# Application Process

Under, Section C, Application Process, the NTIA proposes that applicants
be required only to submit: 1) name, 2) address, 3) the number of
coupons they require, and 4) a certification that no other member of the
household has or will apply for a coupons. With only name and address
information submitted, service providers are hampered in their ability
to prevent duplicate requests. First, although the postal service issues
guidelines for households to use for printing their addresses,
considerable variation exists. Service providers can attempt to scrub
address lines submitted on applications to conform to specific standards
during entry; however, without requesting some form of more uniform
identification, such as a social security or drivers license number, it
is systematically challenging to rely only on address line information.
Even through the use of forms, whether applications are taken by paper,
phone or web page; it is extremely difficult to impose definite
standards. Conversely, for the unscrupulous, there are many
opportunities to obtain multiple coupons through the mails unless
additional controls are put in place.

For example, during the early years of automating banking services,
financial institutions undertook the task to scrub all of their
individual bank services to create a centralized customer information
file incorporating all of the relationships of a common household.
Because social security numbers were initially only captured for
interest bearing services for tax reporting reasons such as savings or
loan type accounts, banks were required to scrutinize the name and
address lines for the other bank services. Postal boxes provided an
ability to match the number to a similar postal box listing, but
provided little guidance against other accounts with a street listing.
For new accounts, imposed standards attempted to enter the street number
first, followed by the standardized directional abbreviations (i.e.,
NW), specific street name, and then ending with specified abbreviations
for common address terms such as street, boulevard, parkway, road, etc.
Separate fields were provided to identify apartment number listings,
order of the listing, and specified abbreviations such as 'Apt'.

All kinds of special rules had to be formulated for various exceptions
such as military personnel, agency relationships, in 'care of'
designations, independent persons residing at the same mailing address,
or dealing with individuals or households that maintain multiple mailing
addresses for various distinct purposes, some of which were to
specifically maintain confidentiality or keep secrecy from a spouse.
Adding names to addresses for matching added yet another layer of
inconsistencies and problems. Language posed yet another variable, and
as noted in GAO testimony, "non-white and Hispanic households are more
likely to rely on over-the-air transmission." Thus, for many U.S.
households, English will not be their primary language. Furthermore,
increasingly communities are reflecting the diversity and growing
internalization of its citizens including the names and abbreviations
that may be contained on address lines.

Today, service providers allow for multiple addresses to be listed
separating ownership from mailing address, or personal from business
listing, along with various other designations. Similarly, additional
separate fields allow multiple phone and e-mail listings. Primary
account or even billing address listings may branch out to numerous
secondary accounts involving persons that may or may not be
blood-related, share the same last name, or necessarily reside at the
same location. Conversely, persons may reside at the same locations but
maintain different mailing addresses. As faced with implementing
identification and documentation requirements associated with the
Patriot Act, definition and specification of acceptable identification
becomes critical in order to attain higher levels of information and
integrity. For face-to-face account openings, banks will demand and copy
presentment of specific forms of identification. However, this raises
privacy concerns and proves difficult in non-face-to-face solicitations.

In the card world, businesses increasingly solicit their household
requests through specific outbound targeting from carefully prepared
lists. Nevertheless, to grow their portfolios, businesses will accept
and process inbound applications without documentation of identity.
Generally, applicants will be required to list more specific
identifiable information such as their social security number and
telephone number. For applications delivered via phone or the Internet,
businesses will capture through caller ID or e-mail address the source
of the request and use this data to match or reverse the identification
of the household for potential duplicate or fraud identification.
Businesses will then perform various investigative routines, including
the attempt to determine whether the applicant matches certain negative
listings or raises certain 'red flags' before fulfilling the requests.
Even after such care, due to increased identify-theft, it is
nevertheless common practice for the retailing community to ask
cardholders to present further identification (i.e., a drivers license,
for example) at the point-of-purchase for acceptance of their credit
card.

Many households mistrust these processes and as noted in the GAO
testimony fail to apply for significant available governmental benefits
even though eligible.[^45] Thus, to meet the desired program objectives
to minimize the administrative burden upon consumers, protect privacy,
while also minimizing the exposure to waste, fraud and abuse, perhaps a
compromise position could be taken on the above processes and routines.
Key procedural elements would be to use some form of government
identification to: 1) define a standard format for listing the street
address, 2) tie the submitted request to a specific government
identification address (but avoid making or retaining an image due to
privacy and identity theft concerns), 3) fulfill the request only to the
provided mail able address, and 4) use the retailer interface commonly
used for other card presentment to verify that the mail able address
indeed matches to a government issued identification, (in exchange for
gaining electronic authorization, automated reporting, next day
settlement, and the avoidance of counterfeits or fraudulent coupons).

More specifically, the suggested process steps might entail:

1.  Households would be instructed to list a name and address on their
    application requests for DTA subsidized coupons that corresponds
    exactly to a name and address as printed on a government issued
    identification (i.e., drivers license, passport, social security,
    etc.) and to check a box that corresponds to the government
    identification used. They would NOT be required to submit a copy of
    such identification, but would be told that the corresponding (same)
    address submitted would be: used for mailing out the coupons,
    printed on the face of the coupons, and verified at the
    point-of-purchase by the retailer redeeming the coupon presented.

2.  The service provider would capture the mail able address exactly as
    provided, perform a check against the specific address to prevent
    duplicate coupon issuances, conduct various suspect checks to
    identify and prevent certain patterns of activity from issuing
    additional duplicative coupons, and print on the face of the coupon
    the specific mail able address and code that the retailer can use to
    identify the required government id that must be presented that
    corresponds to the coupon printed address. Note, a separate line on
    the application would be allowed and printed on the card for the
    retailer to validate if the government identification utilizes a
    postal or agent address, (non-mail able or involving a
    power-of-attorney or agency address). See suspect checks detailed
    further below.

3.  The service provider will mail the coupons to the provided mail able
    address if no duplicates were previously found.

4.  At the point of purchase, the retailer will request the government
    identification corresponding to the printed code to determine
    whether the address matches to the address printed on the coupon
    before accepting the coupon for \$40 payment.

5.  Retailers will be subject to chargeback if later investigation
    determines that fraudulent coupon misredemption was allowed without
    making the separate verification at the point of sale.

6.  A scratch-off, carrier-provided, PIN could also be used in a
    stored-value card solution to allow deactivation of coupon cards and
    issuance of new coupon cards for replacement of lost or stolen
    coupons or to facilitate identification and box purchases at
    Internet or mail-order retailers.

7.  Accountability would be maintained on both a perceived and actual
    basis during both the application and transition period plus
    one-year required record retention to facilitate further
    investigation, chargeback or collection.

The service provider would temporarily hold coupon request fulfillment
until a suspect duplicate or fraudulent coupon request is investigated.
Similar to the gift card and other related bankcard request routines,
the service provider could maintain scrubbed address line files,
captured e-mail addresses and caller ID listings, utilize IVR traps to
flag unusual activity, third-party lists of known fraudulent names and
addresses utilized to request other financial cards, and other routines
noted in the retailer community to detect duplicate requests or related
fraudulent activity. Bumping the requests against the U.S. Postal
Information files could also provide an alert to suspicious activity.

While providing increased integrity to the household definition and
required assurances of Section 3005 of the Act, the latter would not
ensure that only households that rely exclusively on over-the-air
television receive the coupon subsidy. The process would however
establish a standard and verified household identity along with a
specific referenced address that could then be consistently used to
avoid duplicate coupon issuance and potentially used to query against a
developed database listing of cable or satellite subscribers (if deemed
necessary and administratively cost effective) or sample audited to
determine if more stringent compliance monitoring and collection
follow-up might be warranted. Establishing a path of identity and
accountability will provide both the perception by households as a
deterrent to avoid and a path by potential collectors to track and hold
accountable unauthorized coupon usage. Furthermore, increased integrity
in the household requested mailing address will more likely facilitate
matching to a subscriber billing address that has its own built-in
disciplines since interruptions in receipt and subsequent payment will
in time result in cancellation of service, (although increased use of
preauthorized bank debit is cutting into the monthly dependence upon
mail-based remittance by periodic utility-type vendors such as cable and
satellite providers).

> To ensure that only households that rely exclusively on over-the-air
> television receive the coupon subsidy, NTIA proposes in the rules for
> comment to require households in the application to make three
> certifications: "a certification that they only receive over-the-air
> television signals using an analog-only (NTSC) television receiver; a
> certification that no other member of the household has or will apply
> for a coupon; and, a certification if they are requesting a second
> coupon that they have more than one analog-only (NTSC) television
> receiver."[^46] Again, perceived ability to identify and hold
> recipients accountable provide deterrence against potential program
> abuses, non-intended use, or fraudulent claims. Such certifications
> could be required to made under penalty of law not only in the
> application process, but be also printed on the card coupon, (or
> carrier if space becomes an issue). Thus, included language might be:
> "By using this card, the household recipients certify that: they only
> receive over-the-air television signals using an analog-only (NTSC)
> television receiver; no other member of the household has or will use
> a coupon; and, they are using a second coupon because they have more
> than one analog-only (NTSC) television receiver."

Conversely, inclusion of such language or attestation could
unnecessarily deter eligible households from requesting intended
subsidies, add confusion, or complicate the process. Timing differences
could also arise between meeting the requirements of only receiving
over-the-air television signals using an analog-only television receiver
at time of coupon application and coupon usage (purchase). Nevertheless,
such screening and attestation may be less invasive and reach more
intended households than requiring certification through a social
services assistance agency. A balance must be achieved between
administrative burden to assure program compliance and avoidance of
program abuse, fraud, and non-intended use and waste. We believe
combining the dual administrator and retailer household identification
process with the self-certifications provide enhanced compliance without
raising privacy concerns and requiring the administrative burden of a
social service's type, face-to-face certification process. Various
address line scrubbing and fraud identification routines also will
reduce duplicate requests from being fulfilled.

The NTIA notes in its proposed rules that it intends to make application
forms widely available and allow potential applicants to make requests
through the mail, via telephone, and over the Internet. It expresses an
expectation that electronic media and networks will be used to make
aspects of the program more efficient. Comments are sought on how this
might be performed, particularly concerning the use of the Internet,
while preventing waste, fraud and abuse.[^47]

The Internet has rapidly become a key tool for anyone searching for
information on a topic. Keywords need to be identified and coordinated
with major search engines to link inquiries to a designated site
promoting the program and available governmental assistance. Converter
box icons highlighted with "For more information," "if you need
assistance," "help with the cost," or "apply now" linked directly to
specially designed web pages in multiple languages and appealing to
different cultural groups can be made available for placement virtually
on any stake holder's website having an interest in the program.

> One of SVS' commercial, off-the-shelf capabilities to receive coupon
> order requests currently involves the ability to allow NTIA, related
> agencies or industry groups, individual retailer chains or small
> business stores, consumer groups, affinity groups, community,
> educational or promotional websites the ability to create a Converter
> Box icon on their websites so that household members can click on the
> icon ("apply now") and hyperlink over to SVS' order request form while
> still thinking they were on the original website. SVS would then
> process all orders submitted in this request process. Public
> information campaigns would not have to focus and educate citizens
> toward specific websites to apply, but households would find
> themselves easily able to find and order from a multitude of intuitive
> or related locations.
>
> Recognizing different levels of citizen access and comfort with using
> differing technologies and processes, SVS does and would support a
> variety of order request entry points. Essentially, we would want to
> be everywhere or wherever various diverse households might expect to
> make their request. From a technology assisted standpoint, in addition
> to website icon hyperlinks, SVS currently offers to its other
> customers automated voice response (IVR) and Live Agent customer
> service centers supporting 24/7 services nationally in English,
> Spanish and French (Canadian). Visitors to the SVS website
> (www.storedvalue.com) will note that it can be viewed in different
> languages.
>
> ![](media/image1.png){width="3.125in" height="2.34375in"}
>
> ![](media/image2.png){width="3.125in" height="2.35in"}
>
> SVS operates internationally in 37 countries and is acutely aware of
> the need to be responsive and sensitive to different cultures,
> languages, special needs, and purchasing habits. Translation services
> would need to be secured where appropriate.
>
> Each of the above referenced technologies could conversely be used to
> simply obtain initial information or a printed form for later
> automated entry or physical submittal. Care needs to be taken to not
> incorporate a double mail-out process, since the latter would prove
> inefficient and costly. In addition to web and phone order request
> entry, SVS offers specific integrated screen order entry with our
> institutional clients operating in-house systems such as Federal,
> State, and Local governmental assistance clinics. Alternatively, we
> support various image transmission technologies, including simple fax
> transmission. To the extent eligibility is aligned with social
> services, SVS will enable all those who assist those seeking services
> to easily make such requests whether they are employed, volunteer, or
> simply extend a helping hand to lessen confusion and ease the
> transition.
>
> For many groups or households, order requests may be simply submitted
> in paper form. These could be sought through personal contact from
> neighborhood groups, friends, or family. For compliance purposes, we
> would want to direct the completion of such requests through easily
> understood, designed forms. These would need to be made readily
> available in different formats, languages and contexts recognizing the
> diversity of American households. Wide availability and easy public
> access to such forms will prove critical and need to be closely linked
> to the public awareness campaign. Community partnerships could provide
> a vital link to reaching many households before television service is
> disrupted.
>
> The ordering and distribution of such paper-based forms could be
> achieved through a variety of distribution channels. Currently, SVS is
> an innovative leader in the marketing and distribution of the growing
> popularity of gift, loyalty, and promotional cards. SVS and its
> partners provide secure technologies that allows cards to be
> distributed and activated on-demand through a variety of channels such
> as: retailer cashier and customer service counters, strategically
> placed kiosks, coin wrapping and deposit to card machines, gift card
> malls marketing and merchandising popular cards through venues such as
> grocery, drug and convenience stores, and the wide distribution of
> prepaid cards commonly associated with phone, wireless, music, ring
> tones, and debit cards. For example, Walgreen's uses SVS to provide
> prepaid card activation services for AT&T prepaid Internet and other
> related products. Thus, in today's world emphasizing service speed and
> convenience, requesting, fulfilling, and activating card-based
> services can respond to consumer impulses in ways, places and times
> previously unimagined. The key to the public awareness campaign is to
> convert awareness into action before analog service is turned off.
>
> The proposed rules state "NTIA will place the highest priority on
> designing an application system that prevents waste, fraud and
> abuse."[^48] Thus, while allowing potential applicants the ability to
> request forms through a variety of methods, the application system
> must prevent duplicate issuance (actually, the rules indicate "prevent
> duplicate requests for coupons"[^49]) of coupons and other potential
> abuses of the program by households. Applications received through the
> various provided channels from mail to Internet, would therefore all
> involve entry, verification, and updated maintenance against some form
> of electronic application processing and fraud identification system
> and database. We concur. An administrative process would need to be
> developed to review initial denials and resolve some form of appeal
> process. For clarification, we presume that a household would not be
> eligible to receive a coupon if it had previously been issued a coupon
> that was left to expire.
>
> Under the DTA subsidy program, fulfillment, in turn, appears to be
> statutory mandated per Section 3005 (c) (1) (A) via the United States
> Postal Service[^50]. Typically, SVS will contract to process
> business-to-customer requests and provide card fulfillment on a next
> business day or in most cases on a three business days or less basis.
> SVS has a number of contracts where it provides same business day card
> fulfillment on order requests against preprinted stock received by
> 2:00 PM EST. When a card requires individual personalization, i.e.,
> the customized printing of a specific household name and additional
> information such as an address if required on the face of the card,
> card fulfillment can be provided as early as on a next business day
> basis on orders received by 7 PM EST. SVS can conduct such fulfillment
> out of a number of alternative service locations depending upon
> specific customized requirements.
>
> Processing and fulfilling such requests 'in a timely manner' will
> often depend upon an administrator's capacity, processes, systems,
> maintained card inventory, and back-up/off-loading arrangements. SVS
> will produce over 500 million cards in 2006 and process a billion
> retail transactions. The 20.8 million American households found by GAO
> to rely exclusively on over-the-air transmissions for their television
> viewing[^51] (recognizing that others have estimated a lower number of
> households relying on over-the-air television), would represent only a
> 4% increase in annual SVS card production. SVS is the leading cash and
> gift card provider in the industry today operating not only in the
> U.S., but also in 37 other countries. SVS offers its customers turnkey
> solutions from card production management, transaction processing,
> database management, analytical reporting, and sales channel
> development to multiple fulfillment options.
>
> On a quarterly basis, SVS reviews each of its accounts for the
> forecasted number of cards and transactions (including history) on a
> twelve (12) month rolling basis. This drives our requirements for card
> production capacity, processing and communications capacity, and
> support personnel. With regard to host processing capacity, we
> currently configure to not exceed significantly beyond 50% capacity of
> our busiest day of the year, which usually occurs during Christmas
> holiday week. In 2005 we processed over 9 million transactions at our
> peak and over 300 transactions per second reaching 52% capacity.
>
> SVS has redundancy built into all its systems from duplicate
> processing sites, three individual network providers, and multiple
> card inventory management warehouses. SVS maintains 4 primary plastic
> printing vendors, 5 primary personalization vendors, 2 primary
> affixing vendors, and a set of Tier 2 vendors for each function for
> small jobs, special jobs, and backup. SVS manages all aspects of the
> card production process with our vendor groups. SVS sends it engineers
> to Q/A the cards onsite at the plastic and personalization vendors. As
> a substantial portion of our vendor's total revenue, SVS will contract
> with these vendors well in advance with specific capacity terms and
> conditions, and expects and commands high levels of performance.

# Coupon Expiration

According to CouponInfoNow[^52], consumers prefer coupons with longer
expiration periods. CMS, Inc. reports that the average expiration
period, or the length of time a consumer has to use a manufacturer's
coupon, has remained fairly flat in recent years at 2.9 to 3.0
months[^53]. The Act and NPRM both note that all DTA subsidy coupons are
to expire three (3) months after issuance[^54]. This will correspond
closely to commercial manufacturer coupons, however, growing popularity
of in-store and Internet distributed coupons have much shorter
expiration dates.

The proposed rules seek to solicit comments on how the date of coupon
issuance should be determined, i.e., date the coupon is placed in the
mail, date the consumer receives a coupon, or a calculated date of
two-to-three days after the coupon is placed in the U.S. Mail to address
the average delivery of a first class letter. What we believe is most
important is that the expiration date be clearly made certain. Since
commercial mail distribution operations will most likely affix a
presorted first-class mail permit stamping and the U.S. postal handling
may or may not always stamp a clear postal mark, consumers will want or
rely on the expiration date printed on the coupon. We believe the better
practice is to err on the side of caution and implement a practice that
targets placing an expiration date that corresponds to three days after
a performance of 99.5% expected date of delivery to a U.S. Postal Office
on a day of Regular business operation. We concur that the expiration
date needs to be prominently printed on the coupon and in our proposed
use of a stored value card be maintained at the SVS host for validation
in a separate data field.

SVS would suggest that the attributes of a stored value card solution
afford superior monitoring and compliance capabilities over a paper
coupon process. First, manufacturers might be viewed as being fairly
lenient in requiring compliance with printed expiration dates on
distributed coupons. Due to the number of intermediary parties and labor
intensiveness of handling paper coupons, published rules for retailer
redemption will include a significant grace period, perhaps six (6)
months[^55]. Because manufacturers use coupons to promote product
purchase and increase brand loyalty, they might not clamp down on known
situations where retailers might be possibly taking and include in their
submittal for redemption coupons after an expiration date.

For example, it has been widely published that military commissaries
have high incidences of 'expired' coupons, the latter in part due to
programs that have even encouraged expired coupons to be sent to benefit
military families.[^56] We mention this because sometimes electronic
automated solutions provide requested capabilities to enforce compliance
that could never be achieved, although part of the regulations, under
previous paper vehicles. Suddenly new tools of enforcement cause
recipients and supporting advocacy groups to register complaints. An
electronic solution such as a stored value card system will allow NTIA
to instill discipline and enforcement consistent across all points of
purchase including retail stores, mail-order houses, Internet sales and
military commissaries.

Despite some extent of leniency and significant grace periods, a
significant percentage of coupon redemption payments are withheld by
manufacturers due to expiration. In 2002 data published by CMS[^57], the
% of Total Misredemption Volume by Class of Trade for 'expired'
indicated wide percentage differences ranging from 4% at convenience
stores, 12% at supermarkets, to 38% at mass merchandisers. CouponInfoNow
publishes on its website a lot of good data on speed of redemption for
coupons, including different cumulative percentages across different
distribution methods[^58]. They indicate that on average, 3-4 weeks
elapse from the time of distribution until arrival at the manufacturer's
agent's processor. Thus, while 3.0 months may be the average expiration
date, average cumulative redemption by week 10 is just about half or 54%
for a FSI (free standing insert). Week 26 (six months) cumulative
redemption percentages (adjusting for the 3-4 week elapsed delivery
time) are 98% for the popular FSI's while 45% for in-pack coupons, 59%
for military shelf pad coupons and 60% for on-pack coupons. Week 26
(again adjusting for the 3-4 week elapsed delivery time) cumulative
redemption percentages shown are 73% for instant redeemable coupons, 74%
for handout coupons, 80% for internet coupons, and 89% for direct mail
coupons.[^59]

NTIA's proposed expiration date of 3 months plus required retailer
submission of coupons for redemption within 30 days after the coupons
have been used to purchase a converter box essentially targets 100%
cumulative redemption by the end of week 17 or four months. A stored
value card solution can meet this demand. Paper coupon distribution
methods would appear to be challenged by such requirements. With less
intermediaries (i.e., retailers, retailer agents, manufacturer
clearinghouses), mail-in rebate redemption centers could perhaps instill
more discipline, but this would not mean that intended coupon recipients
would receive their targeted subsidies. As was eluded in previous
testimony given by the GAO,[^60] less than half of most rebates are ever
redeemed.

Even if rebate coupons are placed inside or affixed to the outside of
the box, documentation will be needed to validate the purchase, such as
the purchase receipt which may not adequately provide sufficient
description to certify that an eligible converter box was purchased. The
GAO study already addressed the many shortcomings of applying
eligibility requirements. Many segments of the population are not
responsive to rebates, are frustrated by the requirements, and then
either never receive their rebate or once received have to pay a fee to
convert the rebate to usable cash. Even with a meaningful \$40 rebate
amount, we believe there would be substantial legitimate consumer
fall-out from a rebate approach, not to mention that the same \$40
rebate amount would conversely prove very attractive to counterfeiters.

NTIA would also have to provide a whole additional administrative
process to respond and validate that the rebates were actually received
and cashed by the eligible households. Giving purchasing households
thirty (30) days to send in their rebates, another 2-3 months for rebate
centers to typically process the filing, and then time for recipients to
discover that their processed rebates were never received along with
resolution to determine whether in fact the processed rebates were
indeed received and cashed by the actual box purchasers, we believe the
application requesting period would have to be significantly shortened
in order to allow sufficient time to complete the redemption process on
a rebate approach to cease operation of the Program by the end of Fiscal
Year 2009[^61]. We do not believe the latter would be acceptable.

# Digital-to-Analog Converter Box

SVS is not an equipment manufacturer nor an engineering firm involved in
the design, manufacture, or evaluation of DTA set-top converter boxes.
With its headquarters in Louisville, SVS is closely located to many of
the key global technologies design, manufacture, repair, and reverse
logistics companies due to UPS' International Worldwide Hub located in
Louisville. In fact, one of the global leaders in set-top box service
and repair performs major set-box services out of its Louisville plant
location.

> If after the rule-making process manufacturer standards are defined
> and the finalized rules require the program administrator to manage
> the specifications and certification of standard converter boxes
> eligible for the coupon program, SVS would seek a qualified partner to
> provide this expertise. SVS would then propose that approved or
> certified boxes be managed similar to the WIC database of items,
> although the number, variety and churn of approved DTA subsidy boxes
> would represent a fraction of the items compared to the 1,500 item WIC
> database. The framework would still be similar in that all certified
> standard boxes eligible for coupon redemption would be maintained
> real-time on a centralized database.

One of the first requirements imposed upon the retailer is to know and
identify what is an eligible item (brand, size and quantity) for which
the retailer can subtract the face value from the retail price of the
manufacturer-named product. In fact, before that item is presented at
retail checkout with the associated coupon, the customer (or with the
prior assistance of store personnel) needs to be able to identify what
item is eligible for receiving the targeted coupon use value. While
manufacturers and retailers may disagree with us, we believe the
consumer educational campaign should focus more on defining what a
'standard' eligible box under the subsidy program means and where such
boxes can be purchased with the coupons, rather than attempt to list or
promote individual manufacturer boxes. Manufacturers, in turn, may
choose to mark and promote their individual boxes certified as eligible
'standard' boxes for coupon usage. Again, the educational wrinkle is
what is an eligible or 'standard' box in easily understood, consumer
friendly, terms. As will be noted below, for the consumer, our
educational campaign might focus on promoting awareness of a standard
SYMBOL (graphical) universally crossing multiple languages as denoting,
"DTA coupon eligible".

> Once presented at the checkout, SVS has commercial, off-the-shelf
> systems that can perform item-specific (UPC) authorization at retail
> point-of-sale. Thus, either at specific UPC level type listing or
> agreed model/sub-model identification, actual coupon usage can be
> restricted to only those certified boxes listed on the aforementioned
> centrally maintained database. All attempted uses would be tracked
> systematically under standard bank-type security measures whether
> accepted or denied. While educational program monies with manufacturer
> aided markings of agreed unifying marks (graphical symbols) could
> facilitate consumer selection, we believe consumers will also benefit
> from access to informed manufacturer or sales personnel at retail
> point-of-purchase. Note, we are not necessarily restricting retail
> point-of-purchase to only brick and mortar, but recognize that
> information and knowledgeable service can also be provided over the
> phone and Internet by remote retailers.
>
> Unless standard boxes include all the variety of connections and
> configurations introduced on televisions over the past several
> decades, this may be the area where the manufacturer and retailer
> community see their opportunity to differentiate themselves from their
> competitors. We perceive the general educational program focused on
> letting customers know that assistance is available for them to
> purchase boxes that will enable them to continue to receive service,
> however, manufacturers and retailers may also sell additional boxes or
> models with added features that extend beyond the subsidy program
> which are not eligible for coupon usage. A unifying service mark could
> be used to easily alert consumers of potential inclusion, but
> consumers might be well advised to seek further expertise to better
> understand their options.

Retailers of course benefit from identification with carrying popular
and publicly promoted manufacturer brands. Retailers often jointly
participate in manufacturer promotions, offering their own added store
discount or co-promoting a coupon that can be used only at their store
for the highly recognized brand item. Manufacturers will carefully plan
and provide additional monies and incentives to assure that the promoted
product is in inventory, might be promoted in the store's individual
advertising circulars, receive the best shelf space, secure the
attention and knowledge of in-store sales and support staff including
cashiers, and perhaps be supported by in-store signage, end-of-lane
display, or even broadcasted over the in-store speakers. In a number of
trials, excellent results have been obtained from in-store visual
broadcasts. District and store personnel will often be provided heads-up
awareness and training of planned manufacturer advertising and external
promotional campaign components. Staff might even be given pins to wear
or special incentives.

The key for highest sales lift is that the coupons are only one
component to the overall sales or promotional campaign, and are
carefully coordinated and orchestrated with all other components of the
campaign from initial public awareness to final sales delivery in order
to optimize the program's effectiveness and ROI (return on investment).
We believe the same kind of retailer planning, coordination,
communication, and program execution should be applied for the DTA
converter boxes that are eligible for the subsidy. SVS views this to be
key elements of both Consumer Education and Retailer Certification. SVS
views the development of the Coupon Program to be a public-private
partnership that will require the active input, planning, and execution
cooperatively by all stakeholders.

Some of the tools and technologies that a stored-value service provider
like SVS would bring to the eligible converter box deliverable involve:

-   The unifying artwork, copy and design of the stored-value card and
    carrier (snap-out) that can:

    -   draw public awareness and attention to the need to act;

    -   provide information to the holding household about the necessity
        for and the installation of a converter box;

    -   provide suggestion of the types of places where eligible boxes
        might be obtained;

    -   guide consumers on the features that a certified standard box
        can provide;

    -   emphasize the limited period of time the consumer has to act in
        order to use the subsidy for purchase of an eligible box.

-   The in-store, point-of-sale coupon authorization process which
    enables the automated matching, verification, and validation through
    integrated:

    -   presentment of the stored-value card;

    -   scanning of the purchased item bar-code UPC code;

    -   item-specific verification that the item being purchased is
        eligible as an approved item meeting the program certified
        standards;

    -   assurance that the verified eligibility item list is the most
        current and up-to-date;

    -   printing on both the consumer and store copy of the receipt hard
        copy information detailing the transaction and specifically
        identifying by manufacturer UPC and description of the eligible
        item purchased;

    -   ability to print-out a reasonable-managed list of eligible boxes
        certified for subsidy.

SVS' Analytical Reporting packages and query tools could be tapped to
timely record, monitor and assess in an automated systematic manner,
household use of issued coupons on a store-by-store, store chain, store
type classification, and geographic basis. SVS could use the coupon card
request and fulfillment data to highlight and alert NTIA and retailer
management of designated market area potential demand and unused issued
coupon balances.

SVS currently markets and provides a product called CIMS where SVS will
provide its retail clients with gift card inventory management,
warehousing, direct to store distribution, and auto replenishment down
to the store and SKU levels. The product's automatic replenishment (AR)
functional tools allow SVS to ship and assure product is available where
it is needed. SVS' standard offering provides a "URL web address" for
its retailer home offices and remote locations to access critical card
fulfillment data in a real-time mode. SVS provides a full compliment of
fulfillment reports to its CIMS clients.

In short, CIMS is a site/store service that manages SKU level inventory
and fulfillment that is driven by min/max parameters set by the client
and assists in production forecasting and inventory management. This
same system linked to coupon card production could prove extremely
valuable in providing a data-driven vehicle so that an adequate number
of eligible boxes are made widely available in a designated market area
for households to purchase with coupons by and during the transition
period. This, however, assumes that manufacturers will make available
and produce in sufficient quantities converter boxes that meet NTIA
standards, consumer, and retailer preferences.

# Retailer Certification

> From an educational perspective, the overall program must prove
> attractive across the retailer community so the message can assure
> that eligible boxes will be widely available to consumers in their
> home communities as well as via mail-order or Internet if so desired.
> We believe consumers might find comfort in knowing that retailers they
> have come to know and trust, both nationally recognizable or
> historically located in only their community have agreed to
> participate. What SVS is cautious about involves retailer
> certification criteria and whether such criteria will require some
> discretion as toward demonstration of some experience in the consumer
> electronics realm. Conversely, will manufacturers be able to offer
> certified boxes for sale at non-traditional consumer electronics
> outlets, essentially opening up potential purchases at the corner
> market. We believe, retailer certification needs to be more
> discerning, however, we can and will administer a systematic approach
> widely across the retail community as deemed appropriate within the
> final rules.
>
> As previously noted, SVS under a stored value coupon card approach can
> systematically restrict coupon usage to only authorized store
> locations. One of the advantages of such an approach is that coupons
> can be securely used by eligible households to purchase and redeem at
> brick and mortar locations, as well as mail order and Internet
> retailer sites. Commercial, off-the-shelf solutions are available at
> extremely low cost for both large and small retailers, and
> specifications and assistance would be available for retailers wishing
> to integrate on their own existing ECR/POS hardware infrastructures
> following ISO and ANSI standard transaction sets.
>
> The educational campaign would of course send the message that use of
> the coupon can be made at only authorized or certified stores under
> the special coupon program. Consumers could be educated to look for
> the unifying program mark indicating retailer participation. Again we
> would hope that retailers would view program participation as
> attractive and actively promote such participation. Similarly we hope
> that retailers prominently display the unifying mark at the
> point-of-purchase and on doors where appropriate.
>
> Specifically related to a stored value card approach, we understand
> that card based programs such as debit, credit and gift already
> account for the majority of purchases at current electronics
> retailers. EBT card type programs such as food stamps have now
> successfully rolled out across all fifty states. Studies indicate that
> participants, even those thought previously to be apprehensive to
> technologies, strongly prefer card solutions to previous paper
> coupons. Preference for card coupons over paper coupons is now being
> shown in the popular cents-off coupon market.[^62] We do not believe a
> card coupon will prove to deter retailer participation, but in fact
> conversely have reason to believe it will increase retailer
> participation.
>
> SVS with its vendor team (see On-Card example below as one vendor
> example) have the ability when fulfilling household requests to print
> on the mailed pop-out card carriers individual local maps of
> participating retailers triggered off the geographic address of the
> household. In the mail-out piece, information could also indicate
> where consumers can call via phone or visit on the Internet to locate
> participating retailers in their neighborhood.
>
> ![](media/image3.jpeg){width="5.25in" height="3.825in"}[^63]

Reference is made in the proposed NPRM under section F, Retailer
Certification that retailers are "typically familiar with coupon
programs and have systems in place to process coupons." While this is
generally true, we do not believe couponing is as common in electronics
retailers as for instance in grocery, convenience, or drug stores.
According to CMS, Inc., while declining, supermarkets still account for
the bulk of coupon redemption, ("declining from 85% in 1993 to 78% in
2002"[^64]). As grocery spending shifted to non-traditional shopping
channels, coupon redemption also moved to mass merchandisers, discount,
variety, dollar, and convenience stores.[^65] While converter boxes may
well be found and sold in mass merchandisers and discount stores now
more accustomed to handling coupons, consumers may gravitate toward
high-profile electronics dealers and chains along with more localized
specialty service providers, which in particular we believe are not as
familiar with handling coupons.

Industry studies have found high value coupons to be more likely
targeted for fraudulent activity or misredemption. Electronic item
promotions have tended to transact under mail-in rebate offers, which we
have previously noted represent a particularly troubled area for waste,
fraud and abuse. Electronics retailers will be more accustomed and
programmed at the point-of-sale to print out long receipts with
instructions on how and what is needed to file a mail-in rebate along
with a duplicate receipt to file with the mail-in. Unlike standard
coupons, where retailers through retailer agents and clearinghouses
perform the redemption process, mail-in rebates are filed and sent by
consumers to directed rebate-processing houses.

Correspondingly, one of the big areas of fraud on the latter involves
the submission of non-receipt claims, (e.g., where consumers themselves
claim they never received their rebate generating yet another rebate).
Instant savings or in-store rebates are now being combined with mail-in
rebates, because another key difference between traditional couponing
and rebate programs is that the consumer has the coupon value subtracted
from their required payment whereas the consumer has to pay the full
amount for the purchase under a rebate program and then experiences
often a significant delay before the rebate monies are received. And,
there have been many reports and studies that a significant percentage
of consumers never file for their rebates, fail to properly file the
correct paperwork, or fail to timely file for the rebate thereby never
receiving the targeted rebate benefits. While the latter if applied to a
DTA subsidy coupon might lower program costs, it would not serve the
legislative intended purpose of the program. We would suggest that mass
merchandisers and discounters are not as comfortable or geared in their
systems and checkout operations to handle mail-in rebates as electronics
chains might be.

Internet coupons have risen in popularity and frequently involve
electronics promotions. Based on commentary presented in the proposed
NPRM, RFI and Questions/Answers indicating that traditional rebate and
Internet coupon proposals would be viewed as non-responsive[^66], NTIA
already recognizes the many shortcomings in such processes and their
high exposure to waste, fraud and abuse. The intent of our commentary
here is to suggest that retailers in the electronics industry may not
have as much familiarity with coupon programs and have efficient store
procedures and processes to accommodate as might be envisioned. Our
conversations with the retail community indicate a strong preference
toward use of a stored value card solution.

Contrasting traditional coupons with the plastics medium, we would
suggest that households and consumers have grown quite accustomed to
using card payment vehicles. Where supermarkets lead coupon redemption
volume in nearly all methods of coupon distribution[^67], plastics have
accelerated in their acceptance and use at leading grocers. Kroger
reported that in 2003, electronic payments comprised more than 50% of
Kroger's sales for the first time. In 2005, over 60% of Kroger's overall
transactions were being made via credit or debit cards[^68]. When we
first introduced EBT for social service programs such as Food Stamps in
the late eighties and early nineties, it was feared that this recipient
population consisting of higher proportions of the disabled,
lower-income, less educated, high numbers of seniors, and less mobile
(sometimes including home-care) might not easily adapt, be familiar or
even have an aversion to use of technology or new payment vehicles such
as cards. Intense evaluations performed for FNS found this not to be the
case. Today, we understand that EBT card technologies have displaced
paper food stamps across all fifty states.

At mass merchandisers and discounters such as Wal-Mart, K-Mart, Target
and Sears, card technology has been in place for more than two decades
and often account for the majority of payment tender. In the electronics
retail chains such as RadioShack, Best Buy, Circuit City, and HH Gregg
we believe card transactions also account for the majority of payment
tender. Although many of these are being co-branded or transitioned to
the more recognizable bankcards, electronic retailers along with home
improvement and discounters have a history in offering private label
cards, which often accounted for a quarter to one third of sales.[^69]
Store personnel are accustomed and infrastructure is commonly in place
to handle and process magnetic-stripe cards. Mass merchandisers and even
specialty stores have now tapped their checkout and in-department credit
and debit card equipment and infrastructure to respond to the explosion
of gift card popularity. For the past two holiday seasons, gift
stored-value cards have become the number 1 gift of choice nationwide,
even over apparel or electronics, (2004 Pre-holiday Top Gift Choice
Items: #1 Gift Cards 64%, #2 Apparel 63%, #3 CDs and DVDs 56%, #5 Toys
and Games 41%, and #7 Money 32%)[^70].

Today, gift card recipients swipe their stored-value cards just like
another credit or debit card held in their wallet. For the 2004
holidays, the average US household purchased 2.4 gift cards and received
2.5 cards. Twenty-one percent of those received were from mass
discounters and 24% from specialty stores. This year, 2006, gift card
(stored-value) sales are expected to exceed \$100 billion. SVS is now
experiencing an explosion in its mass marketing product targeting gift
and loyalty card programs at small mom & pop stores. Stored value card
solutions are not limited to major chains, but are rapidly being
deployed at stores of all sizes, types and locations. As an alternative
to credit and debit with growing bank fee structures, stored value card
applications also offer significant economic advantages to both
retailers and consumers.[^71]

Before we describe how coupons might be accepted under a stored value
card approach, we believe NTIA needs to be aware and concerned about
another important retail trend that will become important during the DTA
subsidy timeframe. Self-service has gone mainstream in supermarkets,
supercenters, warehouse clubs, home improvement centers, and now a new
wave is expanding into convenience stores.[^72] Some of the findings
from the referenced 2005 North American Retail Self-Checkout Study and
newspaper articles[^73] include:

-   94% of all respondents have tried self-checkout,

-   Men are 60% more likely than women to use self-checkout on nearly
    every trip to the store,

-   Kroger in Atlanta says that 40% of its transactions are going
    through self-checkout,

-   Home Depot estimates that 39% of all its transactions go through
    self-scan checkouts,

-   In a study released by IHL Consulting reported in the Atlanta
    Journal Constitution, consumers scanned \$70 billion worth of
    self-service transactions in 2003, that amount will quintuple to
    over \$330 billion by 2007.

-   Self-scanning is rapidly expanding from airports to hotels, in
    convenience stores and fast food outlets, in retailers where a small
    number of highly visible items are purchased at one time, and soon
    even at the US post office.

The \# 1 complaint about the systems is the need for employee
intervention. While some self-service systems are equipped and attempt
to handle paper coupons, a host of new concerns and issues can arise
including basic compliance such as have the coupons expired. Although
the coupon industry added an Extended Code in 1998 and intend to
transition to possibly RSS technology in the future, the basic Coupon
Bar Code contains a Company Prefix, Family Code, Value Code, Offer Code,
and limited options[^74]. It's these very limits and required manual
interventions that have retailers and manufacturers looking for other
solutions and the coupon industry seeking to re-engineer the coupon.

Stored value cards, in turn, have become the media of choice for
incentive, loyalty, co-branding and partnership marketing. We believe a
stored value card approach offers in the area of coupon acceptance of a
NTIA coupon subsidy program the ability to:

-   Greatly reduce consumer fraud through CVV (card verification value)
    technology and the use of artwork and card design properties, (the
    CVV is a cryptographic checksum generated from the data on the
    magnetic stripe that uses a secret key and triple-DES (data
    encryption standard) algorithm which are verified in a secure device
    at the SVS host site, whereas paper coupons can be easily and
    cheaply reproduced with common scanning technology making them
    highly vulnerable to counterfeiting, misuse and fraud);

-   Provide a more secure vehicle to facilitate verification by the
    retailer that the presenting household is indeed the eligible
    household certified to use the coupon subsidy;

-   Assign, print and encode on the magnetic-strip a primary card number
    (PAN) in accordance with industry standards that will allow specific
    tracking of each issued coupon corresponding to a certified
    converter box purchase;

-   Allow the additional assignment of a PIN (personal identification
    number) if desired for recipients to enter at the point-of-sale
    which together passed only in an encrypted state with the
    recipient's PAN can incorporate standard bankcard industry security
    minimizing WFA associated with lost or stolen coupons, (paper
    coupons, even serialized coupons, would be extremely cumbersome for
    retailers to manually avoid misredemption of lost or stolen
    coupons);

-   Allow certified households and recipients a secure vehicle to
    replace lost or stolen coupon benefits through standard industry
    practice card deactivation and replacement processes (whereas with
    paper coupons either the needy household would lose its intended
    assistance or added non-intended coupon issuance costs would be
    incurred by the subsidy program);

-   Prescribed benefits usage would be restricted through the on-line
    host authorization process to systematically prohibit household
    recipients from using more than the one or two prescribed box
    coupons determined for the specific household;

-   Coupling retail POS with the attached or integrated UPC scanning of
    a certified converter box purchase, recipient consumers would be
    systematically prohibited from using a coupon to purchase any device
    other than a converter box certified pursuant to the DTA subsidy
    coupon program;

-   Requiring that each purchase be validated by an item-specific UPC
    scan and authorization against only certified converter boxes for
    each coupon use would systematically prohibit coupon holders from
    using two coupons in combination towards the purchase of a single
    DTA converter box;

-   Meet the retailer need to have a systematic process in place to
    prevent consumers from returning a converter box to the retailer for
    a cash refund or for credit towards the purchase of another item,
    (i.e., converter box purchases with card coupon subsidies would be
    detailed on the printed consumer receipt copy required for
    presentation in attempted return for cash or non-certified box
    exchange. Presumably, cancel or void coupon transaction capability
    would be desired to provide retailers with the ability to address
    service interruptions or restore error situations at retail
    point-of-sale knowing that all such transaction activity would be
    fully documented, tracked and subject to audit scrutiny.

> NTIA could provide retailers with the ability to request or transact
> reloading of a household prescribed benefit for the return of a
> certified converter box as a matter of desired policy or to deal with
> situations involving damaged box returns when out-of-stock inventory
> prevents the retailer from being able to perform a like certified
> exchange. This will also allow recipients to receive back the cash
> portion of their split tender, yet prevent the retailer or recipient
> from converting the \$40 coupon to cash without a corresponding
> eligible box purchase.

-   Print both a customer and merchant hard copy receipt fully detailing
    the accepted coupon transaction including identification of the
    presented card (recommend printing only the last 4 digits of the
    associated cardholder), merchant ID, name, and store location
    (including both the store address and phone number), cashier user
    ID/lane, time, date, number of coupons used or denied, details of
    the item-specific (UPC) converter box purchased or denied identified
    numerically and by understandable description, the balance of any
    remaining unused coupon benefits, and on the merchant copy
    additional processing details such as purchase start time, end time,
    communication connect time, total transaction length time, and any
    related error messages.

-   Record at the SVS centralized host all attempted as well as accepted
    coupon usage transaction detail including identification of the
    cardholder, merchant, specific-item accepted or denied, date, time,
    cashier/lane ID, and related system performance detail.

-   Enable communication messages to be provided for display or printed
    on the consumer cardholder's receipt. Messages could reflect
    selected standard messages or provide for individual tailored
    communication to the specific cardholder.

-   Lend adaptation following common bankcard processes to facilitate
    'non-card present' transaction tender (coupon acceptance) to
    facilitate secure and acceptable handling of certified converter box
    purchases via mail-order, phone-order, or Internet-based merchant
    sales, (paper coupons would not be readily adaptable to support such
    sales without substantial exposure to potential waste, fraud and
    abuse even if serialized coupons were deployed and some form of
    centralized database were attempted to be maintained).

-   Systematically establish, assure, and document what is expected and
    required for a certified retailer to meet its obligations to honor
    and accept all valid subsidy coupons that are tendered in the
    authorized manner.

-   Provides accepted industry best practices for accepting,
    authorizing, transacting, and recording retail point-of-sale tender
    minimizing coupon handling burden on participating retailers and
    consumers while minimizing waste, fraud and abuse in an efficient
    and cost effective manner for NTIA.

We would propose that a stored value card solution would also offer
substantial advantages for the redemption component, which would include
the ability to:

-   Systematically only submit subsidy coupons for redemption as a
    result of purchases made for converter boxes certified by NTIA, (due
    to the integrated POS purchase, item-specific UPC scan
    authorization, and coupon validation);

-   Automatically submit detailed coupon information on both attempted
    and accepted coupons electronically accurately accounting for the
    at-point-of-purchase transaction to NTIA including detail on both
    the eligible household and the specific purchased converter box, not
    only within 30 days after the coupon was used to purchase a
    converter box, but daily and in accordance with generally accepted
    accounting practice and SAS 70;

-   Following centralized on-line authorization back to the retail POS
    terminal automatic creation of in-store electronic batch detail of
    completed DTA subsidy coupon purchases, (SVS retail terminal
    application provides for the continued cycling of three sequential
    back-up batch files in addition to the current open batch which
    retailers can elect to correspond to end-of-day, end-of-shift, or
    business cut-off sequence to facilitate their own in-store and
    corporate financial reconciliation);

-   Print in hard copy both a customer and merchant copy receipt
    detailing the coupon purchase including detail on the item-specific
    converter box authorized, identification of the recommended last
    4-digits of the cardholder, specific information on the merchant
    name, location, cashier/lane, phone number, date, time, and added
    messages as desired, as well as reasonable assurance through
    customer PIN entry (like a debit) for customer verification that he
    or she did complete the transaction;

-   Facilitate not only within 60 days but next day reimbursement of
    retailers through standard bank retail settlement and reconciliation
    processes;

-   Provide retailers and the NTIA best practice retailer system
    solution to minimize waste, fraud and abuse; and

-   Extends this best redemption practice retail system to potentially
    mail, phone and Internet-order sales vendors.

> With regard to the audit requirements for the Program, in the Coupon
> Industry Survey[^75] conducted by a task force of the coupon industry
> to gather information for coupon reengineering initiatives, retailers
> cited numerous issues with paper coupons:

-   Family codes are incomplete and difficult to maintain,

-   Current POS systems do not handle double coupons properly,

-   Counterfeit coupons are hard to detect,

-   Frequent coding errors occur from incorrect value codes and complex
    offers,

-   Too many chargebacks and requests for proof of purchases are made,

-   Inaccuracies, and

-   Current system takes too much time to process for payment.

Manufacturers complained that:

-   Paper coupons provide inadequate audit and verification trails,

-   Only a low % of retailers scan and validate family code level,

-   Redemptions occur way past the expiration date,

-   There is too much inaccuracy in reporting,

-   Retailers reproduce coupons without consent of the manufacturers,

-   Retailers lack compliance with using as presented,

-   There are count and value differences in the 2-count system,

-   Wholesalers don't care if they pay for misredeemed coupons,

-   The current process takes too long,

-   Family codes do not match specific products, and

-   Coupons are redeemed for items not even carried by the store.

Perhaps the primary burning issue for manufacturers was that they want
to know what was purchased and current coupons systems do not provide
this information. This is stated as one of the primary objectives of the
NTIA subsidy coupon program. As surveyed manufacturers noted, paper
coupons simply do not provide adequate audit and verification trails. As
a result, industry members are turning to new and alternative couponing
solutions. Critical to providing adequate audit and verification trails
are some form of integrated electronic validation between coupon
presentation and item-specific purchase. SVS' stored value card and
item-specific point-of-sale authorization system provides such an
integrated electronic solution. In addition to the redemption related
features noted above, key audit and reporting functionality includes the
ability to:

-   Instantly record and validate at a centralized SVS Host system
    electronic detail of all attempted and transacted purchases along
    with detailed sales information related to coupons used in the
    purchase of certified converter boxes for NTIA reporting, query,
    audit, forecasting, analysis, and use in enabling NTIA to make
    adjustments or improvements during the course of the subsidy
    program;

-   Follow standard banking transactional practices that have been
    proven and are annually audited for compliance with generally
    accepted accounting practice and SAS70,

-   Store or archive sales information to meet proposed 1-year retention
    requirements in both paper and electronic media (SVS retention
    requirements are actually much longer);

-   Systematically provide a vehicle that facilitates both on-site and
    remote audit in real-time not only of individual transaction detail
    but specific retailer transaction velocity or overall system
    analytics, (see SVS Analytical Reporting below);

-   Provide a systematic vehicle to additionally scan, capture and
    record in electronic media a serialized manufacturer code associated
    with each manufactured certified converter box which could be
    utilized to add further manufacturer, retailer and household
    accountability since both the perception and means would be
    available and made known to match and identify any exceptions of
    duplicate, missing, exceeding permissible quantity, impermissible
    exchange, or other related forms of misredemption. Note that adding
    the scan, capture and transmission of a manufacturer serial number
    (not the item-specific, UPC authorization we were referring to
    previously which are part of WIC X9.93 standards) to a POS
    transaction is non-standard to current POS processes and transaction
    field entry. Therefore, systematic modifications would have to be
    made to POS procedures, X.9-type standard transaction sets, and
    transaction processing; however, it is not without precedent (i.e.,
    common in the warranty and reverse logistics business). If NTIA
    wanted to potentially entertain this latter check, a more readily
    means to scan the manufacturer serial number would also be
    desirable. This validation is offered for discussion as a possible
    expanded element.

NTIA rules for comment propose that participation by retailers will be
voluntary and that retailers who choose to participate will not be
compensated by NTIA. To participate, however, retailers will have to
demonstrate that they can redeem NTIA subsidy coupons expeditiously and
efficiently. The rules also propose that to participate retailers would
certify, under penalty of law, that they:

-   "Provide information to customers about the necessity for and the
    installation of a converter box";

> While information can be printed or contained on a coupon, carrier or
> collateral information, this requirement would appear to focus less on
> the coupon system and more on the educational campaign, application
> process, retailer knowledge and experience in consumer electronics,
> and retail promotion and sales process. Retailer input and active
> participation is critical. Ease of participation and perceived ability
> to make a profit will assure retailer voluntary enrollment. Of
> particular interest to us as a potential service provider, does this
> requirement intend to limit retailer participation to only those
> retailers able to prove knowledge or experience in consumer
> electronics?

-   Have in place systems that can be easily audited as well as systems
    that have the ability to prevent fraud and abuse in the coupon
    program;

> Paper processes provide inadequate audit and verification trails.
> While paper coupon design and best practices provide some protection
> from fraud and abuse, they will provide far less protection than more
> automated system approaches such as electronic offerings and stored
> value card approaches. The concerns raised are how will retailers
> assess such risk in voluntarily participating, how will they be held
> accountable, will NTIA simply withhold individual or some percentage
> of redemptions, and how will retailers counteract their position. In
> the commercial sector, retailers have sometimes deducted manufacturer
> chargebacks or failure to timely make redemptions from their
> manufacturer vendor invoice payments. Without commenting on the
> frequency or appropriateness of the prior practice, since NTIA will
> not be distributing or manufacturing the converter boxes, retailers
> will not be able to take this remedy. Retailers will therefore choose
> to participate because they inherently have more confidence in the
> accuracy, integrity and efficiency of the NTIA coupon subsidy program.

-   Are willing to be audited at any time during the course of the
    coupon program;

> Being willing to be audited does not assure that NTIA will be able to
> effectively and efficiently conduct such audits. Retailers already
> complain about increasing push back by manufacturers requesting POP
> (proof of purchase).[^76] Manufacturers point out retailer inability
> to match coupon usage to specific product purchase. Again retailers
> have a way to offset manufacturer push back in current commercial
> coupon processes, which will not be available to them under the NTIA
> program. Without a more automated approach, retailers may simply
> choose to not participate in the NTIA program.

-   Have the ability to electronically provide NTIA with sales
    information related to coupons used in the purchase of converter
    boxes, specifically tracking each serialized coupon by number with a
    corresponding certified converter box purchase;

> First, the traditional coupon bar code does not hold an individual
> serialized number. Options now allow a household ID and extended code
> implemented in 1998 are targeted to provide better validation of the
> consumer's purchase, however, many retailer POS systems do not
> validate such coding nor target specific capture and reporting of such
> detail. Retailer agents or coupon clearinghouses could provide NTIA
> with requested sales information, but such information would not be as
> timely nor complete as what would be reported in an automated coupon
> system. This shortcoming is a major targeted enhancement of the
> current coupon reengineering efforts, but such capabilities are not
> widely in place in the short term. Retailers and manufacturers have
> emphasized the need to secure more electronic clearing capability in
> the current paper processes.
>
> A stored value card approach would allow such information to be
> audited real time including monitoring various activities around
> exceptions reporting to highlight events outside expected parameters
> such as retailer transaction velocity. The stored value card approach
> will also provide NTIA with a daily cumulative account of redemptions
> to date, issued but unredeemed coupon benefits, expired coupons
> issued, and coupon requests in process for continuous budgetary and
> fiscal program management.

-   Will only submit coupons for redemption as a result of purchases
    made for converter boxes certified by NTIA.

> Under standard paper coupon processes, this may be the most difficult
> requirement for retailers to certify and NTIA to audit. Even common
> bankcard processes focus only on \$'s of the total transaction payment
> tender. Stored value card applications centered on loyalty, point
> reward, item-specific authorization, and EBT applications such as WIC
> have led the introduction of automated checking and matching of
> detailed elements of the purchase as opposed to authorization of the
> final payment amount. Electronic retailers may be less familiar with
> such systems as other retailer types and will likely prove more
> comfortable making such certifications when an endorsed system is made
> available.

In addition to these five proposed certifications, the rules propose to
require retailers to adhere to and enforce certain restrictions
contained in the Act such as:

-   Prohibiting coupon holders from using two coupons in combination
    towards the purchase of a single DTA converter box;

> As noted in the Coupon Industry Survey[^77], manufacturers complain
> that retailers do not match coupons to specific product purchases and
> retailers submit coupons for redemption on items not even carried in
> the store. Thus, a retailer could attempt to redeem coupons that may
> have been doubled up on a previous or single DTA box purchase unless
> an automated system is validating and tracking each item-specific
> purchase. Sometimes retailers do not like the constraints imposed by a
> system that more readily holds and exposes them to detection if they
> circumvent the intended rules. Conversely, to protect them from
> penalty of law, we perceive retailers will prefer to be able to point
> to an endorsed system designed to meet the rules criteria associated
> with soliciting their voluntary participation.

-   Prohibiting consumers from using coupons to purchase any device
    other than a converter box certified pursuant to the rulemaking;

> Again, current paper coupon processes do not adequately assure that
> only specific approved products are purchased with a coupon.
> Item-specific authorization of only eligible boxes at the point of
> purchase with the coupon systematically will be better able to
> prohibit misredemptions and assure adequate trails for verification.

-   Preventing consumers from returning a converter box to the retailer
    for a cash refund or for credit towards the purchase of another item
    (limiting returns to even exchanges);

> Subsequent attempts by customers to return a coupon-purchased
> converter box for cash refund or credit towards purchase of
> non-authorized items could be quite difficult to prevent or discover
> if retailers do not require and validate previous purchase receipts
> under paper-based coupon processes. SVS' item-specific authorization
> receipts provide specific detail highlighting electronic-coupon type
> purchases and require entry of a return reference number (RRF) from
> such receipts to cancel, void or reverse a previous specific
> transaction. Under the NTIA subsidy coupon program, such transactions
> could be prohibited except under specified error condition situations.
> NTIA could also provide retailers with the ability to request or
> transact reloading of a household prescribed benefit for the return of
> a certified converter box as a matter of desired policy or to deal
> with situations involving damaged box returns when out-of-stock
> inventory prevents the retailer from being able to perform a like
> certified exchange. This will also allow recipients to receive back
> the cash portion of their split tender, yet prevent the retailer or
> recipient from converting the \$40 coupon to cash without a
> corresponding eligible box purchase.
>
> Further adding the entry of a unique manufacturer serial number
> associated with each converter box purchase coupled with the
> serialized household identification of each coupon usage would provide
> the ability to either prevent during authorization or highlight for
> exceptions reporting subsequent to the purchase attempts or purchases
> of a specific converter box against more than one household coupon.
> Thus, if a retailer subsequently took back into stock a box previously
> purchased with a NTIA subsidy coupon and in turn attempted to resell
> it to another NTIA subsidy coupon holder, the attempted or duplicate
> redemption against the same manufacturer serialized ID could be
> systematically prohibited or identified. We are not aware that this
> capability exists under standard paper coupon processing.

-   Requiring retailers to submit coupons or coupon information to NTIA
    for redemption within 30 days after the coupon has been used to
    purchase a converter box;

> Per the Coupon Industry Survey[^78], both retailers and manufacturers
> complain about the delays and extended timelines involved for payment
> under the current paper coupon system. Generally, redemption focuses
> around the printed expiration period with manufacturers allowing
> retailers an additional grace period such as 6 months to receive
> payment. While manufacturers will attempt to manage promotions around
> specific budgets and time schedules, leniency is extended. Retailers
> who electronically monitor in-store coupons are able to control
> expiration and redemption periods. However for paper coupons, coupons
> have to be collected from cashier drawers, bundled at individual
> stores, batched again at regional or corporate locations, sent to
> retailer agents, and then submitted to manufacturer designated
> locations or clearinghouses when sufficient quantities are
> accumulated. The process is too labor intensive and cost prohibitive
> to settle out in small batches daily or even weekly by many retailers.
> Furthermore, coupons may not be individually stamped with the date of
> specific purchase for the NTIA to even validate. Conversely,
> electronic clearing programs such as stored value card approaches can
> be monitored real-time and provide for daily redemption. Furthermore,
> the NTIA as the program administrator would have a daily cumulative
> accounting of expended funds versus program appropriations.

-   Reimbursing retailers within 60 days after receiving sales
    information related to converter boxes purchased with coupons;

> While substantial delays may occur from distribution and usage to
> presentment to designated manufacturer redemption points, settlement
> takes place fairly shortly thereafter for paper coupons. To speed up
> payment, the industry has implemented new "one-count coupon" and
> "quick pay processing".[^79] Under "one count", coupon data is
> captured at the first count at retail clearinghouses instead of the
> second count previously conducted at the manufacturer's agent. The
> data is then transferred electronically between the retail
> clearinghouse and the manufacturer's agent. In exchange for
> accelerated payment, retailers and manufacturers agree to new process
> guidelines and tolerances to reduce previous settlement disputes or
> retailer invoice offsets.
>
> Under "quick pay processing", after coupon information is sent
> electronically to the manufacturer, the manufacturer or its agent will
> then use EFT to pay the invoice, and then adjust the quick pay payment
> from the future manufacturer's payment after the physical coupons are
> processed in the normal two-step process. Reconciliation and exception
> processing becomes more intense as upfront payments must be reconciled
> with all the later debits, credits, and chargebacks. The objective
> under both programs is to speed up delivery of financial information
> and cash flow. Payment is made to retailers before final settlement
> and resolution of coupon redemption.
>
> The proposed 60 day delay in reimbursement to retailers after receipt
> of sales information in our opinion is excessive, unnecessary and
> could prove to be a major disincentive for retailers to voluntarily
> participate in the DTA subsidy coupon program. Retailers are already
> being asked to acquire and inventory certified boxes. With \$40
> coupons expected to account for 80% of the \$50 price of the box,
> retailers should not be expected to incur possibly 30 days for
> redemption presentment and another 60 days for payment. Without
> knowing procurement and stocking lead times, payment policies should
> encourage retailers to have sufficient stock on hand to meet eligible
> household demand.
>
> With defined coupon expiration periods and the possibility that
> fulfillment could fall short to demand and benefit those on a first
> come first serve basis, rural households could become disadvantaged as
> a result of the proposed 60 day reimbursement delay. We had understood
> that one of the objectives of the program was to incite households to
> act quickly before service was cut-off. A 60-day delay in
> reimbursement to retailers runs counter to such objectives. In the
> commercial sector and government supported electronic benefit programs
> such as food stamps, WIC, family assistance, and related social
> service benefits, both retailers and overall settlement of the system
> is done daily consistent with business operating days of the Federal
> Reserve. A stored value card approach can support next day retailer
> and total system settlement and reconciliation consistent with
> standard retailer and banking system best practices. We believe the
> closer financial accountability and settlement is moved to real-time
> and daily reconciliation, the less opportunity there will be for
> financial waste, fraud, and abuse in the system.

-   Honoring all valid coupons that are tendered in the authorized
    manner;

> It is difficult to obtain good information on the number or amount of
> paper coupons dishonored at retail point-of-sale. Unless a household
> takes the extra time to go to customer service or requests the
> assistance of a manager, individual cashiers largely determine coupon
> acceptance at checkout. Expansion of self-service or 'U-scan' checkout
> is adding a new point for disruption in coupon acceptance.
> Manufacturers are further removed, relying on customer complaints to
> record and classify instances of customer use problems.
>
> In an electronic card coupon presentment system, the NTIA will have
> real-time records of all attempted usage of DTA subsidy coupons
> including the reason code classification, time, place, household ID,
> cashier/lane Id, and the specific converter box for all denied as well
> as accepted attempts for purchase. The NTIA would therefore have
> timely data to assess retailer acceptance and performance in meeting
> their agreed obligations under the program. This would be
> substantially more difficult to accomplish in a non-electronic
> transaction environment.
>
> Under any program approach, a convenient and easily accessible process
> will need to be made readily available for eligible households to
> register service problems, complaints, and seek quick assistance. SVS
> believes the latter will be an important component of its public
> awareness and education program, a key element in the design of its
> card and carrier printed communications, a critical piece of retailer
> and customer service training, and part of the overall system and
> human interface design and implementation to facilitate timely
> assistance with good recipient effect.

-   Creating a coupon process that prevents waste, fraud and abuse,
    while minimizing the burden on participating retailers and
    consumers.

> First, the reason gift card stored-value solutions have so rapidly
> been accepted by the retail community across both national chain and
> mom & pop operations is its integration and congruence with existing
> standard bank payment processing systems. Even more attractive is the
> ability to extend the solution over a closed-loop system thereby
> AVOIDING high bankcard interchange and third-party transaction
> fees[^80]. Retailers can elect to receive specifications to add the
> additional DTA subsidy coupon tender to their existing POS/ECR system
> or receive a standalone, side-by-side POS terminal solution.

In Appendix A, Initial Regulatory Flexibility Analysis, by the Acting
Assistant Secretary for Communications and Information, issued with the
associated proposed rulemaking process, under the section E and titled
Alternatives to Minimize Burdens, NTIA has "proposed a
self-certification for retailers for the various compliance
requirements."[^81] As further noted therein, NTIA states that,
"alternatively it could require a third-party certification process, or
institute a procedure whereby NTIA certifies the compliance process."
Per the required analysis, reference is made that "either option
includes additional steps in the certification process and therefore
would increase time and cost." We would concur, adding however, that not
pursuing either option would not necessarily relieve the program or
associated stakeholders with conducting similar additional steps and
most likely would add even increased time and cost, or possible program
delay.

Under EBT type programs like Food Stamp and WIC coupons, the state
social services agency will determine, certify and authorize individual
retailer participation. While SVS under an EBT service provider
arrangement will support the state agency in monitoring retailer
compliance, continued participation and authorization is managed by the
state. The EBT service provider is contracted to conduct retailer
training, provide ECR/POS integration specifications or an alternative
stand-alone POS terminal solution, conduct the agreed authorizations and
purchase transactions consistent with industry standards and defined
requirements, extend retailer specific reporting and customer service
assistance, and initiate retailer financial settlement and
reconciliation.

While retailer participation is defined as voluntary under the proposed
rules, we presume some form of legal agreement and certification process
will be needed to establish, define, stipulate, and enforce the roles,
expectations, requirements, rules, processes, relationships, and
covenants among the various stakeholders. In the EBT world, SVS'
contract is established with the state, which defines its relationship,
scope of work, obligations, and contractual remedies associated with how
it interacts and services the retailer community. Due to the financial
settlement obligations, this relationship extends further through the
parties established bank intermediaries. Obviously, however, it is the
strategic partnership and commitment that makes it work.

> In the commercial sector, SVS is accustomed to negotiating,
> contractually entering, certifying, and servicing its retailer
> merchants for coupon and card-related services directly. As part of
> the sales and implementations process, SVS has a team of professionals
> that perform such vital steps as:

-   Validating the legitimacy of the merchant and its authority to do
    business at the designated location;

-   Investigating how the prospective candidate does business and
    determining whether defined business criteria are met;

-   Evaluating the credit worthiness and financial strength of the
    business to assess our financial risk and exposure, and determining
    how the merchant pays its financial obligations;

-   Securing some form of written letter of intent to do business with
    each other and securing appropriate mutual confidentiality and
    non-disclosure agreements;

-   Documenting and reaching agreement on our scope of work for services
    to be performed;

-   Reaching final contractual agreement on our mutual obligations and
    remedies associated with the agreed scope of work, timelines,
    checkpoints, duties and responsibilities, and service performance
    requirements;

-   Recognition and good faith management of required change orders to
    facilitate unforeseen needs and changes;

-   Disciplined planning, testing, possible adjustment, and timely
    execution with good effect of agreed implementation and service
    transition plan particularly revolving around training, systems,
    equipment, supplies, banking relationship, and third-party vendor
    services;

-   Continuous monitoring, measurement and improvement of service
    performance;

-   Quick response to and appropriate escalated addressing of any
    potential fraudulent or criminal activity stemming out of the
    relationship or mutual obligations; and,

-   Good faith resolution and correction of any service or contractual
    shortcomings.

> The advantage that the state or related governmental authority brings
> to a certification process if it assumes the compliance requirements
> is uniformity, a public service mind ness, certain efficiencies, and
> timelines. Sometimes the state may also be in a better position to
> justify a denial or removal of a retailer from a public funded
> program. Conversely, if the agency was to approve and certify a
> standard, uniform, retailer agreement that would be deployed by the
> service provider for all voluntary retailer participants; then,
> similar uniformity, non-discriminating, public service mind ness,
> sign-up efficiencies and timelines could be achieved by the contracted
> service provider assuming retailer certification responsibilities.
>
> To further important public service mind ness interests, a Retailer
> Certification Advisory Group could be established providing membership
> to governmental agency representation, electronics retailer
> association representation, large electronics retailer representation,
> small electronics retailer representation, mass merchandiser
> representation, service provider representation, and possibly consumer
> representation. In addition to providing guidance, this group could
> service an appeal process for retailers denied participation during
> the certification process, but still wishing to participate. For the
> program to work, a strategic alliance and working partnership must
> occur among all stakeholders to minimize related burdens and assure
> all parties enthusiastically participate and promote the program with
> good effect!
>
> Finally, the procedural and technology-supported approach offered by
> the service provider can instill certain systematic discipline,
> control, and verification important to retailer certification. For
> example, in a stored value card approach, system design would require
> retailers to either implement integrated ECR/POS specifications on
> their existing platform infrastructure to leverage current hardware
> investments and certain enhanced process and reporting preferences, or
> install provided standalone terminal system at retail point-of-sale
> and customer service stations. Thus, before a coupon can be authorized
> against a certified eligible box, the SVS Host would have to establish
> that the submitting retailer and network terminal connection is from a
> valid, authorized retailer. Established POS industry standards,
> policies, practices, processes, and security measures independently
> audited for GAAP and SAS 70 conformance provide a level of best
> practices and proven technology that supports billions of dollars of
> commerce daily and under continuous Six Sigma quality management
> minimizes WFA.
>
> As noted in the previous paragraph, a stored-value card approach would
> require some form of transaction enhancement to existing ECR/POS
> equipment or the installation of a standalone terminal to perform the
> new item-specific authorization against the coupon card. The proposed
> rules as well as statements under Associated Costs of Section E in
> Appendix A[^82], both note that as part of the retailer certification
> process retailers wishing to participate must be able "to demonstrate
> that they have systems in place to redeem coupons expeditiously and
> efficiently". While the stated presumption is that retailers already
> have such systems and therefore would not have to purchase a new
> system for the coupon program, the proposed rules go on to further
> state that "the nature of this coupon program, however, may require
> participating retailers to assume additional costs associated with
> preventing fraud"[^83], which the notice indicated "such costs could
> not be estimated at this point of the rulemaking process"[^84]. The
> reality is that whether retailers elect to participate under a paper
> coupon process or a stored-value card coupon process, retailers will
> incur additional cost to handle and redeem the proposed DTA subsidy
> coupons.
>
> In our response to NTIA's RFI, we noted that retailers bear a
> significant cost to accept, count, reconcile, bundle, mail, submit
> through their corporate office or retailer agent their claim or charge
> to the various manufacturer agents, respond to proof of purchase
> demands, bear related bank fees and charges associated with final
> payment, carry the float or fund the substantial delay between the
> date of the item sale and multiple week delay in receipt of payment,
> and incur the deductions associated with substantial misredemptions,
> acceptance of expired coupons, or counterfeits. Noting that this
> program will not take the leniency often extended by manufacturers who
> want to promote sales of their product under manufacturer coupon
> programs and that the potential fraud and counterfeit appeal of a \$40
> coupon will likely far exceed the 15% abuse that occurs with coupons
> averaging around a dollar, retailers may indeed choose to not
> participate if they perceive such costs will exceed their potential
> margins attainable on sale of the standard boxes.
>
> Conversely, retailers may argue that they should not have to bear the
> initial cost to purchase a low-cost standalone terminal or
> alternatively the cost to program on their ECR/POS platform the
> additional item-specific transaction set so they could leverage their
> existing infrastructure across their network of stores. Argument might
> be made that the latter are part of the administrative cost of the
> program. Conversely, the statement was made that avoiding the loss
> associated with 1 counterfeit a month during the program would more
> than offset the cost of a standalone terminal. For larger chains with
> hundreds or thousands of stores, the cost to program the integration
> spread out across all its stores might be offset by avoiding just one
> counterfeit per store during the full eighteen-month period. We
> believe retailers will demand an automated, card-based solution when
> faced with assuming the additional costs associated with fraud.
> However, we would note that retailers are commonly paid by
> manufacturers to handle coupons, even though the payment falls far
> short of their costs and manufacturers are quite lenient in their
> misredemption policies. Thus, the NTIA may want to allot some portion
> of the administrative appropriation, perhaps on a per store location
> allowance, toward providing retailer certification, education,
> training and system support to handle the proposed coupons in order to
> allow retailers to reasonably assess and quantify their potential
> risks and costs associated with voluntary participation. As noted in
> our response to the RFI, we do not believe such costs will be cost
> prohibitive.

One of the key components of any process for minimizing waste, fraud and
abuse will of course involve supporting management information systems,
whether for a paper or card-based coupon. Recommended use of a stored
value card coupon approach will systematically assure real-time, daily
tracking of all attempted, accepted, and denied coupon usage
(redemption) through:

-   Centralized, on-line SVS Host authorization, data warehouse, and
    analytical reporting (including query tools) consistent with ISO
    8583 and X9.93 ANSI standard or similarly agreed transaction sets;

-   Printed, consumer and merchant hard-copy receipts detailing unused
    coupon balances, accepted item-specific (UPC) converter box coupon
    purchases, and denied item-specific (UPC) attempted coupon purchases
    along with household, retailer, cashier/lane, date/time, and
    location.

-   Sequenced batch file transaction detail of all attempted
    transactions conducted in a provided standalone POS terminal, plus 3
    prior back-up batch sequences;

-   Tested retailer integrated ECR/POS developed software meeting
    program, data warehouse, and system specifications; and

-   Standard banking industry, next day settlement and payment via the
    Federal Reserve ACH process.

Daily coupon request and fulfillment activities would be consolidated,
entered, validated, and tracked in an automated database utilized to
set-up, administer and control coupon card production and account
management. Household coupon requests submitted via program icon links
to a SVS website application would provide for earlier systematic
tracking and control, than a paper application request sent via mail to
SVS for coupon fulfillment. Phone requested applications would pass
through customer service agent human user interface (HUI) application
entry which involves a PC-based network integrated application tool
permitting detailed, automated reporting capability. SVS has a number of
automated vendor interfaces supporting various alternative and back-up
coupon card printing, personalization, and distribution/logistics
processes. QA processes and tools assure required specifications are
met. Procedural elements assure two separate, independent reviews and
comparison against the job specification. Consistent with our Six Sigma
program, SVS' QA process continually strives to measure, assess, and
improve upon key performance objectives, particularly focused around
customer value.

> Standard industry type reports are provided on a daily, weekly, and
> monthly basis. These reports can be obtained by the following options:

-   From a website;

-   By a report file to be picked up from an FTP site;

-   Through flat files picked up from a FTP or web site; or

-   On request sent via e-mail or FTP.

SVS does provide a web-based tool to receive reports called
I-Connectdata.com. The website is secured using a Secure Socket Layer
(SSL) certificate and user login. I-Connectdata.com is used as a portal
to obtain access to all standard reports, SVS' Card Inventory Management
System (CIMS) application and the Online System Interface (OSI)
application. Both CIMS and OSI are web-based applications as well. SVS'
standard provided reports are based upon more than 10 years of client
input, client focus groups held in 2003 and 2004, and feedback from our
SVS Client Working Group on Reporting Needs. Part of the efforts of the
latter cited Group is to provide guidance on formulating Industry
Benchmark Reports for our clients to compare their own data against
different provided Industry Benchmarks.

> One of the unique tools SVS provides to its clients to view, save, and
> print reports that provide information on coupon distribution and
> redemption activity is called Analytical Reporting. Based on the
> InfoView mechanism from Business Objects, Inc., Analytical Reporting
> would allow NTIA to view and retrieve documents from the Business
> Objects repository. This functionality includes the ability to
> retrieve and display the reports as HTML, Excel, or Adobe Acrobat.pdf
> files. In addition, Business Objects offers NTIA the ability to create
> its own queries on SVS tables directly to sort and display only the
> relevant information it needs. It also includes drill down capability.
> A user guide provides step-by-step instructions on Analytical
> Reporting's login procedures and navigation, locating and opening
> reports, responding to prompts and executing queries, and saving
> reports as Microsoft Excel files.
>
> ![](media/image4.wmf){width="5.122916666666667in"
> height="4.0784722222222225in"}

This tool would give NTIA the ability to define and re-define categories
to dissect data as often as it wishes from the desktop PC. For example,
our current clients will earmark an incentive or card program and pull a
life-to-date report to see how quickly the cards are redeemed, or what
the residual value is on the card, if there was lift, or split tender.
Information can be sliced as narrow as analyzing redemptions within the
window of an hour or day part, or as broad as determining velocity for a
week, month, a single store location or by a complete chain. For
instance, SVS has clients that want to analyze the popularity of new
artwork or promotional material placed at the point-of-sale at a store
location. In another situation, we have clients interested in
investigating discrepancies at a certain store. Each user within defined
security parameters can set his or her own individualized segmentations.
Because reports can be produced and saved in Microsoft Excel format,
clients are able to further sort, analyze and format selected
information as they choose. Essentially, NTIA will have the means to
track and analyze coupon requests, distribution and redemption at its
fingertips on its own desktop PCs. And, the NTIA would have a daily
cumulative account of redemptions to date, issued but unredeemed coupon
benefits, expired coupons issued, and coupon requests in process for
continuous budgetary and fiscal program management, slice or diced to
their choosing.

> This same tool could also be provided for individual retailers to
> allow them to secure information to monitor and even better strategize
> their own marketing efforts. Thus, the tool might give retailers
> participating in the DTA subsidy coupon program not only the ability
> to view transactional activity, but the unprecedented flexibility and
> freedom to specify and assess their own marketing campaign around the
> DTA coupon subsidy program.
>
> Currently, SVS is taking a leadership role to stop stored value card
> fraud by sharing industry stored value card anti-fraud "Best
> Practices" with retailers, assisting federal and local law enforcement
> agencies, developing anti-fraud card production techniques with
> manufacturers, and proactively identifying fraud trends and
> information sharing with merchants. While fraud cannot be eliminated
> from any program approach entirely, an automated stored value card
> program will be substantially more secure than a paper coupon
> approach.
>
> Internally, SVS maintains an Anti-Fraud Unit that includes staff that
> monitor activity and designed processes to detect, trap and track
> previous identified patterns and new threats. The head of this unit
> works closely with the National Retail Federation (NRF) and the Retail
> Industry Leaders Association (RILA) to identify, alert, share, and
> formulate joint industry responses to various concerns and trends.
> Through industry news (link on SVS website), industry newsletters (SVS
> NEWSLETTER and SVS Focus), Retail Alerts, and break-out sessions at
> sponsored meetings, SVS is proactively taking steps to put stopgaps in
> place and educate clients to use preventive measures.
>
> ![](media/image5.png){width="4.9375in" height="0.8020833333333334in"}

For example, in Vol. 5 No. 3, Fall 2005, issue of SVS NEWSLETTER online,
SVS reported on new security alliances and reporting tools introduced to
boost stored-value card program security. Two of the tools cited
involved enhancements to SVS' integrated voice response (IVR) system for
exceptions reporting and linkage with software providers like
Datavantage, Retail Expert, Aspect, Traxx and others for out clients to
be able to take SVS card data feeds and run it into their monitoring
software for client check, debit and credit card to potentially trigger
suspicious activities.

> ![](media/image6.png){width="5.25in" height="3.93125in"}
>
> SVS to our knowledge is one of the few firms with designated fraud
> resources assigned to assist clients with identifying or working
> issues of potential fraud. Carefully screening transaction activity
> for fraud patterns is of course one component to timely detect and
> track threats of WFA. Toward this objective, SVS provides its clients
> both real-time access and daily reporting to help identify internal
> and external fraud (such as IVR traps) patterns. Included in the daily
> reporting are what SVS labels as Clients Fraud Protection Reports.
> This series of reports are designed to alert the client to 'high risk'
> transactional activity or events. Pre-defined client settings are
> mutually established and a series of reports will detail any
> transactions that meet the pre-defined criteria. Reports are made
> available daily for transactions processed the previous day, and at
> the first of each month using the previous month's transactions.
>
> Examples of exceptions reporting areas of potential concern in the DTA
> coupon subsidy program might include:

-   Duplicate suspect household requests for coupons:

    -   Address line match with same zip

    -   Street name match with same zip

    -   Household name match with same city or zip

    -   Caller ID or e-mail address matched to another name or address

    -   Combinations of the above

-   Duplicate suspect households issued coupons:

    -   Address line match with same zip

    -   Street name match with same zip

    -   Household name match with same city or zip

    -   Caller ID or e-mail address matched to another name or address

    -   Combinations of the above

-   Multiple 'call-in' numbers to IVR by the same household

-   Multiple 'call-in' numbers to Customer Service by the same household

-   Call-in number to IVR or Customer Service against a household
    account with a zero balance remaining

-   Call-in number to IVR or Customer Service against a reported lost or
    stolen coupon

-   Coupon requests against identified suspect household names

-   Coupon requests against identified suspect address locations

-   Issued coupons against identified suspect household names

-   Issued coupons against identified suspect address locations

-   Cancelled coupon redemption attempts

-   Coupon redemptions exceeding two against a single household account

-   Coupon cards issued with more than two eligible coupons

-   Denied coupon redemption attempts due to ineligible converter box

-   Denied coupon redemption attempts at more than one retail location

-   Coupon redemption attempt at an unauthorized retailer

-   Coupon redemption attempts against a household account with a zero
    balance remaining

-   Attempted activity against a reported lost or stolen coupon

-   Exchange transactions due to damaged equipment

-   Households reporting more than one lost or stolen coupon

-   Household accounts with two or more coupon cards issued

-   Household accounts with more than 3 successive PIN entry errors

-   Attempted activity against a coupon that has expired

-   Redemption transactions authorized against an expired coupon card

-   Invalid coupon redemption attempts

-   Retailer daily redemption activity exceeding X amount designated for
    a specific location, retail type, or day type

-   Retailer weekly redemption activity exceeding X amount designated
    for a specific location or retail type

-   Settlement value given to retail locations with no reported
    redemption activity on the previous business day

-   Settlement value returned due to an invalid bank account

-   Redemption activity at retailers "on-watch"

-   Redemption activity approved against "shopper audit" accounts

-   Attempted activity or activity against 'deactivated' or
    'inactivated' household accounts

> Suspect activity needing to be reported from the retailer include:

-   Attempted activity where the household name and address printed on
    the coupon do not match the name and address on the indicated
    presented government picture ID

-   Attempted activity on a coupon card that appears to indicate that an
    attempt was made to alter the printed name or address on the coupon

-   Authorized coupon redemption where the last four digits on the card
    do not match those printed on the hard copy receipt

-   Suspect counterfeit card presented

In addition to exceptions reporting, SVS provides a data warehouse-type
structure for its clients to perform ad hoc queries, custom reporting,
and data downloads. The data will be real-time mirrored from the
production database. Access will be via industry standard browser such
as Microsoft IE or Netscape Navigator. Reference should be made to the
prior section regarding SVS' Analytical Reporting tool, which could be
used to view discrepancies at an individual store level or monitor
activity down to an hour unit level.

# Consumer Education

> Testimony provided by the GAO on September 6, 2005[^85] noted that a
> survey conducted back in 2002 "found that 83% of respondents had never
> heard of or were only somewhat aware of the transition." From our own
> informal polling, we believe a large percentage of consumers are still
> only slightly aware of the impending transition and are confused
> between digital and high definition. Furthermore, brief inquiry to
> some retailers and other industry representatives led us to conclude
> that considerable awareness and educational efforts will be needed
> there as well. Thus, despite the initiatives and on-going efforts of
> numerous organizations to distribute and make publicly available some
> excellent material on the DTV transition, the public campaign to be
> launched under this program may be the most important component
> outlined in the proposed scope of work.
>
> Our initial view concurs with comments presented that NTIA will need
> to leverage the proposed \$5,000,000 spending limit[^86] by
> complementing and collaborating with the other stakeholders. In many
> respects, this is how EBT was first launched and this is how we have
> led the development of the gift card industry. In our early EBT days,
> key partnerships were formed among various social service agency
> members, retailers, retailer associations, consumer groups, advocacy
> groups, community members, members of the media, and individual
> recipients. Clear, concise, open and responsive communication at every
> stage of the project from initial planning to final evaluation proved
> critical and was the best assurance for program success. We found each
> partner wanted and needed ownership. When they got it, positive things
> happened! Costs involved primarily time and travel.
>
> To the extent specific objectives and measures are provided and agreed
> among key stakeholders, we believe that a separate proposal process
> could be carved out to produce common usable pieces and themes for use
> across all media to convey a clear, unifying and consistent message.
> Conversely, since the effectiveness of this material and campaign will
> be so critical to the successful delivery and performance of all other
> components of the program, we would be extremely hesitant if it were
> awarded separate from the overall work and program objective. Our
> sense is that the application process and the coupons themselves are
> critical pieces to the consumer education campaign as well as the
> retailer provided certification, education, and collateral material
> supporting coupon use and redemption at point-of-sale. We would
> further suspect that lift from the campaign should be tested,
> measured, and efforts refined during the course of implementing and
> running the coupon program. Therefore, where does consumer educational
> efforts end and are they truly separate from daily performance of the
> other required program activities? Our general sense is that they are
> inseparable and so vital to the overall effective performance that
> consumer education should preferably come under the overall project
> management of an end-to-end service provider.
>
> SVS' core competency, however, is not in designing or mounting a
> national public awareness and education campaign. We would subcontract
> a significant part of this work to a reputable firm. While we have
> existing relationships, we also often work with those firms and agents
> of the most highly recognized retailers in the country, if not in the
> world. Today, we operate globally in 37 different countries. Currently
> we believe and research supports that one of our competitive
> advantages in the gift and coupon card industry is our client support
> in marketing and education. Those clients are primarily retailers; so
> much of our focus is from their perspective and helping them drive
> consumer awareness and usage. We succeed because our retailer clients
> succeed with their customers!
>
> Toward this end, we collaborate, conduct, and share primary market
> research. Some of this information is made publicly available through
> access on our website and publications released. Obviously, more
> detailed information and
>
> ![](media/image7.png){width="4.5in" height="3.38125in"}
>
> analyses are processed to benefit our clients. Our shared common
> objective, for example in gift cards, is to increase their demand and
> use both nationally and globally. SVS' primary research data is used
> by our clients to create copy and build campaigns that appeal to these
> opportunities.
>
> SVS actually treats and tracks the cards associated with these
> promotions as separate product SKU's. SVS clients can then access SVS
> Analytical Tools to pull at any time a life-to-date report to: see how
> quickly the cards are purchased, measure if there was a particular
> lift as a result of a change in artwork, determine how quickly the
> cards are redeemed, identify whether split tender occurred with use of
> the cards, evaluate the residual value on the cards, or dimension the
> frequency that value was reloaded onto the cards. Clients can slice
> information as narrow as analyzing purchases or redemptions within the
> window of an hour or day part, or as broad as determining velocity for
> a week, month, a single store location, or by a complete division.
>
> ![](media/image8.png){width="4.625in" height="3.08125in"}
>
> Clients sometimes want to analyze the popularity of new material at
> point-of-purchase (POP) for a particular holiday, compare lift from
> different themes placed in different locations, or set their own
> individualized segmentations. If desired, data can be extracted and
> saved to a Microsoft Excel format for even further client
> manipulation. This tool could prove particularly useful in support of
> community outreach efforts, for example in partnering with key
> organizations in the Hispanic, Native American, African American, or
> similar communities. Likewise, the tool would assist in measuring
> program efforts and effectiveness to special needs individuals such as
> those with hearing or visual impairments, or those requiring
> additional assistance due to physical or learning impairments. We
> believe one of keys to consumer education will be to provide tools,
> communication and ownership to those vital organizations that directly
> service the diversity of US households.
>
> ![](media/image9.png){width="4.625in" height="3.4625in"}
>
> To facilitate improvement, SVS will generate industry benchmarks and
> allow individual retailer or chains to compare themselves to their
> industry, other divisions, or different regions/countries. SVS will be
> asked by industry groups to share strategies for Best Practices or
> Best In Class, i.e. what works and what doesn't work! SVS will also
> share more generic success stories or alert clients to specific new
> programs in the industry. Again, vehicles for timely and frequent
> communication are often the key.
>
> ![](media/image10.png){width="4.75in" height="3.55in"}
>
> For purposes of the consumer education program, many of these same
> tools can be used both during initial strategy formulation and during
> program transition to assess different elements and mix, compare
> alternative campaigns, evaluate the lift from assistance of specific
> community groups and outreach efforts, measure the boost from specific
> public service announcements, assess investment in retail
> point-of-purchase materials, or determine the impact on coupon
> non-redemption due to electronics retailer attempts to up-sell coupon
> holders toward purchase of higher feature, non-eligible boxes.
>
> We believe through collaborative efforts, materials can be jointly
> produced and disseminated to provide unifying messages across various
> media including public service announcements, web sites, print
> articles, flyers, and manufacturer or retailer promotion. We are less
> sure that monies used for pure program advertising would be an
> effective and efficient use of scarce resources. Our understanding is
> that the intent of the program is to "assist consumers who rely
> exclusively on analog-only transmission and who wish to continue
> receiving broadcast programming over the air using analog-only
> televisions after February 18, 2009, the date that full-power
> television stations are required to cease analog broadcasting."[^87]
> The effectiveness and efficiency of the consumer education program can
> be measured during the course of the transition by how progress is
> made and full penetration attained toward receiving numbers of
> requests and having coupons redeemed in each segmented market, (i.e.,
> geographic, cultural, economic, rural, or even behavioral). Ongoing
> measures of consumer awareness and action will also prove useful to
> gauge performance. When analog broadcasting is ceased, our measure of
> success will be "no adverse effects either actual or perceived to
> DOC/NTIA or the digital transition due to unawareness of the
> transition or problems in coupon operations."[^88]
>
> Consistent with the public campaign to let consumers know that they
> can continue receiving broadcast programming over the air using
> analog-only televisions after February 18, 2009 when analog
> broadcasting is required to cease, the campaign has to let consumers
> know that the government will help defray the cost if they meet the
> eligibility criteria. Clear determination of eligibility will be
> critical and how to make the public aware of eligibility criteria in a
> positive vein.
>
> We believe the amount of \$40, particularly if it offsets 80% of the
> expected \$50 cost of standard boxes, will spread quickly by
> word-of-mouth when consumers become aware that they must act. The \$40
> defrayal provides a reason to act timely. We believe the \$40 chance
> to save brings a dollar incentive to bridging the messages "why should
> I care" and "why should I act now" in both the application request and
> coupon fulfillment materials and processes.
>
> Whether the coupon is paper or a stored-value card, research indicates
> that clearly stating and prominently displaying the coupon's face
> value is important for coupon design. Because expectations are that
> multiple manufacturers will develop eligible boxes, brand or
> manufacturer name may become less important or will not be as
> prominent for the subsidy coupon as in the normal coupon world.
> Government is the issuer or entity making the coupon deal available,
> and we believe part of the communication and presentation involves
> positioning 'government' as the giver of value, making the transition
> painless, while noting all the added benefits consumers will get from
> digital TV. Manufacturers may then want to come back to promote their
> brands noting the added services that might be obtained, but we
> perceive that our campaign needs to focus on the standard box and
> keeping current service operational.

Research notes that coupon users don't generally focus on the final
cost, but are motivated on what they will save. From informal discussion
with some electronics retailers, if the program assures that there is a
market, we believe retailers will feature the \$40 potential coupon
savings in their targeted advertising and would welcome in-store
point-of-purchase material. Providing unifying trademarks and copy for
retailers to include in their own promotions would appear to be a good
use of a portion of the consumer educational funding. One of the
challenges of the subsidy program is to provide clear consumer guidance
as to what qualifies as an eligible, standard box. Symbols can provide a
simple, clear mark across multiple languages.

Successful manufacturing coupon issuers will also report that they
carefully coordinate their coupon program launches as a component of
their overall promotional campaign. Therefore, manufacturers will
solicit co-retailer promotion through website, signage, POP and door
promos, preferred shelf-display, additional retail discount/sale,
inclusion in retail circulars or ads, training and education of sales
staff, and possibly excitement generators such as 'ask me' buttons (with
unifying mark). Retailers can be a tremendous partner in the overall
public campaign to let households know that "service can be retained"
and "the government will help defray the cost;" but, you must act now!

> The Internet has rapidly become a key tool for anyone searching for
> information on a topic. Keywords need to be identified and coordinated
> with major search engines to link inquiries to a designated site
> promoting the program and available governmental assistance. Converter
> box icons highlighted with "For more information," "if you need
> assistance," "help with the cost," or "apply now" linked directly to
> specially designed web pages in multiple languages and appealing to
> different cultural groups can be made available for placement
> virtually on any stake holder's website having an interest in the
> program.
>
> Consumer and volunteer groups, however, become even more important
> partners for distribution and guidance to their constituencies. During
> SVS' launch a number of years ago of a smart card demonstration for
> electronic food stamp delivery in Dayton, Ohio, approximately one
> hundred twenty (120) consumer interest and advocacy groups partnered
> to get out the word with an army of volunteers and a means to meet
> with households in ways we could have never attained or foreseen. We
> learned first hand that "people help other people find financial
> assistance." These other people, however, need simple,
> easy-to-understand information and communication!
>
> Essentially, we want to be everywhere! The first educational hurdles
> involve letting households know they need to act, assistance is
> available, and this is where and how you can get it! While assistance
> is available, under the Act, it must be requested. When households are
> ready to apply, SVS recognizes the importance of being able to accept
> applications from a variety of sources and medium. The most difficult
> mechanical and potentially controversial step, however, involves
> discerning eligibility. Thus the educational campaign hurdle must not
> only establish how assistance can be requested, but guide potential
> requesting households on how to determine whether they are eligible to
> apply.

# Implementation

The decisions on how NTIA will require the DTA coupon program to be
rolled-out, (i.e., phased in geographically or turned-on overnight), is
of concern. In the EBT arena, implementations are carefully piloted,
tested and then implemented across the state in an organized and
staggered basis. A national program roll-out presents a far more
challenging situation. In some of the referenced data contained in the
Comments of the Association of Public Television Stations made before
NTIA, considerable detail was noted for example in Appendix C about
numbers of households relying on over-the-air analog service provided by
Dennis Haarsager and Television Bureau of Advertising (November,
2003)[^89] which could be used to plan and stagger national roll-out.

If the implementation was not only phased, but the program window
possibly narrowed for each phased in region, resources such as staff to
sign-up and certify retailers, trainers, equipment installers, and
possibly folks to meet with volunteer and consumer interest groups could
be driven by experienced personnel leveraging from what was learned in
each prior phase implementation. Even standalone terminal equipment or
promotional signage could be reused. We believe there could be
significant fixed cost leveraged under such an implementation. In our
discussions with various stakeholders, the message repeated
over-and-over was a perception that there would be a major lull between
the first month or two, and the last two months!

We believe shorter, regional implementations would yield substantially
more cost effective and efficient implementation of the program with
better effect on many stakeholders. However, we do understand that
different parties may intend to pursue differing strategies that might
prefer the full eighteen-month window nationally. We also understand
that there may be some legislative or regulatory hurdles to address.
Since fulfilled coupons carry an expiration date of three months, we
would not be limiting individual household coupon usage. We could be
viewed as limiting the time window to act and request assistance, which
some consumer interest groups might view as too restrictive. Conversely,
these same interest groups could better marshal usage of their own
limited resources by concentrating their outreach and
'get-out-campaigns' in a more manageable, regional basis.

Retailers might benefit from better turnover of their standard box
inventory; however, they would incur a shorter window for building store
traffic. National retailer chains might benefit from more effective
regionalized use of promotional or advertising dollars and the ability
to fine-tune their marketing efforts, but others may prefer the longer
national traffic building campaign opportunity. Manufacturers might be
better able to gauge production, warehousing and distribution efforts,
which could translate into less consumer stock-out situations. We would
think that retailers would similarly benefit from improved warehousing
and distribution. Other manufacturers might view the full national
eighteen-month window as more attractive to their marketing aspirations.
Broadcasters might similarly benefit through accelerated ability to
eliminate supporting costly dual transmissions, bring the digital
revolution to Americans, and free up valuable spectrum for other more
effective use.

Perhaps there is real value in the learning and experience attained from
the European DTV transitions that merit more debate for possible
application in our own roll-out. We understand, views will differ,
however, we want to indicate that as a potential service provider, we
are quite flexible on this matter and can see real advantages to a
phased-in approach for program implementation.

# Conclusion

> For the above stated reasons, Stored Value Systems and its partners
> believe an item-specific, stored-value card approach best meets the
> objectives and proposed requirements of a DTA subsidy coupon program,
> caters to the differing needs of various stakeholders, and mitigates
> the potential for waste, fraud and abuse in a cost-effective manner.
> Some of those important attributes of our stored-value card coupon
> approach include to:

1.  Let U.S. households know that "service can be retained, services
    will improve, and the government will help defray the cost, but you
    must act now!"

2.  Recognize that 'people help other people' to explain and find
    financial assistance, and these helping people want and need program
    ownership. When they get it, positive things happen.

3.  Realize that a service provider brings tools, techniques and
    enabling technologies solutions, but it is members of the public
    that best understand how to mutually leverage and implement such
    solutions for optimal effect. The service provider's role is to
    bring expertise, be flexible, and serve!

4.  Be essentially everywhere when households are ready to apply,
    allowing information and the request for coupon benefits to be made
    via hand, mail, phone, fax, or electronic transmission seamlessly
    from wherever households might intuitively or readily seek such
    assistance recognizing the diversity and language differences of US
    households.

5.  Ensure that such benefit requests are fulfilled timely and
    accurately, but in compliance with program directives and preventing
    duplicate issuance.

6.  Extend assistance to those households for which the benefits are
    intended, and assure those benefits are not lost because a coupon
    might be stolen, misplaced, or a damaged box is returned.

7.  Provide a vehicle for households to easily and conveniently use
    those benefits without hassle, stigmatization, or denial of intended
    access, (focus on providing benefits, not the physical coupon).

8.  Foster clear communication and information to all stakeholders on
    which DTA and where converter boxes will be demanded and can be
    purchased before the transition date, so that they are widely
    available at a variety of knowledgeable, authorized, retailer brick
    & mortar, mail-order, and Internet based locations conveniently
    accessible to coupon holders.

9.  Validate that coupons are used only to purchase certified 'standard'
    eligible boxes at the point-of-purchase in a systematic, integrated
    manner that assures compliance with program rules and intended use.

10. Encourage retailer participation by systematically facilitating
    quick, accurate, and secure coupon acceptance, redemption, and funds
    settlement.

11. Minimize retailer burden and risk associated with seeking
    certification and complying with program regulations and
    requirements.

12. Account in a verifiable, accurate and timely manner all commitment
    and use of program funds on a daily basis in accordance with
    generally accepted accounting and audit practices.

13. Mitigate levels of waste, fraud and abuse throughout coupon
    operations tapping best practices and automated technologies in a
    cost effective manner.

14. Provide leadership and accountability throughout coupon program
    design, development, implementation, operation, and completion so
    that there will be no adverse effects either actual or perceived to
    DOC/NTIA or the digital transmission due to problems in coupon
    operations.

> SVS believes that through a public-private partnership, the
> objectives, requirements, and timelines for the proposed Coupon
> Program are feasible under an item-specific, stored-value card
> approach and can be met cost effectively by the vendor community with
> good effect on all stakeholders.
>
> Respectfully submitted,
>
> /s/ Mike Godfrey
>
> Mike Godfrey
>
> Director of Government Services
>
> Roger Donaldson
>
> Government Services Consultant
>
> Stored Value Systems, Inc.
>
> 101 Bullitt Lane, Suite 305
>
> Louisville, KY 40222
>
> <mgodfrey@storedvalue.com>
>
> Telephone: 502-326-4635
>
> Fax: 502-326-4677
>
> September 25, 2006

[^1]: "*Request for Comment and Notice of Proposed Rules to Implement
    and Administer a Coupon Program for Digital-to-Analog Converter
    Boxes,"* Department of Commerce, National Telecommunications and
    Information Administration, Notice of Proposed Rulemaking, 47 CFR
    Chapter 3, Docket No. 060512129-6129-01, (July 25, 2006).

[^2]: Title III-Digital Television Transition and Public Safety, Section
    3005 (a), Digital-to-Analog Converter Box Program, of the Deficit
    Reduction Act of 2005, Pub. L. No. 109-171, 120 Stat. 4, 21 (Feb. 8,
    2006).

[^3]: Id. at Sec. 3005 (c)(1)(A).

[^4]: "*Notice of Proposed Rulemaking (7/25/2006),"* Section II. A.,
    Eligible U.S. Households, at
    www.ntia.doc.gov/ntiahome/frnotices/2006/couponprogram_nprm_07202006.htm.

[^5]: Id.

[^6]: *"Notice of Proposed Rulemaking (7/25/2006),"* Section II. C.,
    Application Process, p. 4.

[^7]: Id. at Section II, A., Eligible U.S. Households, at p. 3.

[^8]: "*Digital Broadcast Television Transition, Several Challenges
    Could Arise in Administering a Subsidy Program for DTV Equipment",*
    GAO-05-623T, released May 26, 2005, a testimony before the
    Subcommittee on Telecommunications and the Internet, Committee on
    Energy and Commerce, House of Representatives, p. 8.

[^9]: Id. at p. 8.

[^10]: Id. at p. 9

[^11]: "*Washington State Project Key Outcomes & Feedback Report",*
    March 16, 2006, USDA, Food and Nutrition Service Online WIC EBT
    Demonstration, p. 142.

[^12]: Id. at p. 117.

[^13]: Id. "Several Challenges Could Arise in Administering a Subsidy
    Program for DTV Equipment," p. 10-11.

[^14]: Id. at p. 10.

[^15]: Id. at p. 11.

[^16]: Id.

[^17]: Id.

[^18]: *"Digital Broadcast Television Transition, Estimated Cost of
    Supporting Set-Top Boxes to Help Advance the DTV Transition,",* p.
    7.

[^19]: Robert Kieschnick and B.D. McCullough, "*Why Do People Not
    Subscribe to Cable Television? A Review of the Evidence," (1998),
    available at:
    [www.tprc.org/abstracts98/kieschnick.pdf](http://www.tprc.org/abstracts98/kieschnick.pdf),
    p. 4.*

[^20]: "Several Challenges Could Arise in Administering a Subsidy
    Program for DTV Equipment," p. 12.

[^21]: Id. at *"Notice of Proposed Rulemaking ((7/25/2006),"* Section
    II. G., Consumer Education, at p. 8.

[^22]: *"Digital Broadcast Television Transition, Estimated Cost of
    Supporting Set-Top Boxes to Help Advance the DTV Transition,"*
    GAO-05-258T, Testimony Before the Subcommittee on Telecommunications
    and the Internet, Committee on Energy and Commerce, House of
    Representatives, Released on February 17, 2005, p. 7 & 8.

[^23]: *"Digital TV switch set for early 2009,"* Anne Broache, May 24,
    2006, as displayed on http://news.com.com/2102-1028_3-6004429.html.

[^24]: *Request For Information: Market Research For Implementation Of
    The Digital To Analog Converter Box Coupon Program,* Questions and
    Answers, August 11, 2006, p. 6.

[^25]: "*A Roadmap For Early Return of Public Television's Analog
    Spectrum"* by Andrew D. Cotlar, Association of Public Television
    Stations, Digital-Only Broadcasting, March, 2004, p. 13.

[^26]: Id at p. 14, further referencing in footnote 62, *In the Matter
    of Annual Assessment of the Status of Competition in the Market for
    the Delivery of Video Programming,"* Comment of the National
    Association of Broadcasters, CS Docket 01-129 (Aug, 3, 2001).

[^27]: See Section 3005 (a)(1) and (c)(1) of the Act.

[^28]: *"Notice of Proposed Rulemaking (7/25/2006),"* Section A,
    Eligible Households, p. 3.

[^29]: "*Request For Information: Market Research For Implementation Of
    The Digital to Analog Converter Box Coupon Program,"* NTIA, July 31,
    2006 at p. 2.

[^30]: "*Notice of Proposed Rulemaking (7/25/2006),"* Section B, Coupon
    Value and Use Restrictions, p. 4.

[^31]: Id. at Section 3005(c)(4).

[^32]: *"Notice of Proposed Rulemaking,"* Section B, Coupon Value and
    Use Restrictions, p. 3-4.

[^33]: *"More Retailers Team Up Against Credit Card Fees,"* Convenience
    Store News, July 18, 2005, as reported at www.progressivegrocer.com.

[^34]: Id.

[^35]: *"Hurricane Katrina and Rita Disaster Relief: Improper and
    Potentially Fraudulent Individual Assistance Payments Estimated
    Between \$600 Million and \$1.4 Billion,"* GAO Report to the
    Subcomm. On Investigations, Comm. on Homeland Security, House of
    Representatives, p. 14-24 (June 14, 2006).

[^36]: Recognized authority sources and volume reports are publicly
    provided at the websites of CMS, Inc., Promotion Marketing
    Association, the Association of Coupon Professionals, and NCH
    Marketing Services. CMS, Inc. provided 2005 data at the 2006 Annual
    Industry Coupon Conference which can also be referenced at
    www.couponinfonow.com/Couponing/2006trendsoverview.cfm.

[^37]: "*2002 Coupon Industry Survey", Summary,* July 31, 2002, Coupon
    Re-Engineering Workgroup, Document \# 2002-001.

[^38]: "*2002 Coupon Industry Survey," Summary,* July 31, 2002, Coupon
    Re-Engineering Workgroup, Document \# 2002-001.

[^39]: CIC Updates, (the CIC is an industry organization that encourages
    and supports federal, state, and local law enforcement efforts to
    identify, investigate, and prosecute coupon misredemption).

[^40]: *Presentation Highlights from the 2006 Industry Coupon
    Conference,"* E-zine Newsletter, August 2006, p. 2, @
    www.couponpros.org.

[^41]: Rebate Data Center, at www.bmitf.org and Association of Coupon
    Professionals at www.couponpros.org.

[^42]: JICC & CouponInfoNow websites.

[^43]: Global Standards Update & UCC Update, NACStech 2005.

[^44]: Id. at NACStech 2005.

[^45]: Id. at *"Digital Broadcast Television Transition, Several
    Challenges Could Arise in Administering a Subsidy Program for DTV
    Equipment,"* p. 10.

[^46]: "*Notice of Proposed Rulemaking (7/25/2006)"* Section C,
    Application Process, p. 4.

[^47]: Id.

[^48]: Id., Application Process, at p. 5.

[^49]: Id.

[^50]: *Deficit Reduction Act/Digital Television Transition and Public
    Safety Act of 2005,* Attachment A to this RFI and referenced at
    www.ntia.doc.gov/otiahome/dtv/S1932_titleIII.pdf.

[^51]: "*Digital Broadcast Television Transition, Estimated Cost of
    Supporting Set-Top Boxes to Help Advance the DTV Transition,"*
    GAO-05-258T, released February 17, 2005, a testimony before the
    Subcommittee on Telecommunications and the Internet, Committee on
    Energy and Commerce, House of Representatives, p. 7.

[^52]: See www.couponinfonow.com.

[^53]: *"Marketers offer additional \$37 Billion in Coupon Savings in
    2005,"* Coupon Use Trends, at www.couponinfonow.com.

[^54]: Id. at *Notice of Proposed Rulemaking (7/25/2006),"* Section D,
    Coupon Expiration, p 5.

[^55]: See www.couponinfonow.com.

[^56]: CMS Advantage Update Q3, 2003, a publication of Inmar.Inc.

[^57]: "*The Case Studies,"* CMS, at www.cms.inmar.com.

[^58]: See www.couponinfonow.com/processing/speedofredeem.asp.

[^59]: CouponInfoNow.com, Fall 2005.

[^60]: Digital Broadcast Television Transition, Several Challenges Could
    Arise in Administering a Subsidy Program for DTV Equipment, p. 20.

[^61]: Id. *"Request For Information,"* Questions and Answers, August
    11, 2006, p. 5.

[^62]: See "News From the Retail Industry," Integrated Solutions For
    Retailers, August 2004, p. 36.

[^63]: On-Card, Inc., Delray Beach, Florida, 2006.

[^64]: *Coupon Redemption by Class of Trade,* 2003 CMS, Inc.

[^65]: Id. 2003 CMS, Inc.

[^66]: Id. *"Request For Information,"* Operating Methods Required By
    Legislation, p. 4.

[^67]: *Percent Redeemed by Class of Trade and Method (2002),* 2003 CMS,
    Inc. an Inmar Company.

[^68]: *"More Retailers Team Up Against Credit Card Fees,"* Convenience
    Store News, July 18, 2005, as reported at www.progressivegrocer.com.

[^69]: First Annapolis Consulting, April, 2005.

[^70]: Deloitte Touche and National Retail Federation research, 2005.

[^71]: *More Retailers Team Up Against Credit Card Fees,* Convenience
    Store News, July 15, 2005.

[^72]: *Self-Checkout Transactions on the Increase*, Progressive Grocer,
    *Tech Briefs, Emerging Technologies for Retail* by IBM, and a Study
    by IHL Consulting Group 9/1/05.

[^73]: *"Study: Self-Scanning Keeps Growing,"* Kevin Coupe,
    morningnewsbeat.com, 9/21/2005, referencing an Atlanta
    Journal-Constitution report.

[^74]: See couponinfonow.com.

[^75]: "2002 Coupon Industry Survey," *Summary*, July 31, 2002, Coupon
    Re-Engineering Workgroup, Document \# 2002-001.

[^76]: "2002 Coupon Industry Survey," *Summary*, July 31, 2002, Coupon
    Re-Engineering Workgroup, Document \# 2002-001.

[^77]: Id.

[^78]: Id.

[^79]: UCC Coupon Work Group.

[^80]: *More Retailers Team Up Against Credit Card Fees,* Convenience
    Store News, July 15, 2005.

[^81]: Id. *"Notice of Proposed Rulemaking,"* Initial Regulatory
    Flexibility Analysis, Appendix A.

[^82]: Id. at*"Notice of Proposed Rulemaking,"* Section F, Retailer
    Certification, p. 7 and *"Initial Regulatory Flexibility Analysis,"*
    Appendix A, Section E, Associated Costs, p. 4.

[^83]: Id.

[^84]: Id.

[^85]: *"Digital Television Transition: Issues Related to an Information
    Campaign Regarding the Transition,"* GAO-05-940R Digital Television
    Transition, September 6, 2005, p. 5.

[^86]: Id. at *"Notice of Proposed Rulemaking,"* Section G, Consumer
    Education, p. 8.

[^87]: *"Notice of Proposed Rulemaking (7/25/2006),"* Summary, p. 1.

[^88]: *Request For Information (RFI)*, Draft Statement of Requirements,
    Section Objectives of DTA Converter Box Coupon Program, p. 3.

[^89]: *"A Roadmap For Early Return of Public Television's Analog
    Spectrum,"* by Andrew D. Cotlar, Association of Public Television
    Stations, Digital-Only Broadcasting, March 2004, Appendix C, p. 40.