Testimony 

Before the Subcommittee on 

Telecommunications and the Internet, 

Committee on Energy and Commerce, 

House of Representatives 

United States Government Accountability Office

GAO 

For Release on Delivery 

Expected at 11:30 a.m. EDT 

Thursday, May 26, 2005 DIGITAL BROADCAST 

TELEVISION TRANSITION 

Several Challenges Could 

Arise in Administering a 

Subsidy Program for DTV 

Equipment 

Statement of Mark L. Goldstein, Director 

Physical Infrastructure Issues 

GAO-05-623T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-623T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Mark Goldstein 

at (202) 512-2834 or goldsteinm@gao.gov. 

Highlights of GAO-05-623T, a testimony 

before the Subcommittee on 

Telecommunications and the Internet, 

Committee on Energy and Commerce, 

House of Representatives 

May 26, 2005

DIGITAL BROADCAST TELEVISION 

TRANSITION 

Several Challenges Could Arise in 

Administering a Subsidy Program for 

DTV Equipment 

We found that several administrative challenges might arise in 

implementing a subsidy for DTV equipment. One of several key 

challenges we identified would be determining those eligible to receive a 

subsidy. If the subsidy were restricted to low-income households or to 

households that rely exclusively on over-the-air television, methods to 

identify these households would need to be developed and may prove to 

be challenging. Another key challenge would be ensuring that eligible 

recipients understand the availability of a subsidy, how they could obtain 

it, and what equipment would be subsidized. Effectively communicating 

this information will likely first require that information about the DTV 

transition itself is successfully communicated to the public. 

Several administrative options could be used to provide a government 

subsidy to help households obtain DTV equipment, including a 

refundable tax credit, government distribution of equipment, a voucher 

program, and a rebate program. The suitability of any of these methods 

depends on aspects of the subsidy’s design, such as which entity is most 

appropriate to administer the subsidy and who would be eligible to 

receive the benefit. 

Various government programs make use of rebates or vouchers to 

subsidize consumers’ purchase of products. We reviewed three rebate 

and three voucher programs that might provide insight for the 

development of a DTV subsidy and found that differences existed 

between these types of programs. We observed that eligibility for the 

voucher programs was specifically defined and the benefits were 

targeted to low-income individuals, whereas eligibility for the rebate 

programs was not based on income. Overall, however, we found these 

programs differed with respect to what might be undertaken for a DTV 

subsidy. 

In addition to the administrative challenges of a subsidy program, there 

are other aspects of the DTV transition that are ongoing and will take 

time to complete or may pose their own challenges. For example, the 

channel election process, which will determine each television station’s 

channel placement for its digital signal, will not be final until sometime in 

2007, according to the Federal Communications Commission. Another 

issue that might arise relates to antennas used to receive digital 

broadcast signals. Although many stakeholders believe that antennas 

used for analog reception will work well for digital signals, we were also 

told that reception of digital signals may vary on the basis of a 

household’s geography and other factors. 

The digital television (DTV) 

transition offers the promise of 

enhanced television. At the end of 

the transition, radiofrequency 

spectrum currently used for analog 

broadcast television will be used 

for other wireless services and for 

critical public safety services. To 

spur the digital transition while 

preventing any loss of television 

service to households, some 

industry participants and experts 

have suggested that the 

government subsidize DTV 

equipment to enable households to 

view digital broadcast signals. This 

testimony provides information on 

(1) some challenges to 

administering a subsidy program 

for DTV equipment, (2) some 

administrative options for 

implementing a DTV subsidy, (3) 

examples of government programs 

that make use of rebates or 

vouchers to provide subsidies, and 

(4) other efforts necessary for the 

completion of the DTV transition. 

We discussed administrative 

challenges to and options for a DTV 

subsidy with federal and state 

government officials, electronics 

manufacturers and retailers, and 

experts in product promotion. As 

in our previous work, we take no 

position on whether a subsidy 

should be implemented or not, or 

whether, if a subsidy program is 

established, it should be 

implemented in any particular way. 

While policies other than a subsidy 

might help promote the DTV 

transition, any other such 

approaches were not part of this 

investigation. 
Page 1 GAO-05-623T 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to report on our work on the challenges to 

and the administrative options for implementing a subsidy program for 

consumers to purchase digital television (DTV) equipment. As you know, 

the return of radiofrequency spectrum used for analog broadcast 

television at the end of the DTV transition will provide many benefits to 

society, such as easing the spectrum scarcity facing public safety first 

responders, engendering economic growth and consumer value from 

spectrum redeployed to wireless services, and affording the federal 

government revenues from the proceeds of a spectrum auction. Under the 

law, the transition’s end is, in part, dictated by consumers’ adoption of 

digital television equipment. While the purchase of digital televisions is 

steadily increasing, it nevertheless appears unlikely that a sufficient 

proportion of households will have digital television equipment in place by 

the end of 2006—the date originally set by Congress as a goal for the 

transition’s end. 

Households viewing television solely through the reception of over-the-air 

signals must take action to ensure that they have the necessary equipment 

to be able to view digital broadcast signals before the transition occurs 

and analog broadcast signals are shut off. If they do not take such action, 

they will lose television service. Consequently, the DTV transition imposes 

costs on some American households, assuming those households purchase 

equipment capable of receiving digital television signals to avoid the loss 

of television service. In February we reported to this Subcommittee that of 

the roughly 21 million households in the United States that rely exclusively 

on over-the-air television, nearly half have incomes under $30,000. Cable 

and satellite subscribers might also, at some point, need to upgrade their 

equipment—and thus incur costs related to the DTV transition—in order 

to be able to continue to receive broadcasters’ digital signals through their 

subscription providers. 

In order to spur households’ adoption of the digital equipment necessary 

for the transition, some have suggested that the government provide a 

subsidy to certain households to purchase a device, known as a set-top 

box, that can receive digital broadcast television signals and convert them 

into analog signals so that they can be displayed on existing analog 

television sets. This device—which several manufacturers have stated 
Page 2 GAO-05-623T 

could sell for as little as $501 once they are produced in high volume—

would enable the household to view digital broadcast signals without 

purchasing a digital television set.2

 To the extent a subsidy facilitates the 

DTV transition, it might be advantageous for several reasons, such as (1) 

promoting a more rapid reclamation of valuable radiofrequency spectrum 

for other uses, which could spur economic growth and improve public 

safety, (2) possibly increasing government revenues from spectrum 

auctions by ensuring that companies that bid on spectrum can more 

quickly and with greater assuredness claim unencumbered spectrum, and 

(3) minimizing any loss in television service that households might suffer 

because they have not yet obtained necessary equipment for receiving 

digital broadcasts. At the same time, policymakers might consider these 

benefits in relation to other contexts in which policy decisions of the 

federal government have imposed costs and burdens on Americans 

without compensation. We believe while it is difficult to measure the 

specific benefits and costs of undertaking a specific DTV subsidy program, 

it is also difficult to evaluate the suitability of subsidizing the costs 

imposed by this particular government policy relative to other policies that 

have also imposed costs on citizens. 

While there may be other policy options to spur the DTV transition, my 

testimony today only will focus on the use of a DTV equipment subsidy 

program. In particular, I will discuss the challenges to and several 

administrative options for a possible subsidy program. As we developed 

this work, no specific option for administering a DTV subsidy was formed, 

and as such, our work focused on the possible challenges to a hypothetical 

program. As in our previous work, we take no position on whether a 

subsidy should be implemented or not, or whether, if a subsidy program is 

established, it should be implemented in any particular way. 

In February we testified before this Subcommittee and provided estimates 

of the cost of a subsidy for set-top boxes using data on household 

television characteristics and expected set-top box costs. Today we will 

discuss (1) some challenges to administering a subsidy program for DTV 

equipment, (2) some administrative options for implementing a DTV 

 1

Set-top boxes that have enhanced features, such as digital video recorders and output of 

high definition signals, would be more costly. 

2

Viewers using such a set-top box would not actually be viewing the channels digitally, but 

would be viewing the broadcasters’ digital signals after they have been downconverted to 

analog. 
Page 3 GAO-05-623T 

subsidy, (3) examples of government programs that make use of rebates 

and vouchers to provide subsidies, and (4) some other efforts necessary 

for the completion of the DTV transition. In addition to information 

provided in this testimony, we will provide a more detailed study on these 

and other issues related to the DTV transition for the Committee later this 

year. 

To address the issues we will discuss today, we interviewed federal and 

state government officials who have experience in providing assistance to 

individuals or households through various subsidy programs. The agencies 

we contacted include the Department of the Treasury, the Department of 

Agriculture’s Food and Nutrition Service, the Department of Health and 

Human Services, and state social service agencies from Alabama, Illinois, 

Maryland, and Texas. These states were chosen to represent varied 

demographic and geographic characteristics. We also spoke with 

companies in several key industry segments including nine electronics 

manufacturers, four electronics retailers, and a rebate fulfillment house (a 

company that processes rebates for manufacturers and retailers). 

Additionally, we interviewed a rebate and retail promotion expert, an 

academic who has studied consumer rebate redemption behavior, and 

representatives from the Promotion Marketing Association. We also 

contacted a company that provides identification and credential 

verification services. For general information about the DTV transition, we 

spoke with seven broadcasters, three cable and satellite companies, and 

five television station owners. We also had several meetings with Federal 

Communications Commission (FCC) staff and various industry trade 

groups, such as the National Cable & Telecommunications Association, 

the Satellite Broadcasting and Communications Association, the 

Consumer Electronics Association, the National Association of 

Broadcasters, and the American Cable Association. We obtained 

information on government programs that used rebates or vouchers from 

program administrators and other sources. We contacted the National 

Telecommunications and Information Administration (NTIA) to ask 

questions about their views on the administration of a DTV subsidy 

program, but an agency official stated that they had no official comment. 
Page 4 GAO-05-623T 

We conducted our work from August 2004 to May 2005 in accordance with 

generally accepted government auditing standards. We discussed this 

testimony with FCC officials to obtain their comments. FCC provided 

technical corrections that we incorporated where appropriate. 

In summary: 

• We found that several administrative challenges might arise in 

implementing a subsidy for DTV equipment. Key issues we identified 

include challenges related to making determinations about (1) which 

federal entity would administer a subsidy program, (2) whether a 

rulemaking process would be necessary to fully determine and stipulate 

how the subsidy program will be structured, (3) who would be eligible to 

receive a subsidy, (4) what equipment would be covered, (5) how 

information about the subsidy would be communicated to consumers and 

industry, and (6) what measures, if any, would be taken to limit fraud. 

Some of these issues could be particularly difficult to address. For 

example: 

• If the subsidy were only available to low-income households, a possible 

method of identifying these households would be to use receipt of 

some other low-income assistance—such as food stamps—to identify 

those eligible for the DTV subsidy. A drawback to this approach, 

however, is that agencies overseeing such programs may not be 

allowed to release lists of their recipients to others. If the subsidy is 

only provided to households that rely exclusively on over-the-air 

television, the identification of these households may be difficult 

because no list of such households exists, and information on the 

inverse—those households that subscribe to cable or satellite service—

is dispersed across hundreds of providers in the country, and these 

providers may also face limitations on the release of their subscribers’ 

lists to others. 

• Another key challenge would be to make sure that eligible recipients 

understand that a subsidy is available to them, how they can obtain it, 

which equipment the subsidy can be used for, and where they can 

obtain the equipment. Effectively communicating this information 

would likely first require that information about the broader DTV 

transition is effectively communicated to the public. Three years ago 

we found that many Americans did not have an awareness of the DTV 

transition. Recently, the Consumer Electronics Association reported 

that knowledge of DTV is increasing. Our interviews with several 

retailers and manufacturers, indicated, however, that while consumers 

are more familiar with the concept of high-definition television, many 
Page 5 GAO-05-623T 

are still confused or unaware that at some point in the future analog 

television will cease operation and analog televisions sets will not be 

able to receive digital over-the-air television signals. 

• Several administrative options could be used to provide a government 

subsidy to help households obtain DTV equipment. The four options for 

administering a DTV subsidy that we reviewed are a refundable tax credit, 

government distribution of equipment, a voucher program, and a rebate 

program. We found that the suitability of any of these methods depends on 

aspects of the subsidy’s design, such as which entity is most appropriate to 

administer the subsidy and who would be eligible to receive the benefit. 

For example, if the DTV subsidy were only available to low-income 

households, a voucher might be a possible method to deliver the subsidy. 

Alternatively, if the subsidy is more widely available, a rebate might be a 

good delivery mechanism. 

• Various government programs make use of rebates or vouchers to 

subsidize consumers’ purchase of products. We reviewed three local 

government rebate programs that provide incentives for furthering 

environmental policy goals and three voucher programs, including one 

state program that subsidizes equipment for deaf and hard of hearing 

individuals and two federal programs that provide assistance to needy 

households to purchase food. For the programs we reviewed, we found 

differences existed between the rebates and vouchers programs that might 

provide insight for the development of DTV subsidy. Regarding eligibility 

determinations, we observed that eligibility for the voucher programs was 

specifically defined and the benefits were targeted to low-income 

individuals, whereas eligibility for the rebate programs was not based on 

income. Overall, however, we found these programs differed with respect 

to what might be undertaken for a DTV subsidy. Further, choosing not to 

participate in any of the programs we reviewed would not cause a 

household to lose any existing service or functionality. In contrast, if a 

household relying exclusively on over-the-air television chose not to take 

advantage of a DTV subsidy for which it is qualified, and then did not 

obtain the necessary equipment to receive broadcast digital signals, the 

household would lose access to broadcast television signals when the 

transition occurs. 

• If a subsidy program is implemented, it will pose many challenges for the 

implementing agency and industry. However, there are other aspects of 

the DTV transition not related to the implementation of possible subsidy 

program that are ongoing and will take time to complete or may pose their 

own challenges. For example, the channel election process, which will 

determine the channel placement for each television station’s digital 
Page 6 GAO-05-623T 

signal, is ongoing. Because a proposed rulemaking will follow the end of 

this selection process (scheduled to be completed in August 2006), all 

stations’ final selections will not be set until sometime in 2007, according 

to an FCC official. Another example of an issue that may arise as the DTV 

transition progresses relates to antennas used to receive digital broadcast 

signals. While many stakeholders we interviewed told us that antennas 

used for analog over-the-air reception should work well for the digital 

broadcast signal, a few stakeholders (including an antenna manufacturer, 

a broadcaster, and a retailer) told us that reception will depend on 

geographic and topographic factors and that some people may need new 

antennas or adjustment of existing antennas. 

The United States is currently undergoing a transition from analog to 

digital broadcast television. With traditional analog technology, pictures 

and sounds are converted into “waveform” electrical signals for 

transmission through the radiofrequency spectrum, while digital 

technology converts these pictures and sounds into a stream of digits 

consisting of zeros and ones for transmission. Digital transmission of 

television signals provides several advantages compared to analog 

transmission, such as enabling better quality picture and sound reception 

as well as using the radiofrequency spectrum more efficiently than analog 

transmission. 

A primary goal of the DTV transition is for the federal government to 

reclaim spectrum that broadcasters currently use to provide analog 

television signals. The radiofrequency spectrum is a medium that enables 

many forms of wireless communications, such as mobile telephone, 

paging, broadcast television and radio, private radio systems, and satellite 

services. Because of the virtual explosion of wireless applications in 

recent years, there is considerable concern that future spectrum needs—

both for commercial as well as for varied government purposes—will not 

be met. The spectrum that will be cleared at the end of the DTV transition 

is considered highly valuable spectrum—sometimes called “beachfront 

spectrum”—because of its particular technical properties. In all, the DTV 

transition will clear 108 MHz of spectrum—a fairly significant amount. In 

the Balanced Budget Act of 1997, the Congress directed FCC to reallocate 

24 MHz of the reclaimed spectrum to public safety uses. Since the terrorist 

attacks of September 11, 2001, there has been a greater sense of urgency 

to free spectrum for public safety purposes. The remaining returned 

Background 
Page 7 GAO-05-623T 

spectrum will be auctioned for use in advanced wireless services, such as 

wireless high-speed Internet access.3

To implement the DTV transition, television stations must provide a digital 

signal, which requires them to upgrade their transmission facilities, such 

as transmission lines, antennas, and digital transmitters and encoders. 

Depending on each individual station’s tower configuration, the digital 

conversion may require new towers or upgrades to existing towers. Most 

television stations throughout the country are now providing a digital 

broadcast signal in addition to their analog signal. After 2006, the 

transition will end in each market—that is, analog broadcast signals will 

no longer be provided—when at least 85 percent of households in a given 

market have the ability to receive digital broadcast signals. 

During the course of our review, we identified several administrative 

challenges to implementing a subsidy for DTV equipment. For example, 

prior to implementing a subsidy program, various determinations need to 

be made, including (1) which federal entity will administer a subsidy 

program, (2) whether a rulemaking process is necessary to fully determine 

and stipulate how the subsidy program will be structured, (3) who will be 

eligible to receive a subsidy, (4) what equipment will be covered, (5) how 

information about the subsidy will be communicated to consumers and 

industry, and (6) what measures, if any, will be taken to limit fraud. 

One challenge to the DTV subsidy that we identified is determining which 

entity should administer the subsidy program. An industry representative 

told us that the implementing agency should have some level of 

telecommunications expertise in order to be able to set appropriate 

standards for the equipment being subsidized and to effectively educate 

consumers about the DTV transition. In our opinion, policymakers might 

also consider if the entity has experience administering a household 

assistance program. 

Based on our discussions with government officials, it appears that no 

single entity has the combined technical knowledge and subsidy 

administration expertise that might be necessary to successfully 

 3

In addition to the 24 MHz that is allocated to public safety, another 24 MHz has already 

been auctioned. 

Several Challenges 

Might Arise That 

Require Consideration 

in Administering a 

Subsidy Program for 

DTV Equipment 

It is Unclear What Entity 

Would Be Best Suited to 

Administer the Subsidy 

Program 
Page 8 GAO-05-623T 

implement a DTV subsidy. For example, while FCC and NTIA have 

telecommunications knowledge and are responsible for managing the use 

of the radiofrequency spectrum, neither has experience administering a 

federal subsidy program of this kind. We asked these agencies about their 

ability, based on their experience, to administer a DTV subsidy. NTIA had 

no official comment. FCC officials told us they believe the Commission 

could have some role, such as defining which equipment would be eligible 

for the subsidy, but did not believe FCC was best suited to administer the 

entire subsidy program. Further, an FCC official said 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. 

We also asked two agencies that have experience administering federal 

assistance programs, the Department of Health and Human Services and 

the Department of Agriculture’s Food and Nutrition Service, about their 

ability to implement a DTV subsidy.4

 Although these agencies have 

experience with subsidy programs, they do not have expertise in 

telecommunications. Officials from the Department of Health and Human 

Services told us the agency would not be well suited to administer a DTV 

subsidy because their programs, such as Temporary Assistance for Needy 

Families, are narrowly defined—a household must have children to be 

eligible for Temporary Assistance for Needy Families—and would not 

offer broad enough coverage for a DTV subsidy. Similarly, officials from 

the Food and Nutrition Service said they did not believe their agency 

would be the best entity to administer the subsidy. However, after we 

asked whether the state agencies that administer food stamps could 

provide a DTV subsidy to their recipients, Food and Nutrition Service 

officials said that this might be possible under certain conditions, but that 

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. 

When we contacted four state heath and human services agencies that 

administer various assistance programs on behalf of the federal 

government, such as food stamps, all four indicated that it might be 

possible for the states to provide the DTV subsidy to the low-income 

individuals who already receive assistance from one or more programs 

 4

The Department of Heath and Human Services administers a number of programs, 

including Temporary Assistance for Needy Families. The Food and Nutrition Service also 

administers various programs, including the nation’s Food Stamp Program and the Special 

Supplemental Nutrition Program for Women, Infants, and Children, better known as WIC. 
Page 9 GAO-05-623T 

they administer. However, they told us there would be costs associated 

with implementing a subsidy program, such as staff time, programming 

costs, postage, and envelopes. One state we contacted estimated that it 

would cost approximately $552,000 to mail vouchers to the approximately 

1.5 million households that receive food stamps, Medicaid, and Temporary 

Assistance for Needy Families within the state. However, two states told 

us that if the program ran over a period of time it would be difficult to 

track which households already received the DTV subsidy as people go on 

and off of assistance over time, so some households could receive 

duplicate benefits. Further, three of the four states told us that such a 

program would be burdensome on their limited staff resources. 

A rulemaking process might be required to implement a DTV subsidy, and 

if so, this would likely have implications for how quickly a subsidy 

program could be established. While legislation could broadly define the 

parameters of the subsidy program and may even prescribe specific 

elements of the programs’ structure and administration, it is not 

uncommon for a federal agency to determine that a rulemaking process is 

necessary to more fully detail how a program will be implemented. 

Through a rulemaking, the agency would finalize the rules of the program 

that were not specifically addressed in the legislation. FCC told us that if 

the legislation is very specific a rulemaking process may not be necessary 

for a DTV subsidy. However, FCC did note that rulemakings have been 

used in the past after legislation enacted new programs. For example, 

rulemaking processes have been undertaken several times to make 

adjustments to the Lifeline Assistance Program since it was established in 

1985.5

The rulemaking process generally takes time because it requires a wide 

range of procedural, consultative, and analytical actions on the part the 

agencies. Sometimes agencies take years to develop final rules. Among 

other things, the rulemaking process generally requires agencies to (1) 

publish a notice of proposed rulemaking in the Federal Register; (2) allow 

interested parties an opportunity to participate in the rulemaking process 

by providing written data, views, or arguments; (3) review the comments 

received and make any changes to the rule that it believes are necessary to 

respond to those comments; and (4) publish the final rule at least 30 days 

 5

The Lifeline program, created in 1985, provides a discount on local telephone bills for 

certain low-income customers so that basic local phone service is more affordable. 

Implementing a Subsidy 

Program May Require a 

Rulemaking Process 
Page 10 GAO-05-623T 

before it becomes effective. Further, the Office of Management and Budget 

reviews significant proposed and final rules initiated by executive branch 

agencies other than independent regulatory agencies before those rules 

are published in the Federal Register.6

 A former official from the 

Department of Health and Human Services told us that industry 

participants, interest groups, or other stakeholders can challenge a 

proposed rulemaking, which can delay the process further. He said that in 

order to avoid such challenges, it is essential to have the key stakeholders 

involved early in the process. That is, if the key stakeholders have the 

opportunity to provide input prior to the development of the rulemaking 

and are satisfied that their concerns are addressed, they will be less likely 

to file a challenge to the proposed rulemaking. 

Determining who would be eligible to receive the subsidy could present an 

administrative challenge to developing a subsidy program. If the 

government decides not to provide a DTV subsidy to all households, it 

would need to establish criteria to determine who is eligible. For example, 

a means test could be imposed to restrict eligibility to low-income 

households determined to be in financial need of the subsidy. The subsidy 

could also be limited to only those households relying on over-the-air 

television signals, on the grounds that these households are likely to be the 

most adversely affected by the DTV transition. 

Eligibility for Low-Income Households: If it is determined that a DTV 

subsidy will only be made available to low-income households, a means 

test of some kind would need to be used to identify the appropriate target 

households. Officials from the Department of Health and Human Services 

told us that using the income-based eligibility criteria of existing social 

service programs to define eligibility for a DTV subsidy program would be 

the most efficient way to employ a means test. That is, 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, we were also told that one of the drawbacks to 

using these existing programs is that not all who are eligible for any 

particular program actually choose to apply for and receive benefits. This 

would mean that by only providing a DTV subsidy to those already 

receiving other assistance, some people who would be eligible for the 

 6

The Office of Management and Budget does not review rules of independent regulatory 

agencies, such as FCC. 

Eligibility Criteria Pose 

Challenges to the 

Administration of a DTV 

Subsidy Program 
Page 11 GAO-05-623T 

subsidy based on their underlying income would not qualify for the 

subsidy because they have chosen not to receive another form of 

assistance. Officials from the Food and Nutrition Service told us that for 

the Food Stamp Program, approximately 54 percent of those who would 

be eligible for the program receive the benefit nationwide. It was thus 

suggested to us that if recipient lists from social assistance programs were 

used in developing eligibility determinations for a DTV subsidy, it might be 

beneficial to use more than one program. By combining the participants of 

several programs, a DTV subsidy for low-income households would target 

a higher percentage of needy households than if only one program was 

used to establish eligibility. For example, FCC told us that the Lifeline 

Assistance Program uses receipt of any of seven social assistance 

programs, including food stamps and Medicaid, as an eligibility 

requirement.7

Privacy concerns could, however, be a limitation of using existing social 

welfare programs to develop eligibility for a DTV subsidy because the 

agencies administering these programs may be prohibited from providing 

the list of recipients to any outside entity. Under current law for example, 

food stamp recipient information might not be available to other federal 

agencies or to any private party or outside entity that might be involved in 

the administering the subsidy. Another limitation in using these data is that 

there is continuous change in recipient rolls because of people entering 

and leaving the program. Those implementing a DTV subsidy program 

would need to take into account the volatility of recipient rolls in deciding 

how this information could be used. 

Eligibility for Over-the-Air Households: Some stakeholders we contacted 

indicated that a DTV subsidy should be focused on or limited to only those 

households that rely exclusively on over-the-air television. Because no list 

of these households exists, limiting a subsidy in this manner will require 

determining who the over-the-air households are—a task that could pose 

administrative challenges. One possible approach to identifying over-theair households is to first identify cable and satellite8

 subscribers. A 

 7

Consumers can receive assistance if they participate in Medicaid, the Food Stamp 

Program, Supplemental Security Income, Federal Public Housing Assistance (Section 8), 

the Low Income Home Energy Assistance Program, the National School Lunch Program’s 

free lunch program, or Temporary Assistance for Needy Families. 

8

For satellite subscribers, we are referring to those that subscribe to a direct broadcast 

satellite (DBS) service, such as DIRECTV or DISH Network. 
Page 12 GAO-05-623T 

combined list of all cable and satellite subscribers could be used as a 

mechanism to check whether those applying for a DTV subsidy are not 

qualified for the subsidy. 

The process of combining cable and satellite subscriber information into a 

comprehensive list could be a highly challenging task. First, cable industry 

officials we interviewed expressed concern over providing their 

subscriber lists to a government agency or another entity. Cable officials 

told us that under current law, they could not turn over subscriber 

information to the government without prior permission from subscribers 

unless they were under a court order.9

 Cable industry officials also told us 

that any change in current legislation would need to include liability 

protection for cable and satellite companies because their subscriber 

lists—which include personal information provided to these companies 

from subscribers—would be outside their control. An industry official said 

that even more stringent safeguards would need to be in place if the 

information were provided to an outside entity—such as a contractor—

rather than to a government agency. One cable company official stated 

that even if the law were changed to allow the company to provide its 

subscriber lists, it would be placed in the awkward situation of having to 

inform their subscribers that their names were provided to the government 

to help administer a subsidy that the cable subscribers are not eligible to 

receive. The cable company official also stated that subscribers would be 

sensitive to their information being used in this manner, especially in light 

of recent security issues related to personal information. 

A second challenge to developing a national list of all cable and satellite 

subscribers is the difficulty of merging this information across all cable 

and satellite companies. Currently, there are over 1,100 cable and satellite 

companies operating throughout the country, with a total of nearly 90 

million subscribers. Information from these companies, which is 

maintained in various formats, would have to be collected and combined 

into a comprehensive list of subscribers. Cable industry officials stated 

that the process of merging and maintaining a list of nearly 90 million 

subscribers would not be an easy undertaking. For example, one cable 

industry official estimated that the process of working through all the 

technical logistics for establishing a list could take 6 to 12 months. 

Additionally, cable industry officials stated that there is significant “churn” 

(i.e., the number of people moving on and off subscriber lists) in the 

 9

47 U.S.C. §§ 338(i) and 551. 
Page 13 GAO-05-623T 

industry. For example, one cable company official stated that churn can be 

as high as 10 percent of subscribers from month to month. Another cable 

industry official told us that a significant level of resources would be 

needed to keep such a combined subscriber list up to date. 

Another possible, albeit difficult, way to determine who the over-the-air 

households are would be to send queries to cable and satellite providers to 

ask if particular people who have applied for the DTV subsidy are, in fact, 

already subscribing to cable or satellite. For cable customers, a database 

would need to be developed to direct the queries to the applicable 

provider. According to FCC, the Commission maintains a master data base 

with information on all franchised cable areas—of which there are over 

30,000. The most identifiable geographic information in that database is 

the name of county where each cable franchise is located. If an applicant 

for the DTV subsidy provided a county of residence, a query could be sent 

to all the franchised cable areas in that county. However, an FCC official 

told us that in many counties there are multiple cable franchises operating. 

Moreover, the FCC official stated that even though there is a contact name 

for each franchise area, in many cases, the contact was someone at a 

corporate headquarters of the cable company. Thus, we believe that to 

contact the local cable franchise directly, the database would need to be 

further developed to include information—perhaps an e-mail address at 

the local franchise level—to which the query could be sent. This process 

could be time consuming for both the entity processing the subsidy 

applications and the cable providers. On the satellite side, we believe 

querying the satellite providers might not be too difficult because there are 

only two primary providers. However, people may object to their personal 

information being sent to the satellite providers as well as the cable 

providers in their area. Another option might be to use information 

maintained by companies that perform subscriber billing for cable and 

satellite companies. We were told that about six large billing companies 

provide billing services for a substantial majority of the cable and satellite 

companies. Representatives from a company that provides identification 

and credential verification services told us they could verify that 

individuals applying for a DTV subsidy do not subscribe to a cable or 

satellite service by checking the applicant’s address against the addresses 

maintained by the cable and satellite providers’ billing companies. To 

protect the privacy of subsidy applicants, the identification and 

verification services company told us such queries should be based on an 

individual’s address rather than name or Social Security number. Company 

officials also told us that it would likely take a few months to develop this 

checking process. 
Page 14 GAO-05-623T 

One of the administrative elements of a subsidy program that would likely 

need to be determined is exactly what equipment will be subsidized. In 

making this determination, policymakers might consider both policy 

issues as well as issues related to the ability of the program to be 

implemented and managed. 

From a policy perspective, several of the manufacturers and retailers we 

contacted told us that they believe it would be most beneficial to 

consumers if the program did not put highly specific limits on the type of 

equipment they could buy with the subsidy. In particular, some 

stakeholders generally believed that eligible consumers should not only be 

allowed to apply the subsidy toward a basic set-top box, but should also 

be allowed to apply that amount toward enhanced set-top boxes (those 

with upgraded features or functions) or digital televisions capable of 

receiving and displaying digital broadcast signals. Several stakeholders 

noted that any product that enables consumers to receive digital broadcast 

signals does the job of ensuring that there is no loss in television service 

when the transition occurs. Moreover, some said a wide application of the 

subsidy provides consumers the most choice and promotes the adoption 

of digital television. An opposing view is that a subsidy should only be 

designed to ensure that there is no loss of television service when the DTV 

transition is completed, and therefore the subsidy should only be 

applicable to a set-top box. 

From the perspective of administering the program, determining what 

items the subsidy can be applied towards is critical for communicating to 

manufacturers, retailers, and consumers a key parameter of the program. 

Some stakeholders noted that either the Congress or the administering 

agency would need to identify the products that would be subsidized so 

that manufacturers produce the appropriate equipment. If the intent is to 

subsidize only simple set-top boxes, FCC officials told us that the subsidy 

would cover boxes that have only analog outputs. If the Congress or the 

implementing agency determines that the subsidy will be more broadly 

applicable, the particular parameters of the program would need to be 

communicated to the manufacturing industry so that their business plans 

can proceed. 

There would also likely be some process by which specific items meeting 

the parameters of the subsidy program are approved and flagged as 

eligible for the subsidy. Manufacturers need certainty about what items 

are approved for the subsidy if they are to place a rebate coupon on or 

inside of the equipment boxes, along with any related information. 

Congress and 

Implementing Agency 

Must Determine What 

Specific Equipment Would 

Be Subsidized 
Page 15 GAO-05-623T 

Specific identification of subsidized items will also be important for 

retailers as they make inventory decisions and train staff about how to 

guide consumers’ purchasing decisions. Also, if retailers are asked to play 

a part in the administration of the program, such as by accepting vouchers 

or printing rebate coupons at the time of sale, it will be critical for them to 

have validation of items that are eligible for the subsidy. And, clearly, 

consumers need to understand which items they can purchase using the 

subsidy. 

Some industry representatives we contacted also expressed concern about 

the interface between industry and the government in the design of the 

subsidy program. In particular, industry representatives said that the 

government should work with industry as the subsidy program is 

developed to ensure that the program is designed in a manner that will 

provide incentives for manufacturers and retailers to participate. 

Additionally, some companies noted that the government would need to 

provide industry with information on the expected scope of the program in 

order to avoid shortages of equipment at retail. In general, some 

companies told us that industry should be involved in the development of 

the program to help ensure that it is designed and implemented efficiently. 

To successfully implement a DTV subsidy program, eligible recipients will 

need to understand that a subsidy is available, how to obtain it, which 

equipment the subsidy can be used for, and where they can obtain the 

equipment. Thus the agency responsible for implementing the program 

would need to undertake a communication campaign. At the same time, it 

could be difficult to provide information about the parameters of the 

subsidy program if there is not a general understanding about the broader 

DTV transition. As such, it appears that an information campaign regarding 

the availability of a subsidy for DTV equipment might need to be 

coordinated with a more general information campaign about the 

transition and its ramifications for American households. 

Three years ago we found that many Americans did not have significant 

awareness of the DTV transition, and we recommended that FCC explore 

options to raise public awareness about the transition and the impact it 

will have on consumers.10 Since that time, FCC and industry have 

 10See GAO, Telecommunications: Additional Federal Efforts Could Help Advance Digital 

Television Transition, GAO-03-7 (Washington, D.C.: Nov. 8, 2002). 

A Successful Subsidy 

Program Will Require an 

Effective Information 

Campaign about the DTV 

Transition and Subsidy 
Page 16 GAO-05-623T 

undertaken efforts to better inform the public about the transition. In 

March of this year, the Consumer Electronics Association, an association 

of electronics manufacturers, reported that consumers’ understanding of 

digital television has improved. This association surveyed individuals and 

found that, compared to past years, there has been an increase in 

consumer familiarity and understanding of DTV, as well as an increase in 

the likelihood of over-the-air households to take action to avoid losing 

television service. 

Based on our interviews with several stakeholders, it appears that despite 

these findings many consumers—particularly those who may be the most 

affected by the transition—may still be unaware or confused about the 

DTV transition. Several of the company representatives with whom we 

spoke told us that while consumers are more familiar with the concept of 

high-definition television, they are still unaware or confused about other 

aspects of the DTV transition. Some told us that few consumers 

understand that at some point analog television will cease operation and 

analog television sets will be unable to receive digital over-the-air signals. 

We were told that it is especially difficult to provide consumers with a 

better understanding of this in the absence of a hard transition date. 

Additionally, some populations might be difficult to reach because English 

may not be their primary language or because they only receive television 

over-the-air and have no business relationship with a subscription 

television provider that would likely provide them with information about 

the transition. 

Depending on how a subsidy program is structured and implemented, 

there may be opportunities for people to defraud the government. For 

example, one official familiar with government subsidy programs noted 

that if everyone were eligible for the subsidy, the opportunities for fraud 

would decline. For this reason, the more restrictive the eligibility 

requirements, the greater may be the chances for fraud. In terms of 

reducing fraud, those familiar with rebates noted that the more 

requirements for rebate redemption—that is, the more documentation the 

consumer must provide to redeem the rebate—the fewer problems with 

fraud there are likely to be. However, we were also told that increased 

requirements would tend to reduce the number of people who attempt to 

redeem the rebate. An additional consideration regarding fraud is the cost 

of fraud mitigation. A former official from the Department of Health and 

Human Services told us that while minimizing fraud should be considered 

in developing a subsidy program, the cost-effectiveness of these efforts 

should also be measured. For example, we were told that administering 

Minimizing Fraud Might Be 

a Consideration in the 

Development of a Subsidy 

Program 
Page 17 GAO-05-623T 

systems to mitigate and prevent fraud may be costly and may not be 

worthwhile, especially if the value of the subsidy is low. 

While a government subsidy for consumers to purchase DTV equipment 

could be administered in several ways, each of the subsidy options we 

examined had advantages and disadvantages. Following is a description of 

and stakeholders’ views on four DTV subsidy options: a refundable tax 

credit, government distribution of equipment, a voucher program, and a 

rebate program. As we noted above, we take no position on whether a 

subsidy should be implemented, or whether, if a subsidy program is 

established, it should be implemented in any particular way. 

Refundable Tax Credit Program: One method that could be used to 

administer a subsidy program for DTV equipment would be a refundable 

tax credit, administered as part of the federal individual income tax. A 

refundable tax credit could be designed to provide qualifying taxpayers a 

refund greater than the amount of their tax liability before credits. Based 

on the manner in which tax credits work, we believe that a tax credit for 

DTV equipment would likely be structured such that consumers purchase 

an eligible set-top box, maintain required information on their purchase, 

and seek reimbursement for all or some portion of the cost from the 

federal government for the equipment when they file their federal income 

taxes. Based on discussions with an official from the Department of the 

Treasury, it does not appear that this method would be well suited for a 

DTV subsidy. The Treasury official told us that considerable administrative 

burdens would be imposed on the Internal Revenue Service (IRS) to 

administer a refundable tax credit for a one-time subsidy. This official 

noted that implementation of a new tax credit would require the IRS to 

change tax forms, as well as instructions, for the years that the program 

would be in operation. Changing tax forms imposes administrative costs, 

particularly if tax laws are changed after forms have been developed for a 

given tax year. Additionally, he noted that IRS Form 1040 is currently 

completely full, so that any new credit could require the form to be 

lengthened from two pages to three pages, which would be costly and 

burdensome. The official also noted that the availability of the tax credit 

may cause some individuals who otherwise would not file a tax form to do 

so, which would increase IRS administrative burdens. The Treasury 

official also noted that there could be compliance problems with a tax 

credit approach. Because of the small amount of the credit—likely about 

$50—it would not be cost-effective for the IRS to assign resources to 

check compliance, thus it would be very difficult to minimize fraudulent 

A Variety of Options 

Exist for 

Administering a DTV 

Subsidy, Each with 

Unique Challenges 
Page 18 GAO-05-623T 

use of the credit. In fact, IRS has had difficulty assuring compliance for a 

refundable tax credit. In particular, for the Earned Income Tax Credit, IRS 

estimated that roughly 30 percent of the dollars claimed was erroneous. 

We heard from stakeholders that a tax credit for DTV equipment might not 

be the most helpful to low-income Americans because individuals would 

have to purchase the equipment with their own money and file—possibly 

many months later—for a tax refund. Also, we were told some low-income 

Americans do not file tax returns. We believe the additional costs and 

burdens for such individuals to file taxes for the purpose of obtaining a tax 

credit may exceed the value of the credit. 

Government Distribution: With government distribution, the government 

provides certain goods for needy citizens. One example of government 

distribution is the Emergency Food Assistance Program whereby the 

government provides food, such as dried fruit, non-fat dry milk, and 

peanut butter, to states for distribution to selected local agencies—usually 

food banks—which, in turn, distribute the food to soup kitchens and food 

pantries that serve the public directly. 

For the DTV transition, the government could directly provide the 

necessary equipment to individuals, but we found there would be a 

number of challenges to implementing and administering such a program, 

and, based on discussions with state social service agencies, it appears 

that this would be an unwieldy way to administer a DTV subsidy. One 

challenge would be finding locations for distributing the equipment. We 

heard from several officials whose state agencies administer benefit 

programs that using local social services offices as a distribution point 

would not be feasible. These officials cited the lack of space and staff 

resources to store, secure, and distribute equipment as reasons why local 

offices could not be used to administer such a program. Further, 

stakeholders told us that government distribution does not take advantage 

of existing retail supply chains that already move large quantities of goods 

to stores throughout the country. 

While a government distribution program would not require households to 

pay for equipment in advance of receiving the subsidy, which would be 

beneficial to low-income households, the program could present other 

challenges to those eligible to participate. For example, stakeholders we 

interviewed told us that a distribution program limits consumers’ choices 

and provides no mechanism for consumers to obtain support if the 

equipment does not work properly. Additionally, officials from one state 

agency told us that people obtaining equipment at local offices would have 
Page 19 GAO-05-623T 

to wait in long lines, which could be problematic for those with physical 

limitations, such as the disabled and the elderly. 

Voucher Program: Another mechanism to subsidize DTV equipment could 

be through a voucher program. A voucher—which is a coupon or 

electronic benefit card, similar to a credit card, which provides purchasing 

power for a restricted set of goods or services—could be provided to 

households that qualify for a DTV subsidy. The federal government has 

used vouchers to provide a variety of assistance to households, such as 

food stamps and housing subsidies. Also, vouchers have been used on a 

limited basis to provide benefits to consumers for the changeover of 

certain technology. For example, the Colorado Department of Human 

Services provided a voucher to individuals who qualified as hard of 

hearing to purchase text telephones and other specialized 

telecommunications equipment. 

For a DTV equipment subsidy using a voucher system, various 

administrative steps would be necessary to design and implement an 

effective program. After decisions were made about the specific 

equipment to be covered, vouchers would need to be distributed to eligible 

households. Several of those we contacted noted that if the program is to 

be means tested, state agencies—such as those that administer the Food 

Stamp Program—might be able to mail vouchers to their existing 

recipients.11 Additionally, with a voucher program, several administrative 

steps involving the retail industry would be required. Participating 

retailers would have to know how the program is structured, which 

specific items were covered by the subsidy, approximately how many 

pieces of DTV equipment were expected to be subsidized in a particular 

area, and how the mechanism for retailer reimbursement would operate. 

Overall, using vouchers to administer a DTV subsidy might be beneficial 

for low-income households because such households would not be 

required to pay for the DTV equipment in advance and then wait to be 

reimbursed. However, stakeholders told us that this type of program could 

create a burden on retailers because they must determine the authenticity 

of the vouchers. Also, stakeholders mentioned that it might be more 

 11State agencies we contacted suggested that mailing a paper voucher to recipients would 

be the least difficult and most effective way of distributing a voucher for a potential DTV 

subsidy. While food stamp benefits are provided to recipients electronically (through an 

Electronic Benefit Transfer (EBT) card), the state agencies told us it would be costly and 

time-consuming to add the DTV subsidy to these electronic cards. 
Page 20 GAO-05-623T 

challenging to include smaller and independent retailers in a subsidy 

program that uses vouchers. 

Rebate Program: A rebate program could also be used to administer a DTV 

subsidy. Rebates generally require consumers to pay the full cost of an 

item at the time of purchase and then send documentation to an address 

specified by the manufacturer or retailer to receive a rebate by mail. The 

documentation required generally includes the original sales receipt, the 

UPC code from the product packaging, a rebate slip, and the customer’s 

name, address, and telephone number. In most cases, this paperwork must 

be sent within 30 days of the purchase, and consumers generally receive 

their rebates up to 12 weeks later. According to the three rebate experts 

we interviewed, only about 30 percent of rebates are ever redeemed. While 

two rebate experts said that redemption rates would likely rise with a 

larger rebate, such as might be provided with a DTV subsidy, none of the 

three we spoke with believed that the redemption rate would rise above 50 

percent. Also we were told that depending on the type of rebate, on 

average 1 percent to 20 percent of rebate applications are rejected based 

on the lack of proper documentation. 

Typically, a variety of decisions are made in developing a rebate program. 

For example, as we discussed these decisions with stakeholders, various 

methods of implementing a rebate were highlighted, including placing the 

rebate coupon inside the equipment box, affixing it to the outside of the 

box, or printing a coupon at the cash register at the time of sale. The 

method used would, in part, determine which entities have some 

administrative responsibility for the rebate program. If a DTV subsidy 

program were designed to have a rebate coupon placed in or on the box, it 

would be the responsibility of the manufacturer to do so, while if it were 

designed to have a rebate coupon generated at the cash register, the 

retailer would be responsible for managing this process. A consensus on 

the best rebate method did not emerge from our interviews with industry 

experts. 

One of the most difficult elements associated with using a rebate for a 

DTV subsidy would be applying eligibility requirements. As previously 

discussed, information about over-the-air and low-income eligibility is not 

readily available to the rebate fulfillment houses—which are the entities 

that process rebates for manufacturers and retailers—and there are legal 

obstacles to the government collecting and providing that information to 

them. Another downside of rebates is that consumers generally pay the full 

cost of an item at the time of purchase, which could create a hardship for 

low-income households. Furthermore, one rebate fulfillment center 
Page 21 GAO-05-623T 

representative told us that low-income individuals are less likely to 

redeem rebates than other segments of the population. Similarly, an 

official from a state agency told us that based on her experience a rebate 

program is not a good choice if the subsidy is supposed to target lowincome individuals because many low-income individuals are not 

comfortable with rebates and will not redeem them. If eligibility for the 

subsidy is not restricted, a rebate might provide a good delivery 

mechanism. A benefit of using a rebate program for a DTV subsidy is that 

this method could take advantage of the relationships that already exist 

between retailers, manufacturers, and the rebate fulfillment industry. 

We identified several government programs that have used or are using 

rebates or vouchers to subsidize consumers’ purchase of products. While 

aspects of these programs might provide insight into the establishment of 

a DTV subsidy, we found, overall, that the programs we reviewed differed 

in many respects from what might be undertaken for a DTV subsidy. We 

reviewed three rebate programs that were implemented by local 

governments to provide incentives for furthering a policy goal, such as 

clean air, water conservation, and the use of energy-efficient appliances. 

We also reviewed three voucher programs, including one state program 

that subsidizes equipment for deaf and hard of hearing citizens and two 

federal programs that provide assistance to needy households to purchase 

food. See table 1 for key information about the six programs we reviewed. 

Several Government 

Programs Have 

Employed Rebates or 

Vouchers to Provide 

Subsidies 
Page 1 GAO-05-623T 

Table 1: Information on Rebate and Voucher Programs GAO Reviewed 

Program name Subsidy 

type and amount 

Administering entity 

Item/commodity subsidized 

Eligibility requirements 

Total budget 

Percent of budget allocated to administrative costs 

Number of persons served 

Time required to develop and implement program 

Length of program existence 

Information dissemination 

Santa Cruz County Electric Bike Commuter Incentive Program 

Rebate; maximum rebate is $375 

Ecology Action, Inc. on behalf of Santa Cruz County, California 

Electric-powered bicycles 

Must be a resident of Santa Cruz County, also must attend a safety training class 

$1 million Start up 

administrative costs were 26.4 percent; once the program was established, administrative costs were 14 percent 

879 About 12 

months total; 6 months to design the program and 6 months to secure funding 

August 2000 through June 2006 

The program was launched with a high profile press conference attended by regional and national press; then used main stream media to promote the program 

Sacramento County Water Agency Ultralow Flow Toilet Rebate Program 

Rebate; rebates vary from $75 to $125 per rebate 

County of Sacramento, California 

Ultra-low flush toilets (that use only 1.6 gallons of water per flush) 

Must be a Sacramento County Water Agency customer (with a high flow toilet ) 

$45,000 in 2004 and 2005 

Administrative costs not separated out from general agency costs 

142 in 2004 About 18 

months to implement; majority of this time was spent coordinating with the various water agencies that were participating in the program 

Ongoing; started in 2003 

Advertised in water bills and newsletters; allowed installers to advertise program’s availability 
Page 2 GAO-05-623T 

Program name Subsidy 

type and amount 

Administering entity 

Item/commodity subsidized 

Eligibility requirements 

Total budget 

Percent of budget allocated to administrative costs 

Number of persons served 

Time required to develop and implement program 

Length of program existence 

Information dissemination 

Consumer Rebate Program (for Energy Efficient Products) 

Rebate Los Angeles 

Dept. of Water and Power (LADWP), California 

Energy efficient appliances, lighting, and windows 

Must be a LADWP customer 

$3 million Approximately 

$1.18 million, or 39 percent of the total budget, is for labor, marketing and materials 

Approximately 6,000 per year 

Original program development was lengthy; program implemented in 3 months once contractor was hired 

Ongoing; started in 2002. 

Provided handouts at retail stores and LADWP branch offices, advertised on radio, placed inserts in all residential utility bills, created special page on LADWP web site, had kick-off event at Home Depot that was carried on local news stations 

Colorado Telecommunications Equipment Distribution Program 

Voucher Colorado 

Commission for the Deaf and Hard of Hearing 

Text telephones, printing text telephones, phone signalers, and amplifier 

Medically certified as deaf or hard of hearing and low income, defined as 185 percent of the federal poverty level 

$650,000 Not available 260 Not available Ongoing; 

started in 2003 

Worked with rehab and independent living centers, advocacy groups, subscriber based emails, and newsletters for groups representing the deaf and hard of hearing. Also did a one-time stuffer in phone bills 
Page 3 GAO-05-623T 

Program name Subsidy 

type and amount 

Administering entity 

Item/commodity subsidized 

Eligibility requirements 

Total budget 

Percent of budget allocated to administrative costs 

Number of persons served 

Time required to develop and implement program 

Length of program existence 

Information dissemination 

Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) 

Voucher a Department of 

Agriculture, Food and Nutrition Service 

Food 185 percent of 

federal poverty guideline, among other criteria 

$4.5 billion in fiscal year 2003 

About 28 percent, includes nutrition services as well 

7.6 million in fiscal year 2003 

c Ongoing; 

started in 1974 

c 

Food Stamp Program Voucher b Department of 

Agriculture, Food and Nutrition Service 

Food 130 percent of 

federal poverty guideline, among other criteria 

$23.9 billion in fiscal year 2003 

About 10 percent 

21.3 million in fiscal year 2003 

c Ongoing; 

started in 1964 

c 

Source: GAO analysis. aMost state agencies distribute WIC benefits through checks or vouchers that enable recipients to purchase specific foods each month. A few state agencies 

distribute WIC foods through warehouses or deliver the foods to participants’ homes. 

bThe Food Stamp Program provides low-income households with coupons or electronic benefits that recipients use as cash at most grocery stores. cFor long-standing programs, we did not obtain information on time required to develop and implement the program and to disseminate information to eligible 

participants. 
Page 1 GAO-05-623T 

We believe some aspects of the programs’ implementation, such as the 

time required to develop a program and the manner in which program 

information was disseminated, might have relevance to the establishment 

of a DTV subsidy. For example, for two of the rebate programs, we learned 

that it took several months to develop and implement the programs, with 

one rebate program taking 12 months and another taking 18 months to 

implement. In reviewing various other aspects of the programs, such as 

eligibility determinations and what products were subsidized, we found 

that differences existed between the voucher and rebate programs that 

might also provide some insight for a DTV subsidy. For example, for all of 

the voucher programs we reviewed, benefits were targeted to low-income 

individuals, and eligibility was specifically defined. In contrast, eligibility 

for the rebate programs not based on income; rather, a person only had to 

reside in the location where the subsidy was being offered or be a water or 

power customer to be eligible. We also found differences in the types of 

products subsidized for the rebate and voucher programs that we 

reviewed. Whereas the rebates subsidized items in an effort to further a 

policy goal (generally environmental protection), the voucher programs 

provided recipients with items for their basic needs. 

Overall, however, we observed that aspects of these programs’ 

implementation are dissimilar to what might be undertaken for a DTV 

subsidy. First, choosing not to participate in any of the programs we 

reviewed would not cause a household to lose any existing service or 

functionality. In contrast, if a household chose not to take advantage of a 

DTV subsidy for which it was qualified, and then did not obtain the 

necessary equipment to receive broadcast digital signals, the household 

might lose access to broadcast television signals when the transition 

occurs. Additionally, none of the rebate programs we reviewed are 

comparable to the size of a potential DTV subsidy in terms of number of 

people served. While the national voucher programs serve millions of 

households, they are unlike the DTV subsidy in that they are longestablished programs with an entire infrastructure designed to provide 

benefits to recipients on a recurring monthly basis. Due to differences in 

the scope of the rebate and voucher programs we reviewed and a potential 

DTV subsidy, it is not clear how applicable the administrative costs of 

these programs are to estimating the costs of a DTV subsidy. 
Page 2 GAO-05-623T 

If a subsidy program is implemented, it will pose many challenges for the 

implementing agency and industry. However, there are other aspects of 

the DTV transition not related to the implementation of possible subsidy 

program that are ongoing and will take time to complete or may pose their 

own challenges. For example: 

• Under current FCC time frames, the final process for television stations to 

select their permanent channel placement for their digital signals is 

ongoing. Broadcast stations began the process of choosing their final DTV 

channel in February 2005.1

 In August 2006, FCC expects to issue a Notice 

of Proposed Rulemaking that includes a tentative DTV Table of Allotments 

once the channel election process is finished. FCC will seek comment on 

the proposed Table and then issue an order with a Final DTV Table of 

Allotments, which, at a minimum, would take several months. An FCC 

official told us that it would likely be sometime in 2007 before all the 

allotments are finalized. In order for the DTV Table of Allotments to be 

finalized by the end of 2006, FCC officials told us that they would need to 

shorten the channel election process time frames that they currently have 

in place. We were told that once stations know their final channel 

assignments, they might need to make adjustments to certain equipment. 

Therefore, we found that for stations that do not have certainty on their 

assignments until sometime in 2007, equipment modifications will be 

undertaken well into that year. 

• Currently, a small number of television stations are not yet broadcasting 

digital signals. FCC told us that issues of technical interference and the 

permitting process for locating and constructing broadcast towers are the 

primary reasons these stations are not yet online with a digital broadcast 

signal. For example, for any station located within 200 miles of the 

Canadian border, coordination and approval from the Canadian 

government is required, in accordance with international treaties. 

• At present, no requirements for the application of the Emergency Alert 

System (EAS) apply to stations’ digital broadcast signals. FCC is now 

considering how requirements will be set. An FCC official told us that 

rules for EAS on DTV stations that are similar to requirements for analog 

stations should be developed within a few months, but additional work 

 1

In the Matter of Second Periodic Review of the Commission’s Rules and Policies 

Affecting the Conversion to Digital Television, MB Docket No. 03-15, Report and Order, 

FCC 04-192, released September 7, 2004, FCC established a multistep channel election and 

repacking process through which broadcast licensees will select their ultimate DTV 

channel (i.e., channels 2-51). 

Other Efforts 

Necessary for the 

Completion of the 

DTV Transition Are 

Ongoing 
Page 3 GAO-05-623T 

will look at whether there will be expanded functionality required in the 

digital environment. According to FCC, the equipment that stations will be 

required to purchase to meet the basic requirements that are likely to be 

set before the end of 2005 is not very expensive. Because the requirements 

for expanded functionality are not yet set, an FCC official told us that it is 

not clear what the cost of any additional equipment will be. 

• Another challenge that may be posed by the DTV transition relates to 

antenna reception of digital over-the-air broadcast signals. Many 

stakeholders said that antennas currently used to view analog over-the-air 

signals will be sufficient to receive DTV signals and an FCC official told us 

that many viewers will have improved picture quality with digital signals. 

However, a few indicated that improved antenna technology may be 

needed for some households. An antenna manufacturer, a broadcaster, a 

retailer, and other stakeholders said that the ability to receive digital overthe-air signals is variable and contingent on each household’s geography, 

among other things, and that some people may need new antennas or 

adjustment of existing antennas. In particular, we were told that adjusting 

the antenna to receive digital broadcast signals can be more difficult than 

analog signals because if the antenna is not aimed correctly, the television 

may not be able to display any signal. Also, while interference from trees, 

buildings, and other structures can distort an analog picture, this type of 

interference can cause a complete loss of digital signals. 

• Ensuring that households understand the transition and how they will be 

affected is critical to a smooth transition. Any household that does not 

understand what will occur could be adversely affected. Over-the-air 

households are the most likely to be impacted by the transition because, to 

whatever extent cable subscribers will be affected, they will likely have 

support and information provided by their subscription video providers. 

Based on our work, other specific populations might also be more difficult 

to reach with needed information about the transition, including lowincome households and those who do not speak English as a first 

language. The consequences of any information gaps are serious because 

households could lose their access to television signals. During our work 

on the transition to DTV in Berlin, Germany, we found that an extensive 

information campaign was widely viewed as critical to the success of the 

transition. 

There are many difficult decisions and determinations that will likely be 

considered if a subsidy program for DTV equipment is developed. In 

addition, there are unique interfaces between the challenges we identified 

and the administrative method used to deliver the subsidy that will require 

Concluding 

Observations 
Page 4 GAO-05-623T 

careful consideration. For example, if such a program were developed and 

eligibility were limited to only low-income individuals, it might be 

advantageous to leverage the infrastructure and expertise that state social 

service agencies have in providing assistance to needy households. But to 

utilize the state agencies, the subsidy might need to be provided in the 

form of a voucher because the state agencies have experience mailing 

information and could mail a voucher to the low-income recipients of 

other assistance. In contrast, if there were no eligibility restrictions 

applied to the subsidy, a rebate might be a good method for administering 

the subsidy because it would draw on the existing relationships between 

manufacturers, retailers, and rebate fulfillment companies, all of whom 

have extensive knowledge and experience in developing, advertising, and 

implementing rebates. However, such a design might render the subsidy 

less usable by low-income Americans. 

The return of the spectrum for public safety and commercial purposes is a 

critical goal for the United States. Implementing a subsidy program for 

DTV equipment poses a variety of difficult challenges and may not be the 

only policy option that could help advance the overall goal of reclaiming 

spectrum. Given the importance of this transition, it seems critical for 

knowledgeable officials in government and in industry to work together to 

find the best means to address any issues that may impede progress in 

completing the DTV transition—and the associated reclamation of 

valuable radiofrequency spectrum. 

Mr. Chairman, this concludes my prepared statement. I would be happy to 

respond to any questions you or other Members of the Committee may 

have at this time. 

For questions regarding this testimony, please contact Mark L. Goldstein 

on (202) 512-2834 or goldsteinm@gao.gov. Individuals making key 

contributions to this testimony included Amy Abramowitz, Michael 

Clements, Andy Clinton, Simon Galed, Eric Hudson, Bert Japikse, and 

Sally Moino. 

Contact and 

Acknowledgments 

(543124) 
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
The Government Accountability Office, the audit, evaluation and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help 

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost 

is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts 

newly released reports, testimony, and correspondence on its Web site. To 

have GAO e-mail you a list of newly posted products every afternoon, go 

to www.gao.gov and select “Subscribe to Updates.” 

The first copy of each printed report is free. Additional copies are $2 each. 

A check or money order should be made out to the Superintendent of 

Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 

more copies mailed to a single address are discounted 25 percent. Orders 

should be sent to: 

U.S. Government Accountability Office 

441 G Street NW, Room LM 

Washington, D.C. 20548 

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm 

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400 

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548 

Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800 

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

GAO’s Mission 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Mail or Phone 

To Report Fraud, 

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Public Affairs 

PRINTED ON RECYCLED PAPER