GAO-05-837R Subsidy Administration Issues Related to the DTV Transition 

United States Government Accountability Office

Washington, DC 20548 

June 20, 2005 

The Honorable John D. Dingell 

Ranking Member 

Committee on Energy and Commerce 

The Honorable Edward J. Markey 

Ranking Member 

Subcommittee on Telecommunications 

 and the Internet 

House of Representatives 

Subject: Digital Television Transition: Questions on Administrative Costs of an 

Equipment Subsidy Program

On May 26, 2005, I testified before the Subcommittee on Telecommunications and the 

Internet on a staff discussion draft of the DTV Transition Act of 2005.1 At that time, I 

discussed several challenges to administering a program for subsidizing the purchase 

of digital converter boxes to advance the DTV transition. This letter responds to your 

June 9, 2005 letter requesting that we provide information on the approximate cost of 

various administrative steps that might be necessary to administer such a subsidy 

program. Specifically, your letter identifies a number of administrative steps that 

might be required to administer a rebate program targeted to low-income households 

that rely solely on over-the-air television signals, and asks us to estimate the costs of 

specific administrative steps. As I indicated at the hearing, estimating the specific 

costs of these administrative steps is difficult because of the substantial uncertainty 

about exactly what would be required to implement them. Your letter also notes that 

the administrative costs for the rebate and voucher programs that we reviewed 

ranged from 10 percent to 39 percent. However, as we noted in our written 

statement, 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. 

We recognize that the Committee desires a clear understanding of the administrative 

costs associated with implementing a converter box subsidy program in considering 

legislation to end the DTV transition on a date certain. As your letter suggests, 

several administrative steps would likely be taken to establish a rebate program 

targeting low-income households that rely solely on over-the-air television signals. 

Costs would be incurred to complete these administrative steps. For example, during 

our review, we heard from a rebate clearinghouse that it usually charges between 

 

1

GAO, Digital Broadcast Television Transition: Several Challenges Could Arise in Administering a 

Subsidy Program for DTV Equipment, GAO-05-623T (Washington, D.C.: May 26, 2005). 
Page 2 GAO-05-837R Subsidy Administration Issues Related to the DTV Transition

$0.30 and $0.45 per redeemed rebate to cover the processing costs, with an additional 

cost of $0.37 for first class postage to mail the rebate check to the recipient. We 

believe that this estimate might not reflect all of the rebate clearinghouse costs for 

the rebate program you describe because a DTV subsidy program requires the 

clearinghouse to complete more steps than would be typical for most manufacturer 

or retailer rebates. This program step is just one small element of the overall subsidy 

program. 

Regarding other costs, the various uncertainties surrounding a hypothetical subsidy 

complicate measuring or approximating the administrative costs of such a program. 

For example, it is unclear what approach would be most efficient to identify over-theair households. As we indicated in our written statement, determining over-the-air 

households could be accomplished through different, albeit highly challenging, 

approaches. The tasks necessary to attain a list of over-the-air households and the 

associated administrative costs of doing so could vary depending on how this is done 

and until it is clearer what would need to be accomplished to develop this list, the 

cost of its derivation is unknown. Restricting eligibility further by requiring an 

income means test adds more uncertainty to the administrative costs of a potential 

DTV subsidy program. We noted in our written statement that one possible approach 

to identify low-income households would be to use receipt of an existing social 

service program as eligibility criteria for the DTV subsidy. However, the program 

could be set up in different ways depending on which social service programs are 

included as criteria for identifying low-income households. These differences would 

have implications for administrative costs, as would the unknown burdens placed on 

local social service agencies that oversee those programs. 

In addition, your letter asks us to determine the total administrative costs for a DTV 

subsidy program given two hypothetical funding levels. Your letter subsequently asks 

us to determine the number of households that would be able to receive a rebate 

under various scenarios, given the administrative costs that would be subtracted 

from the total funding level. Because we are unable to determine the subsidy 

program’s administrative costs, we cannot address these questions. 

For additional information on our work on the DTV transition, please contact me or 

Amy Abramowitz on (202) 512-2834 or goldsteinm@gao.gov or abramowitza@gao.gov. 

Mark L. Goldstein 

Director, Physical Infrastructure Issues 

(543139) 
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