Page 1 GAO-05-940R Digital Television Transition

United States Government Accountability Office

Washington, D.C. 20548

A

September 6, 2005

The Honorable Joe Barton

Chairman

The Honorable John D. Dingell

Ranking Minority Member

Committee on Energy and Commerce

House of Representatives

The Honorable Fred Upton

Chairman

The Honorable Edward J. Markey

Ranking Minority Member

Subcommittee on Telecommunications 

 and the Internet 

Committee on Energy and Commerce

House of Representatives

Subject: Digital Television Transition: Issues Related to an Information 

Campaign Regarding the Transition 

The United States is currently undergoing a transition from analog to digital 

broadcast television. This transition offers the promise of more television 

programming options, interactive television, and high-definition television. 

An additional goal of the digital television (DTV) transition is for the federal 

government to reclaim radiofrequencies—or spectrum—that broadcasters 

currently use to transmit analog television signals. 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 

government purposes—will not be met. The spectrum that will be cleared 

at the end of the DTV transition is considered to be highly valuable 

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

transition will clear 108 megahertz (MHz) of spectrum, which is a fairly 

significant amount. In the 1997 Balanced Budget Act, the Congress directed 

the Federal Communications Commission (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 spectrum will 

be auctioned for use in advanced wireless services, such as wireless
Page 2 GAO-05-940R Digital Television Transition

high-speed Internet access.1 The return of the radiofrequency spectrum at 

the end of the transition will thus provide many benefits to society by 

easing the spectrum scarcity facing public safety first-responders, 

engendering economic growth and consumer value from spectrum 

redeployed to wireless services, and affording revenues to the federal 

government from the proceeds of a spectrum auction.

Due to your interest in the DTV transition, we testified before the House 

Subcommittee on Telecommunications and the Internet, Committee on 

Energy and Commerce, on May 26, 2005; February 17, 2005; and July 21, 

2004, and on issues related to the DTV transition.2

 Additionally, you asked 

us to report on the information Americans need to know about the DTV 

transition. As such, this report specifically focuses on information 

campaign issues that we have not previously discussed. We are providing 

(1) stakeholder views on Americans’ knowledge of the DTV transition, (2) 

stakeholder views on how government and industry might most effectively 

communicate critical DTV information, and (3) information on efforts by 

Germany and the United Kingdom to inform their citizens about the DTV 

transitions taking place in those countries. See enclosures I, II, and III for 

our recent testimonies related to the DTV transition.

In preparing this report, we obtained information from a variety of 

stakeholders, including companies in several key industry segments, 

government officials, telecommunications experts, and representatives 

from industry trade and consumer groups. We interviewed these 

stakeholders because of their knowledge and involvement with the DTV 

transition and the varying perspectives they may have had. There may be 

other views on information issues related to the DTV transition that are not 

represented by the stakeholders we contacted. Specifically, we interviewed 

45 stakeholders, including 9 consumer electronics manufacturers, 4 

electronics retailers, 7 broadcasters, 5 television station owners, 2 cable 

television providers, and 1 satellite provider. We also met with FCC staff 

and several individuals who are considered experts in the 

1

Some of this spectrum—24 MHz—has already been auctioned.

2

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); Digital Broadcast Television Transition: Estimated Cost of Supporting 

Set-Top Boxes to Help Advance the DTV Transition, GAO-05-258T (Washington, D.C.: Feb. 

17, 2005); and Telecommunications: German DTV Transition Differs from U.S. Transition 

in Many Respects, but Certain Key Challenges Are Similar, GAO-04-926T (Washington, 

D.C.: July 21, 2004).
Page 3 GAO-05-940R Digital Television Transition

telecommunications industry. The industry trade and consumer groups we 

contacted include AARP, the American Cable Association, the Association 

of Public Safety Communications Officials, the Association of Public 

Television Stations, the Cellular Telecommunications and Internet 

Association, Cable Television Laboratories Incorporated, the Consumer 

Electronics Association, the Consumer Federation of America, the Minority 

Media and Telecommunications Council, the National Association of 

Broadcasters, the National Cable & Telecommunications Association, and 

the Satellite Broadcasting and Communications Association. 

We conducted our work between August 2004 and August 2005 in 

accordance with generally accepted government auditing standards.

Background With traditional analog technology, television pictures and sounds are 

converted into “waveform” electrical signals for transmission through the 

radiofrequency spectrum.3

 These analog signals fade with distance, so 

consumers living further from a television tower will experience pictures 

that are distorted or full of “snow.” With digital technology, pictures and 

sounds are converted into a stream of digits consisting of zeros and ones. 

Although digital signals also fade over distance, because each bit of 

information is either a zero or a one, a digital television set or receiver can 

adjust for minor weaknesses in the signal to recreate the zeros and ones as 

originally transmitted. Thus, pictures and sound generally retain their high 

quality unless significant fading of the signal occurs, at which point the 

transmission cannot be corrected and there is no picture at all.

Digital technology uses the radiofrequency spectrum more efficiently than 

analog technology and, as a result, provides greater flexibility in terms of 

the television content that television stations can provide. Television 

stations can transmit a single analog signal in the 6 MHz of radio spectrum 

allocated to each television station. In contrast, with digital technology, 

television stations can use that 6 MHz of spectrum to simultaneously 

transmit multiple signals in standard definition digital format, a concept 

known as “multicasting.” The television station could use the full 6 MHz of 

spectrum to provide high-definition television, which provides roughly 

3

The radiofrequency spectrum is the part of the natural spectrum of electromagnetic 

radiation lying between the frequency limits of 9 kilohertz and 300 gigahertz. It is the 

medium that makes possible wireless communications, including cellular and paging 

services, radio and television broadcasting, radar, and satellite-based services.
Page 4 GAO-05-940R Digital Television Transition

twice as many lines of resolution and thus creates a television picture that 

is much sharper than traditional analog television service.4

 To facilitate the 

transition from analog to digital television, the Congress and FCC provided 

each full-powered television station (both commercial and public) with an 

additional 6 MHz of radiofrequency spectrum so that stations could 

transmit both an analog and digital television signal; that is, each local 

television station now has 12 MHz of spectrum, 6 MHz for their analog 

signal and 6 MHz for their digital signal. Once the transition is complete, 

broadcast stations will operate solely in digital and must return the 6 MHz 

of additional spectrum to the government.

There are over 1,700 commercial and noncommercial (such as public) 

television stations in the United States. Commercial television stations 

produce local programming, such as local news, and may get their 

remaining programming content through an affiliation with one of the top 

seven television broadcast networks (ABC, CBS, Fox, NBC, PAX, UPN, and 

WB). Other commercial television stations are independent. Public 

television stations operate as nonprofit, community-based organizations. 

While public stations produce local programming, many stations are 

affiliated with and receive programming from the Public Broadcasting 

Service. 

Households can view television signals through three primary means. First, 

a household can rely on over-the-air television and receive the television 

signals directly from television stations through a rooftop antenna or 

antennae attached to the television sets in their home. Second, a household 

can receive television signals from cable companies, which deliver the 

signals from cable facilities to subscribers’ homes via a localized network

4

Current analog television sets display about 480 lines of resolution; high-definition 

television sets display up to 1,080 lines of resolution and are often “widescreen” format, 

similar to movie theater screens. High-definition sets offer improved picture and audio 

quality.
Page 5 GAO-05-940R Digital Television Transition

of cable lines.5 Third, households can receive television signals from a 

direct broadcast satellite company.6

As we have previously reported, households with analog televisions sets 

that rely solely on over-the-air signals must take action to be able to view 

digital broadcast signals after the DTV transition is complete.7

 Options 

available to these households include (1) purchasing a digital television set 

that includes a tuner capable of receiving, processing, and displaying a 

digital signal; (2) purchasing a digital-to-analog converter box, which 

converts the digital broadcast signals to analog so that they can be viewed 

on an existing analog set;8

 or (3) subscribing to a cable or satellite service 

to eliminate the need to acquire a digital-to-analog converter box. Without 

some form of public information campaign, these households might not be 

aware of the impending changes related to the DTV transition and the 

actions they need to take. 

Many Stakeholders 

Believed That 

American Households 

Do Not Fully 

Understand the DTV 

Transition 

In 2002, we reported that consumer knowledge about the DTV transition 

and its implications was low. 9 In fact, a survey we conducted found that 83 

percent of respondents had never heard of or were only somewhat aware 

of the transition. Therefore, in November 2002, we recommended that FCC 

explore options to raise public awareness about the DTV transition and the

5

The facility where cable operators originate and distribute cable service in a geographic 

area is referred to as a “headend.” Cable operators receive and package television signals 

from a variety of television stations and networks and distribute the signals over coaxial 

wires emanating from the headend and terminating at subscribers’ residences. 

6

In the markets in which satellite companies provide so-called “local-into-local service,” 

local television stations’ signals are transmitted to satellites orbiting above the equator, and 

then are provided to subscribers in the local market through satellite retransmissions.

7

GAO-05-258T.

8

Viewers with digital-to-analog converter boxes would not actually see the broadcast digital 

signal in a digital format. They would be viewing that signal after it has been converted, by 

the converter box, to be compatible with their existing analog television set.

9

GAO, Telecommunications: Additional Federal Efforts Could Help Advance Digital 

Television Transition, GAO-03-7 (Washington, D.C.: Nov. 8, 2002).
Page 6 GAO-05-940R Digital Television Transition

impact it will have on the public.10 FCC developed a Web site 

(www.dtv.gov) to provide consumer information on the DTV transition. 

This Web site provides information about DTV news, terms, and regulatory 

information, as well as a listing of digital and high-definition television 

programming and a consumer’s guide for digital television sets. FCC told us 

it has also developed several consumer publications on DTV, in English and 

Spanish, and co-authored a “tip sheet” with the Consumer Electronics 

Association and the Consumer Electronics Retailers Coalition that is being 

distributed through major consumer electronics retail stores and Web sites. 

FCC said its staff has met with a number of organizations about possible 

joint DTV consumer education efforts, including AARP, the Alliance for 

Public Technology, Hispanic Technology and Telecommunications 

Partnership, and the Federal Citizen Information Center. Additionally, FCC 

told us they have participated in several widely attended consumer events, 

such as the National Council of La Raza annual conference and AARP’s 

“National Event & Expo,” to assess DTV consumer information needs and 

to disseminate current information about the transition. According to FCC, 

its Consumer Center also provides DTV information through a toll-free line 

and by e-mail and postal mail. Consumers also may subscribe to FCC’s 

Consumer Information Registry to receive updates about the DTV 

transition. Additionally, some retailers we contacted told us they have 

made efforts to provide information about the DTV transition. For example, 

one retailer said his business advises customers about the DTV transition 

and the implications it will have on analog television. A manufacturer we 

contacted said that the Consumer Electronics Association is doing a great 

deal to educate consumers. 

Despite these efforts, several of the stakeholders we interviewed believed 

that consumers are still confused and do not understand the DTV 

transition. For example, one broadcaster we spoke with stated that 

consumers do not understand the difference between the DTV transition 

and high-definition television, and that few people are even aware that the 

transition is taking place. Further, a retailer told us that many consumers 

do not understand that after the transition, analog signals will no longer be 

used to transmit television signals; rather, he said those consumers believe 

that they will always have a choice between viewing analog and digital 

signals, similar to the manner in which they can choose between digital and 

film cameras. This retailer also said that because analog television sets are 

10GAO-03-7.
Page 7 GAO-05-940R Digital Television Transition

priced much lower than digital sets, consumers with no knowledge of the 

DTV transition or when it will occur are not eager to adopt DTV equipment. 

Stakeholders Viewed 

Advertisements as the 

Most Effective Means 

to Communicate DTV 

Information 

Of the 35 stakeholders who responded to our question about the most 

effective mechanism to inform the public about the DTV transition, 22 

believed that public service announcements, such as television 

advertisements, should be the primary form of communication. For 

example, a retailer told us that television would be the most effective 

mechanism because it is the medium that most people use. A trade group 

representative said that, in his opinion, using public service 

announcements on television would reach at least 60 percent of the people. 

Several of the stakeholders who were in favor of television advertisements 

also believed that the information campaign should be coupled with other 

forms of advertisement. For example, a broadcaster told us that in addition 

to television advertisements, other items such as books, pamphlets, and 

information packets should be made available at retail locations and other 

places of interest. A trade group representative said that a variety of 

advertising mechanisms should be used, including commercials and 

newspaper advertisements. 

Some stakeholders believed that other approaches could be used to inform 

the public about the DTV transition. For example, a number of 

broadcasters we interviewed stated that an effective approach to inform 

consumers would be to place labels on analog televisions at retail locations 

stating that the analog sets would not be able to receive digital broadcast 

signals after the transition is complete without being connected to some 

device or service. An electronics manufacturer told us that digital and 

high-definition television program information should be listed in 

newspapers, television guides, and the Internet to inform the public. A 

television station owner told us that a task force consisting of 

broadcasters, press, and government officials should be established with 

consumer education as the focal point.

Stakeholders who responded to our question on which entity should be 

responsible for implementing a public information campaign had differing 

opinions. Eleven stakeholders stated that broadcasters should be primarily 

responsible, 10 said that the government should have primary 

responsibility, and another 4 believed that all parties involved in the 

transition should play a role in educating the public on the DTV transition. 

For example, a television station owner told us that the campaign should 

be a partnership between the government, broadcasters, advertisers, 
Page 8 GAO-05-940R Digital Television Transition

manufacturers, and cable and satellite companies, but that the government 

should take the lead. A trade group representative told us that all groups 

should play a role, but that broadcasters should begin utilizing public 

service announcements immediately. One broadcaster told us that the 

government is responsible for informing the public, but that it should work 

with manufacturers, retailers, and broadcasters in doing so. 

A majority of stakeholders who responded to our question about the 

appropriate timing for a public information campaign believed that the 

campaign should start as soon as possible. For example, an electronics 

retailer told us that the information campaign is already late and should 

begin immediately. A trade group representative said that the information 

campaign should begin as soon as possible to begin influencing the 

purchase of DTV equipment. Several of the responding stakeholders told us 

that the information campaign should be tied to a point in time before the 

actual transition date. For example, a representative of an electronics 

manufacturer stated that consumer education should begin 6 to 12 months 

prior to the end date of analog service because the consumer education 

would be “background noise” if it begins too early. A trade group 

representative also told us that the information campaign should begin at 

least 1 year before the transition date. 

Several of the stakeholders we spoke with noted that a prerequisite for an 

effective information campaign is certainty as to when the transition will 

actually take place. In particular, some stakeholders told us that with 

certainty regarding the transition’s completion, they could take steps to 

more effectively raise the level of pubic awareness about the transition and 

its implications. Some stakeholders we spoke with also told us that it is 

important for any public information campaign to be consistent, stating 

that a unified effort by industry and government participants would be 

effective at reducing consumer confusion. For example, one retailer told us 

that the consumer confusion is driven by poor education, and that a unified 

message would be most effective to educate the public. Another 

consideration for an effective information campaign that was discussed 

with us is ensuring that information about the transition is communicated 

in multiple languages. Since many stakeholders suggested using television 

advertisements to inform the public, it might be beneficial to produce and 

broadcast these advertisements in Spanish. According to a broadcaster, a 

large percentage of Spanish-speaking households watch over-the-air 

television exclusively.
Page 9 GAO-05-940R Digital Television Transition

Legislation introduced in the Senate and a House staff draft of legislation 

contains requirements for consumer education related to the DTV 

transition.11 In particular, the legislation requires labels to be placed on 

analog television sets informing consumers that the televisions will not be 

able to receive digital broadcast signals after the transition is complete, 

unless it is connected to a digital tuner; digital-to-analog converter box; or 

cable, satellite, or other multichannel video service. The bills also require 

FCC to educate consumers about the deadline when analog signals will be 

terminated and about the options consumers have to continue to receive 

broadcast programming. The House staff draft of legislation requires (1) 

television broadcasters to air public service announcements and (2) cable 

and satellite providers to include a notice of the DTV transition in billing 

statements.

Two Other Countries 

Have Been Engaged in 

Extensive Public 

Information 

Campaigns to Inform 

Their Citizens about 

Their DTV Transitions 

We found that Germany and the United Kingdom undertook extensive 

public information campaigns regarding their DTV transitions. As we 

reported in July 2004,12 the Berlin authorities and broadcasters provided 

considerable information to the public, the media, and retailers about what 

the transition would entail, what consumers needed to do, how they would 

benefit by transitioning to digital television, and where to get assistance if 

there was confusion about what equipment was necessary or if there were 

problems with equipment or reception. This effort was planned and 

coordinated among many parties, resources were dedicated to the 

information campaign, and nearly everyone we spoke with told us it was a 

critical factor to the rapid DTV transition in Berlin. We also were told that a 

short consumer education period was best for informing households about 

the DTV transition; in Berlin, the consumer education effort lasted 

approximately 4 weeks and cost approximately 800,000 Euro ($984,160).13

In preparation for their DTV transition, the United Kingdom (1) developed 

an action plan that identified a series of events that needed to occur to 

ensure the transition was completed and (2) formed various strategic 

groups charged with raising public awareness and knowledge of the DTV 

11Senate bill S. 1268; House staff draft entitled, Digital Television Transition Act of 2005.

12GAO-04-926T.

13This amount does not include the value of commercial time that broadcasters devoted to 

the DTV transition. We used the July 13, 2004, exchange rate of 1.2302 to convert Euros into 

U.S. dollars, which was current at the time our previous report was issued. 
Page 10 GAO-05-940R Digital Television Transition

transition. Membership in these groups consisted of government and 

consumer group representatives, broadcasters, manufacturers, and 

industry experts. These groups developed a specific project plan to raise 

awareness and educate the public through information campaigns, 

research on DTV market conditions, training of stakeholders, and product 

labeling. Additionally, a not-for-profit company has been tasked to lead a 

major communication campaign to educate the public about the DTV 

transition and ensure everyone knows what is happening, what they need 

to do, and when they need to take action. The not-for-profit company will 

coordinate with television manufacturers, retailers, consumer groups, and 

others to ensure that the transition is properly implemented. 

In both Germany and the United Kingdom, the countries have devoted 

resources to determine what people understood about the DTV transition. 

During our work on the DTV transition in Berlin, German broadcasters told 

us that studies were conducted to determine citizens’ experiences with the 

transition and to determine what was confusing to them as they 

transitioned to digital. The United Kingdom also undertook research to 

evaluate the human effects of the transition, specifically with regards to 

how this would affect the elderly and disabled members of their society. 

They tested the individuals’ experiences in transition to digital television in 

two villages, and subsequently used questionnaires and interviews with 

members from the trial areas to measure changes in attitudes on a larger 

scale before and after digital installation.

Agency Comments We provided FCC with a draft of this report for their review and comment. 

On August 8, 2005, we met with the Chair of FCC’s Digital Television Task 

Force and other FCC staff within the Media Bureau and the Consumer and 

Governmental Affairs Bureau to discuss the report. FCC officials provided 

information regarding the Commission’s efforts to educate consumers 

about DTV and suggested technical corrections, which we incorporated 

into the report as appropriate.

We are sending copies of this report to interested congressional 

committees; the Chairman, FCC; and other interested parties. The report is 

available at no charge on GAO’s Web site at http://www.gao.gov. If you have 

any questions concerning this report, please contact me on (202) 512-2834 

or goldsteinm@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report.
Page 11 GAO-05-940R Digital Television Transition

Key contributors to this report were Amy Abramowitz, Michael Clements, 

Andy Clinton, Simon Galed, Eric Hudson, Bert Japikse, and Sally Moino.

Mark L. Goldstein

Director, Physical Infrastructure Issues

Enclosures - 3
Page 12 GAO-05-940R Digital Television Transition

Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

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 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 13 GAO-05-940R Digital Television Transition

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. 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 14 GAO-05-940R Digital Television Transition

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 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 15 GAO-05-940R Digital Television Transition

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. 
Enclosure I: GAO May 26, 2005, Testimony 

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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. 
Enclosure I: GAO May 26, 2005, Testimony 

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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 
Enclosure I: GAO May 26, 2005, Testimony 

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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 
Enclosure I: GAO May 26, 2005, Testimony 

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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 
Enclosure I: GAO May 26, 2005, Testimony 

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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 
Enclosure I: GAO May 26, 2005, Testimony 

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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. 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

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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 
Enclosure I: GAO May 26, 2005, Testimony 

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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 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

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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. 
Enclosure I: GAO May 26, 2005, Testimony 

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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. 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

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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. 
Enclosure I: GAO May 26, 2005, Testimony 

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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. 

Specific identification of subsidized items will also be important for 

Congress and 

Implementing Agency 

Must Determine What 

Specific Equipment Would 

Be Subsidized 
Enclosure I: GAO May 26, 2005, Testimony 

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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 

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

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 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 29 GAO-05-940R Digital Television Transition

Page 16 GAO-05-623T 

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 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 30 GAO-05-940R Digital Television Transition

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 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 31 GAO-05-940R Digital Television Transition

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 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 32 GAO-05-940R Digital Television Transition

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. 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 33 GAO-05-940R Digital Television Transition

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 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 34 GAO-05-940R Digital Television Transition

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
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 35 GAO-05-940R Digital Television Transition Page 22 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 Ultra- low 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 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 36 GAO-05-940R Digital Television Transition Page 23 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 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 37 GAO-05-940R Digital Television Transition Page 24 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. 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 38 GAO-05-940R Digital Television Transition

Page 25 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. 
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 39 GAO-05-940R Digital Television Transition

Page 26 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
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 40 GAO-05-940R Digital Television Transition

Page 27 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
Enclosure I: GAO May 26, 2005, Testimony 

(GAO-05-623T)

Page 41 GAO-05-940R Digital Television Transition

Page 28 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) 
Page 42 GAO-05-940R Digital Television Transition

Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

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 10:00 a.m. EST 

Thursday, February 17, 2005 DIGITAL BROADCAST 

TELEVISION TRANSITION 

Estimated Cost of 

Supporting Set-Top Boxes 

to Help Advance the DTV 

Transition

Statement of Mark L. Goldstein, Director 

Physical Infrastructure Issues 

GAO-05-258T 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 43 GAO-05-940R Digital Television Transition

What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-258T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Mark L. 

Goldstein, (202) 512-2834, 

goldsteinm@gao.gov. 

Highlights of GAO-05-258T, a testimony 

before the Subcommittee on 

Telecommunications and the Internet, 

Committee on Energy and Commerce, 

House of Representatives 

February 17, 2005

DIGITAL BROADCAST TELEVISION 

TRANSITION

Estimated Cost of Supporting Set-Top 

Boxes to Help Advance the DTV 

Transition

The three primary means through which Americans view television signals 

are over the air, cable, and direct broadcast satellite (DBS). GAO found that 

19 percent, or roughly 21 million American households, rely exclusively on 

free over-the-air television; 57 percent, or nearly 64 million households, view 

television via a cable service; and 19 percent, or about 22 million households,

have a subscription to a direct broadcast satellite (DBS) service. On 

average, over-the-air households are more likely to have lower incomes 

compared to cable and DBS households. While 48 percent of over-the-air 

households have incomes under $30,000, roughly 29 percent of cable and 

DBS households have incomes less than that level. Also, 6 percent of overthe-air households have incomes over $100,000, while about 13 percent of 

cable and DBS households have incomes exceeding $100,000. 

The specific equipment that each household needs to transition to DTV—

that is, to be able to view digital broadcast signals—depends on the method 

through which the household watches television, whether the household has 

already upgraded its television equipment to be compatible with DTV, and 

the resolution of certain key regulatory issues. GAO examined two key 

cases regarding the regulatory issues. The assumption for case one is that 

cable and DBS providers would continue providing broadcasters’ signals as 

they currently do, thus eliminating the need for their subscribers to acquire 

new equipment. In this case, only households viewing television using only 

an over-the-air antenna would need to take action to be able to view 

broadcasters’ digital signals. The assumption for the second case is that 

cable and DBS providers would be required to provide broadcasters’ digital 

signals to subscribers in substantially the same format as broadcasters 

transmitted those signals. This would require cable and DBS subscribers, in 

addition to over-the-air households, to have equipment in place to be able to 

receive their providers’ high-definition digital signals. 

If a subsidy for set-top boxes is only needed for over-the-air households 

(case one), GAO estimates that its cost could range from about $460 million 

to about $2 billion, depending on the price of the set-top boxes and whether 

a means test—which would limit eligibility to only those households with 

incomes lower than some specified limit—is employed. If cable and satellite 

subscribers also need new equipment (case two), the cost of providing the 

subsidy could range from about $1.8 billion to approximately $10.6 billion. 

We provided a draft of this testimony to the Federal Communications 

Commission (FCC) for their review and comment. FCC staff provided 

technical comments that we incorporated where appropriate. 

The digital television (DTV) 

transition offers the promise of 

enhanced television services. At 

the end of the transition, 

radiofrequency spectrum used for 

analog broadcast television will be 

used for other wireless services 

and for critical public safety 

services. To spur the digital 

transition, some industry 

participants and experts have 

suggested that the government may 

choose to provide a subsidy for settop boxes, which can receive 

digital broadcast television signals 

and convert them into analog 

signals so that they can be 

displayed on existing television 

sets. This testimony provides 

information on (1) the current 

distribution of American 

households by television viewing 

methods and whether there are 

demographic differences among 

these groups; (2) the equipment 

required for households to receive 

digital broadcast signals; and (3) 

the estimated cost to the federal 

government, under various 

scenarios, of providing a subsidy 

for set-top boxes that would enable 

households to view digital 

broadcast signals. 

We developed estimates of the cost 

of a subsidy for set-top boxes using 

data on household television 

characteristics, expected set-top 

box costs, and varied assumptions 

about how certain key regulatory 

issues will be decided. 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 44 GAO-05-940R Digital Television Transition

Page 1 GAO-05-258T 

Mr. Chairman and Members of the Subcommittee: 

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

of providing a subsidy to consumers for the purchase of set-top boxes in 

order to accelerate the transition from analog to digital broadcast 

television. This transition—known as the DTV transition—offers the 

promise of more programming options, interactive services, and highdefinition television (HDTV). Moreover, the return of radiofrequency 

spectrum used for analog broadcast television at the end of the 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. To facilitate the transition, the Congress and the 

Federal Communications Commission (FCC) temporarily provided 

television stations nationwide with additional spectrum so that stations 

could simultaneously broadcast both an analog and a digital signal. 

Stations’ analog licenses are mandated to terminate in December 2006, or 

when 85 percent of households in each market can receive digital 

broadcast signals, whichever is later.1

 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. 

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 television 

sets. This device would enable the household to view digital broadcast 

signals without purchasing a digital television set; such sets currently sell 

at considerably higher prices than traditional analog television sets. Aiding 

in the deployment of set-top boxes may enable the transition to end 

sooner than it might otherwise by increasing the number of households 

that can view digital broadcast signals. 

1

Additional requirements include (1) television stations affiliated with the four largest 

national networks (ABC, CBS, Fox, and NBC) are broadcasting a DTV signal and (2) the 

technology to convert a digital signal for use on an analog television set is generally 

available. 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

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Page 2 GAO-05-258T 

At the request of this subcommittee, we have examined (1) the current 

distribution of American households by television viewing methods and 

whether there are demographic differences among these groups; (2) the 

equipment required for households to receive digital broadcast signals; 

and (3) the estimated cost to the federal government, under various 

scenarios, of providing a subsidy for set-top boxes that would enable 

households to view digital broadcast signals. In addition to information 

provided in this testimony, we are conducting additional work on the DTV 

transition, subsidy options, and administrative approaches for 

implementing a subsidy program, and will provide a more detailed study 

for the Committee and the Subcommittee later this year. 

While a subsidy for set-top boxes may be one policy option to spur the 

transition, there are other policies that might do so as well. In our 

statement today, we provide cost estimates for a possible subsidy program 

under various scenarios. We note, however, that in providing these cost 

estimates, GAO is taking no position on this policy option. We are merely 

providing, as requested by the Committee and the Subcommittee, cost 

estimates for such a program. 

To address the issues we will discuss today, we purchased data from 

Knowledge Networks, a survey research firm that had conducted a 

consumer survey on household television characteristics. The survey 

provided the responses of 2,471 randomly selected American households 

and covers such topics as the method each household uses to view 

television (e.g., cable, over the air), how many television sets they have, 

and whether they have set-top boxes for digital cable service. The survey 

also provides information on an array of demographic characteristics for 

each household. These data were collected between February and April 

2004. The response rate for Knowledge Network’s survey was 47 percent. 

The relevance of the response rate for the study’s findings is discussed in 

appendix I.2

 Using a 95 percent confidence interval, all percentage 

estimates from the survey have margins of error of plus or minus 6 

percentage points or less, and all cost estimates based on the survey data 

have margins of error of plus or minus 16 percent or less. To assess the 

reliability of these survey data, we reviewed documentation of survey 

2

Because we did not have information on those contacted who chose not to participate in 

the survey, we could not estimate the impact of the nonresponse on our results. However, 

distributions of selected household characteristics (including presence of children, race, 

and household income) for the sample and the U.S. Census estimate of households show a 

similar pattern. 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 46 GAO-05-940R Digital Television Transition

Page 3 GAO-05-258T 

procedures provided by Knowledge Networks and questioned 

knowledgeable officials about the survey process and resulting data. We 

determined that the data were sufficiently reliable for the purposes of this 

testimony. We also contracted with Knowledge Networks to recontact 

some of respondents to its survey to ask additional questions that GAO 

developed. 3

 Because the number of recontacted households for the 

additional questions requested by GAO was small, the findings for these 

questions are not generalizable to a larger population. To gather 

information about the likely costs of set-top boxes, we interviewed several 

consumer electronics firms and experts. 

The estimate of the potential cost of a subsidy that we are providing 

should not be interpreted as the cost of a government program. In 

preparing these estimates we discussed the nature of our work with 

Congressional Budget Office (CBO). If the Congress considers legislation 

for a set-top box subsidy program, the CBO will, based on the specifics of 

the law, prepare an estimate of the cost of the program. We conducted our 

work from August 2004 to January 2005 in accordance with generally 

accepted government auditing standards. 

We provided a draft of this testimony to the Federal Communications 

Commission (FCC) for their review and comment. FCC staff provided 

technical comments that we incorporated where appropriate. 

In summary: 

• The three primary means through which Americans view television signals 

are over the air, cable, and direct broadcast satellite (DBS). We found that 

19 percent, or roughly 21 million American households, rely exclusively on 

over-the-air transmissions for their television viewing; 57 percent, or 

nearly 64 million American households, view television via a cable service; 

and about 19 percent, or about 22 million American households, have a 

subscription to a DBS service.4

 We recognize that others have estimated a 

3

The additional questions were related to why the household chose to view television as 

they currently do and whether they are likely to make changes in the viewing methods in 

the near future. 

4

These percentages do not add up to 100 percent because (1) between 1 and 2 percent of 

American households do not have a television, (2) about 1 percent of households receive 

television service through other means, such as a wireless cable system, and (3) the 

numbers reported here do not include close to 3 percent of households that reported 

having a subscription to both cable and DBS. 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 47 GAO-05-940R Digital Television Transition

Page 4 GAO-05-258T 

lower value for the percent of households relying on over the air 

television. 5 Our results were derived from a survey of over 2,400 

households, from which we estimated with 95 percent certainty that 

between 17 and 21 percent of households rely on over the air television. 

On average, over-the-air households are more likely to have lower incomes 

compared to cable or DBS households. While 48 percent of over-the-air 

households have incomes under $30,000,6

 roughly 29 percent of both cable 

and satellite homes had household incomes less than or equal to that level. 

Also, only 6 percent of over-the-air households had incomes over $100,000, 

while about 13 percent of cable and satellite households had incomes 

exceeding $100,000. Additionally, non-white and Hispanic households are 

more likely to rely on over-the-air television than are white and nonHispanic households. 

• The specific equipment needs for each household to transition to DTV—

that is, to be able to view broadcast digital signals—depends on certain 

key factors. First, the method through which a household watches 

television and whether it has already upgraded its television equipment to 

be compatible with digital television, will factor into the equipment needs 

of the household. Additionally, certain regulatory decisions yet to be made 

by FCC will play a role in determining some consumers’ equipment needs. 

We examined two key cases regarding the regulatory decisions. 

• In case one, we assume that cable and DBS providers would continue 

providing broadcasters’ signals as they currently do, thus eliminating 

any need for their subscribers to acquire new equipment. That is, cable 

providers would initially “downconvert”7

 broadcasters’ high-definition 

digital signals to an analog format before they are transmitted to their 

subscribers. Similarly, DBS providers would initially downconvert 

broadcasters’ high-definition digital signals to a standard-definition 

digital format before they are transmitted to their subscribers. This 

enables the signals to be viewed on subscribers’ existing televisions 

5

In its most recent report on video competition, FCC found that number of households 

subscribing to a multichannel video provider, such as a cable or DBS company, was 

approximately 85 percent of television households, thus implying that about 15 percent of 

television households rely on over-the-air television. The methodology employed by FCC 

differed from the household survey used to prepare our estimate. 

6

For a family of four, the poverty level is just under $19,000, so the $30,000 income level 

would correspond to about 160 percent of the 2004 poverty level for a family of four. The 

cutoff for eligibility for food stamps is 175 percent of the poverty level. 

7

The word “downconvert” means to take a signal in a given format and transform it into a 

lower-resolution format. 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 48 GAO-05-940R Digital Television Transition

Page 5 GAO-05-258T 

sets. In this case, only households viewing television using only an 

over-the-air antenna must take action to be able to view broadcasters’ 

digital signals. 

• In case two, we assume that cable and DBS providers would be 

required to provide broadcasters’ digital signals to subscribers in 

substantially the same format as broadcasters transmitted those 

signals. Because some of the broadcasters’ digital transmissions are in 

a high-definition digital format, the second case would require cable 

and DBS providers to transmit the signals in this format to their 

subscribers. To be able to view these signals, cable and DBS 

subscribers would need to have equipment in place, or to acquire new 

equipment, that can receive their providers’ high-definition digital 

signals. The second case would also require, as does case one, all overthe-air households to acquire new equipment. 

• If a subsidy for set-top boxes were needed only for over-the-air 

households, we estimate that its cost could range from about $460 million 

to about $2 billion. The subsidy cost varies depending on the price of the 

set-top boxes and whether a means test—which would limit eligibility for 

the subsidy to only those households with incomes lower than some 

specified limit—were employed. However, if cable and satellite 

subscribers also needed new equipment and the subsidy provides some 

support for these households as well, the overall cost of the program 

would grow. We estimate that in this case, the cost of providing the 

subsidy could range from about $1.8 billion to over $10 billion, depending, 

again, on the price of the set-top boxes and whether a means test were 

employed. 

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. This increased efficiency makes multicasting—where 

several digital television signals are transmitted in the same amount of 

Background 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 49 GAO-05-940R Digital Television Transition

Page 6 GAO-05-258T 

spectrum necessary for one analog television signal—and HDTV8 services 

possible. 

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 government purposes—will not be met. 

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

considered highly valuable spectrum because of its particular technical 

properties. In all, the DTV transition will clear 108 megahertz 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 spectrum will be auctioned for 

use in advanced wireless services, such as wireless high-speed Internet 

access.9

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 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 signals will no longer be 

provided—when at least 85 percent of households have the ability to 

receive digital broadcast signals. 

8

HD television provides roughly twice as many lines of resolution, creating a television 

picture that is much sharper than traditional analog television pictures. HD television can 

also provide CD-quality sound and is in “widescreen” format, with display screen ratios 

similar to a movie theater. 

9

Some of this spectrum—24 MHz—has already been auctioned. 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 50 GAO-05-940R Digital Television Transition

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The three primary means through which Americans view television signals 

are over the air, cable, and direct broadcast satellite (DBS). Over-the-air 

broadcast television, which began around 1940, uses radiofrequencies to 

transmit television signals from stations’ television towers to households’ 

television antennas mounted on rooftops, in attics, or directly on 

television sets. Over-the-air television is a free service. Cable television 

service, a pay television service, emerged in the late 1940s to fill a need for 

television service in areas with poor over-the-air reception, such as 

mountainous or remote areas. Cable providers run localized networks of 

cable lines that deliver television signals from cable facilities to 

subscribers’ homes.10 Cable operators provide their subscribers with, on 

average, approximately 73 analog television channels and 150 digital 

television channels. In 1994, a third primary means of providing television 

emerged: direct broadcast satellite (DBS). Subscribers to DBS service use 

small reception dishes that can be mounted on rooftops or windowsills to 

receive television programming beamed down from satellites that orbit 

over the equator. Like cable, DBS service is a subscription television 

service that provides consumers with many channels of programming. 

When the Congress enacted the Satellite Home Viewer Improvement Act 

of 1999, it allowed DBS carriers to provide local broadcast signals—such 

as the local affiliate of ABC or NBC—which they had previously not 

generally been able to provide. 

Over-the-Air Households. We found that 19 percent, or 20.8 million 

American households, rely exclusively on over-the-air transmissions for 

their television viewing. We recognize that others have estimated a lower 

value for the percent of households relying on over the air television. Our 

results were derived from a survey of over 2,400 households, from which 

we estimated with 95 percent certainty that between 17 and 21 percent of 

households rely on over the air television. Compared to households that 

purchase a subscription to cable or DBS service, we found that exclusive 

over-the-air viewers are somewhat different demographically. Overall, 

over-the-air households are more likely to have lower incomes than cable 

or satellite households. Approximately 48 percent of exclusive over-the-air 

viewers have household incomes less than $30,000, and 6 percent have 

household incomes over $100,000. Additionally, nonwhite and Hispanic 

households are more likely to rely on over-the-air television than are white 

10When cable service first emerged, it was simply a service that provided a wire-based 

delivery of broadcast, or traditional television stations’ signals, but by the late 1970s, cable 

operators began to provide new networks that were only available through a pay television 

service, such as HBO, Showtime, and ESPN. 

Americans Watch 

Television through 

Three Primary Modes 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 51 GAO-05-940R Digital Television Transition

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and non-Hispanic households; over 23 percent of non-white households 

rely on over-the-air television compared to less than 16 percent of white 

households, and about 28 percent of Hispanic households rely on over-theair television compared to about 17 percent of non-Hispanic households. 

Finally, we found that, on average, exclusive over-the-air households have 

2.1 televisions, which is lower than the average for cable and satellite 

households. 

We asked the survey research firm to recontact approximately 100 of the 

respondents who exclusively watch television through over-the-air 

transmission to ask additional questions, including the primary reason the 

household does not purchase a subscription video service.11 Forty-one of 

these respondents said that it was too costly for them to purchase a 

subscription video service, and 44 said that they do not watch enough 

television to warrant paying for television service. Most of the recontacted 

households seemed unlikely to purchase a subscription service in the near 

future. Only 18 of the recontacted households said that they would be 

likely to purchase a subscription video service in the near future, and 

another 10 said that they might do so. 

Cable Households. We found that 57 percent, or 63.7 million American 

households, view television through a cable service. On average, cable 

households have 2.7 television sets. Sixteen percent of cable households 

have at least one television set in the home that is not connected to cable 

but instead receives only over-the-air television signals. Of the cable 

households surveyed, roughly 29 percent had household incomes of less 

than or equal to $30,000, and about 13 percent had incomes exceeding 

$100,000. We also found that 44 percent of the cable homes have at least 

one set-top box. Of those cable subscribers with a set-top box, about 67 

percent reported that their box is capable of viewing channels the cable 

system sells on “digital cable tiers,” meaning that the channels are 

transmitted by their cable provider in a digital format. A subset of these 

“digital cable” customers have a special set-top box capable of receiving 

their providers’ transmission of high-definition digital signals. 

Because the existence of a set-top box in the home may be relevant for 

determining what equipment households would need to view broadcast 

digital television signals, we asked the survey research firm to recontact 

approximately 100 cable households that do not have a set-top box to ask 

11The actual recontacted number was 102. 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

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questions about their likely purchase of digital cable tiers—which require 

a set-top box—in the near future.12 First, we asked the primary reason why 

the household did not currently purchase any cable digital tiers of 

programming. Fifty-one of the recontacted respondents said that they did 

not want to bear the extra expense of digital tiers of cable programming, 

and 33 said that they did not watch enough television to justify purchasing 

digital cable service. Only 9 of the recontacted respondents said that they 

would be likely to purchase digital cable service in the near future, and 

another 9 said that they might purchase such service in the near future. 

Finally, we asked these respondents whether they would be reluctant to 

change their service in any way that would require them to use a set-top 

box. Of the recontacted respondents, 37 said they would be very reluctant 

to change their service in a way that would require them to use a set-top 

box, and another 38 said that they would be somewhat reluctant to do so. 

DBS Households. We found that about 19 percent, or 21.7 million 

American households, have a subscription to a DBS service. These 

households have, on average, 2.7 television sets. About one-third of these 

households have at least one television set that is not hooked to their DBS 

dish and only receives over-the-air television signals. In terms of income, 

29 percent of DBS subscribers have incomes less than or equal to $30,000, 

and 13 percent have incomes exceeding $100,000. 

One important difference between cable and DBS service is that not all 

DBS subscribers have the option of viewing local broadcast signals 

through their DBS provider.13 Although the DBS providers have been 

rolling out local broadcast stations in many markets around the country in 

the past few years, not all markets are served. DBS subscribers in markets 

without local broadcast signals available through their DBS provider 

usually obtain their local broadcast signals through an over-the-air 

antenna, or through a cable connection. This is important to the DTV 

transition because how households with DBS service view their local 

broadcast channels will play into the determination of their requirements 

to transition to broadcast DTV. We therefore requested that the survey 

research firm recontact approximately 100 DBS customers to ask how 

12The firm actually recontacted 102 such households. 

13While cable providers are generally required to provide the local broadcast signals in each 

market, DBS providers are required to provide all local broadcast stations in markets 

where they provide any of those stations. 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 53 GAO-05-940R Digital Television Transition

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they receive their local broadcast channels.14 We found that when local 

channels are available to DBS subscribers, they are very likely to purchase 

those channels. Well more than half of the DBS subscribers who were 

recontacted viewed their local broadcast channels through their DBS 

service. Nearly one-fourth of the recontacted DBS subscribers view their 

local broadcast channels through free over-the-air television. As DBS 

providers continue to roll out local channels to more markets, the 

percentage of DBS subscribers relying on over-the-air transmissions to 

view local signals will likely decline. 

The specific equipment needs for each household to transition to DTV—

that is, to be able to view broadcast digital signals—depends on certain 

key factors: the method through which a household watches television, 

the television equipment the household currently has, and certain critical 

regulatory decisions yet to be made. In this section we discuss two cases 

regarding a key regulatory decision that will need to be made and the 

implications that decision will have on households’ DTV equipment needs. 

Before turning to the two cases, a key assumption underlying this analysis 

must be discussed. Currently, broadcasters have a right to insist that cable 

providers carry their analog television signals. This is known as the “must 

carry” rule, and dates to the Cable Television Consumer Protection and 

Competition Act of 1992. FCC made a determination that these must carry 

rules will apply to the digital local broadcast signals once a station is no 

longer transmitting an analog signal. In our analysis, we assume that the 

must carry right applies to broadcasters’ digital signals, and as such, cable 

providers are generally carrying those signals. DBS providers face some 

must carry rules as well, although they are different in some key respects 

from the requirements that apply to cable providers. For the purposes of 

this analysis, we assume that to the extent that DBS providers face must 

carry requirements, those requirements apply to the digital broadcast 

signals. 

For nearly all cable subscribers, and more than half of the DBS 

subscribers, local broadcast analog signals are provided by their 

subscription television provider. This means that these providers capture 

the broadcasters’ signals through an antenna or a wire and retransmit 

those signals by cable or DBS to subscribers. We make two disparate 

14They actually recontacted 102 such households. 

Households’ 

Equipment Needs for 

DTV Transition Will 

Depend on their Mode 

of Television Viewing 

and Current 

Equipment Status, 

and Will Also Be 

Affected by 

Regulatory Decisions 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 54 GAO-05-940R Digital Television Transition

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assumptions, which we call case one and case two, about how cable and 

DBS providers might provide digital broadcast signals to subscribers. We 

do not suggest that these are the only two possibilities regarding how the 

requirements for carriage of broadcast signals might ultimately be 

decided—these are simply two possible scenarios. 

Case One. In this case, we assume that cable and DBS providers will 

continue providing broadcasters’ signals as they currently do. This 

assumption would be realized if cable and DBS providers initially 

downconvert broadcasters’ digital signals at the providers’ facilities,

which may require legislative or regulatory action. That is, cable providers 

would initially downconvert broadcasters’ high-definition digital signals to 

an analog format before they are transmitted to their subscribers. 

Similarly, DBS providers would initially downconvert broadcasters’ highdefinition digital signals to a standard-definition digital format before they 

are transmitted to their subscribers. In this case, there would be no need 

for cable and DBS subscribers to acquire new equipment; only households 

viewing television using only an over-the-air antenna must take action to 

be able to view broadcasters’ digital signals. This case shares many 

attributes with the recently-completed DTV transition in Berlin, Germany. 

All over-the-air households—which account for approximately 21 million 

households in the United States—must do one of two things to be able to 

view digital broadcast signals.15 First, they could purchase a digital 

television set that includes a tuner capable of receiving, processing, and 

displaying a digital signal. The survey data we used indicated that only 

about 1 percent of over-the-air viewers have, as of now, purchased a 

digital television that contains a tuner. However, some large televisions 

sold today are required to include such a tuner and by July 2007, all 

television sets larger than 13 inches are required to include a tuner. After 

that time, consumers who purchase new television sets will automatically 

have the capability of viewing digital signals. Approximately 25 to 30 

million new television sets are purchased each year in the United States. 

The second option available to over-the-air households is to purchase a 

digital-to-analog set-top box. That is, for those households that have not 

purchased a new television set, the set-top box will convert the digital 

broadcast signals to analog so that they can be viewed on an existing 

analog television set. Viewers with digital-to-analog set-top boxes would 

15Additionally, these households could also choose to subscribe to cable or DBS service to 

eliminate the need to acquire additional equipment to view a television signal over the air. 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

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not actually see the broadcast digital signal in a digital format, but would 

be viewing that signal after it has been downconverted, by the set-top box, 

to be compatible with their existing analog television set. Currently, 

simple set-top boxes that only have the function of downconverting digital 

signals to analog are not on the market. More complex boxes that include 

a variety of functions and features, including digital to analog 

downconversion, are available, but at a substantial cost. However, 

manufacturers told us that simple, and less expensive, set-top boxes would 

come to the market when a demand for them develops. 

Case Two. In the second case, we assume that cable and DBS companies 

would be required to provide the broadcasters’ signals to their subscribers 

in substantially the same format as it was received from the broadcasters. 

Because some of the broadcasters’ signals are in a high-definition digital 

format, cable and DBS subscribers—just like over-the-air households—

would need to have the equipment in place to be able to receive highdefinition digital signals. There are several ways these subscribers could 

view these signals: 

• Cable or DBS subscribers would be able to view digital broadcast 

television if they have purchased a digital television set with an over-theair digital tuner. They would then have the capability of viewing local 

digital broadcast stations through a traditional television antenna—just 

like an over-the-air viewer. However, many cable and DBS households 

may want to continue to view broadcast television signals through their 

cable or DBS provider. 

• Cable or DBS subscribers could purchase a digital television with a “cable 

card” slot. By inserting a “card” provided by the cable company into such a 

television, subscribers can receive and display the digital content 

transmitted by the cable provider. Only very recently, however, have 

cable-ready digital television sets—which allow cable subscribers to 

receive their providers’ digital signals directly into the television set—

come to the market. Similar televisions sets with built-in tuners for 

satellite digital signals are not currently on the market. 

• To view the high-definition signals transmitted by their subscription 

provider, the other possibility for cable and DBS households would be to 

have a set-top box that downconverts the signals so that they can be 

displayed on their existing analog television sets. That is, any 

downconversion in this scenario takes place at the subscribers’ household,

as opposed to the subscription television providers’ facilities, as in case 

one. While all DBS subscribers and about a third of cable subscribers have 

set-top boxes that enable a digital signal from their provider to be 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 56 GAO-05-940R Digital Television Transition

Page 13 GAO-05-258T 

converted to an analog signal for display on existing television sets, few of 

these set-top boxes are designed for handling high-definition digital 

signals. As such, if broadcasters’ signals are transmitted by cable and DBS 

providers in a high-definition format, not all cable and satellite subscribers 

would need new equipment, although most would. In case two, as in case 

one, all exclusively over-the-air households need a digital television set or 

a set-top box. 

In this section we present the estimated cost of providing a subsidy to 

consumers for the purchase of a set-top box that would be designed to 

advance the digital television transition. The estimated subsidy costs 

presented here vary based on (1) the two cases discussed above about 

whether cable and DBS providers initially downconvert broadcasters’ 

digital signals at their facilities before transmitting them to subscribers; (2) 

varied assumptions about whether a means test is imposed and, if so, at 

what level; and (3) the expected cost of a simple digital-to-analog set-top 

box. All of the estimates presented here assume that only one television 

set is subsidized in each household that is determined to be eligible for the 

subsidy.16

Means test. Imposing a means test would limit the subsidy to only those 

households determined to be in financial need of a subsidy. A means test 

would limit eligibility for the subsidy to only those households with 

incomes lower than some specified limit. We employed two different 

levels of means tests. The scenarios with means tests are roughly based on 

200 percent and 300 percent of the poverty level17 as the income threshold 

under which a household’s income must lie to be eligible for the subsidy. 

The poverty level is determined based on both income and the number of 

persons living in the household; for a family of four the official federal 

poverty level in 2004 was $18,850. 

Set-top boxes. We provide estimates based on two possible price levels 

for the boxes: $50 and $100. This range is based on conversations we had 

with consumer electronics manufacturers who will likely produce set-top 

boxes in the future. Set-top boxes for cable and DBS are often rented by 

16In our final report that will be issued later this year, we will also present scenarios under 

which more than one television set per household is subsidized. 

17See appendix I for a methodological discussion and assumptions surrounding our 

determination of thresholds used to approximate the poverty level. 

Cost of Federal 

Subsidy for Set-Top 

Boxes Varies 

Considerably, 

Depending on Several 

Factors
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 57 GAO-05-940R Digital Television Transition

Page 14 GAO-05-258T 

subscribers, rather than purchased. Nevertheless, in cases where cable 

and DBS subscribers need new equipment, we assume that the financial 

support provided to them would be equivalent to that provided to over-theair households. 

Table 1 provides the cost of a subsidy program under the assumption that 

cable and DBS providers downconvert broadcasters’ signals at their 

facilities in a manner that enables them to continue to transmit those 

signals to subscribers as they currently transmit broadcasters’ signals. In 

this case, cable or DBS subscribers do not require any new equipment, so 

only over-the-air households—approximately 21 million American 

households—would need new equipment. As shown in table 1, there is 

considerable variation in the cost of the subsidy program depending on the 

level of a means test and the price of the set-top box. 

Table 1: Estimated Cost of Set-Top Box Subsidy, Assuming Cable and DBS 

Downconversion, only Over-the-Air Households Are Subsidized 

Cost of subsidy, by estimated cost 

of set-top box (dollars in millions) 

Assumption 

about means 

test

Percent of 

over-the-air 

households 

eligible 

Number of 

households 

subsidized 

(in millions) $50 set-top box $100 set-top box

Means test at 

200% of 

poverty level 

50% of overthe-air 

households 

9.3

(7.8 - 10.7)

$463

($391 - $534) 

$925

($782 - $1,068)

Means test at 

300% of 

poverty level 

67 % of overthe-air 

households 

12.5

(10.9 - 14.1) 

$626

($545 - $707)

$1,252

($1,090 - $1,415)

No means test All over-the-air 

households 

20.8

(19.1 - 22.6)

$1,042

($954 - $1,130)

$2,083

($1,907 - $2,259)

Source: GAO. 

Notes: Ninety-five percent confidence intervals in parentheses. 

Analysis based on the status of television households in 2004. 

Table 2 provides the cost of a subsidy program under the assumption that 

cable and DBS providers are required to transmit broadcasters’ digital 

signals in the same format as they are received. Under this scenario, nearly 

all over-the-air households and most cable and DBS subscribers will not 

have the equipment in place to view high-definition digital broadcast 

signals. Although subscribers typically rent, rather than purchase, set-top 

boxes, we assume that the same level of subsidy is provided to these 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 58 GAO-05-940R Digital Television Transition

Page 15 GAO-05-258T 

households as is provided to over-the-air households to defray the cost of 

having to obtain a new or upgraded set-top box from their provider. 

Table 2: Estimated Cost of Set-Top Box Subsidy, No Cable or DBS 

Downconversion, Subsidy Provided to Over-the-Air and Cable and DBS Households 

 Cost of subsidy, by estimated cost of 

set-top box (dollars in millions) 

Assumption 

about

means test 

Percent of 

U.S.

households 

eligible 

Number of 

households 

subsidized 

(in millions) $50 set-top box $100 set-top box

Means test 

at 200% of 

poverty level 

31% of 

households 

35.1

(32.7 - 37.5) 

 $1,753 

($1,633 - $1,873) 

$3,506

($3,266 - $3,745)

Means test 

at 300% of 

poverty level 

50% of 

households 

55.5

(52.9 - 58.1) 

 $2,775 

($2,646 - $2,904) 

$5,551

($5,293 - $5,809)

No means 

test

Nearly all 

households 

106.2

(105.1 - 

107.3) 

 $5,312 

($5,257 - $5,367) 

$10,624

($10,514 - $10,734)

Source: GAO. 

Notes: Ninety-five percent confidence intervals in parentheses. 

Analysis based on the status of television households in 2004. 

There are two issues that stand as important caveats to the analyses we 

have presented on estimated set-top box subsidy costs. The first is that we 

based the majority of the analyses on survey results that provide 

information on the status of American television households as of early 

2004. Over the next several years, new households will be established, 

some households might change the means through which they watch 

television, televisions sets with integrated digital over-the-air tuners as 

well as digital cable compatibility will be purchased, and some cable and 

DBS households will have obtained set-top boxes capable of receiving 

high-definition digital signals from their providers. Households’ purchase 

of certain new equipment could obviate the need for a subsidy for new 

television equipment. For example, some households may purchase a 

digital television set with an over-the-air tuner and begin to view digital 

broadcast signals in this manner; some large televisions sold today are 

required to include such a tuner and by July 2007, all television sets larger 

than 13 inches are required to include a tuner. In time, these factors could 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 59 GAO-05-940R Digital Television Transition

Page 16 GAO-05-258T 

have the effect of reducing the cost of a set-top box subsidy because fewer 

households would need to be subsidized.18

The second caveat to these analyses is that these subsidy estimates do not 

include any costs associated with implementing a subsidy program. If the 

federal government determines that it would be worthwhile to provide this 

subsidy, the subsidy would need to be administered in some fashion, such 

as through a voucher system, a tax credit, a mail-in rebate, government 

distribution of equipment, or some other means. Any of these methods 

would impose costs that could be significant for the federal government 

and any other entities involved in administering the program. Such costs 

would be difficult to estimate until a host of decisions are made about how 

a subsidy program would be administered. 

As I mentioned earlier, our work on the DTV transition continues, and we 

will provide more information in a report later this year. We will discuss 

various ways that a subsidy program might be administered and provide 

some analysis of the benefits and drawbacks of these various methods. We 

will also provide a discussion of how information regarding the DTV 

transition and any associated subsidy program might best be provided to 

the American people. 

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, Dennis Amari, 

Michael Clements, Andy Clinton, Michele Fejfar, Simon Galed, Eric 

18As we mentioned above, if at a later date the Congress considers legislation for a set-top 

box subsidy program, the CBO will, based on the specifics of the law, prepare an estimate 

of the cost of the program. 

Contact and 

Acknowledgments 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 60 GAO-05-940R Digital Television Transition

Page 17 GAO-05-258T 

Hudson, Catherine Hurley, Bert Japikse, Sally Moino, Karen O’Conor, and 

Madhav Panwar. 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 61 GAO-05-940R Digital Television Transition

Page 18 GAO-05-258T 

To obtain information on the types of television service and equipment 

used by U.S. households, we purchased existing survey data from 

Knowledge Networks Statistical Research. Their survey was completed 

with 2,375 of the estimated 5,075 eligible sampled individuals for a 

response rate of 47 percent; partial interviews were conducted with an 

additional 96 people, for a total of 2,471 individuals completing some of 

the survey questions. The survey was conducted between February 23 and 

April 25, 2004. 

The study procedures yielded a sample of members of telephone 

households in the continental United States using a national random-digit 

dialing method. Survey Sampling Inc. (SSI) provided the sample of 

telephone numbers, which included both listed and unlisted numbers and 

excluded blocks of telephone numbers determined to be nonworking or 

business-only. At least five calls were made to each telephone number in 

the sample to attempt to interview a responsible person in the household. 

Special attempts were made to contact refusals and convert them into 

interviews; refusals were sent a letter explaining the purpose of the study 

and an incentive. Data were obtained from telephone households and are 

weighted by the number of household telephone numbers. 

As with all sample surveys, this survey is subject to both sampling and 

nonsampling errors. The effect of sampling errors due to the selection of a 

sample from a larger population can be expressed as a confidence interval 

based on statistical theory. The effects of nonsampling errors, such as 

nonresponse and errors in measurement, may be of greater or lesser 

significance but cannot be quantified on the basis of available data. 

Sampling errors arise because of the use of a sample of individuals to draw 

conclusions about a much larger population. The study’s sample of 

telephone numbers is based on a probability selection procedure. As a 

result, the sample was only one of a large number of samples that might 

have been drawn from the total telephone exchanges from throughout the 

country. If a different sample had been taken, the results might have been 

different. To recognize the possibility that other samples might have 

yielded other results, we express our confidence in the precision of our 

particular sample’s results as a 95 percent confidence interval. We are 95 

percent confident that when only sampling errors are considered each of 

the confidence intervals in this report will include the true values in the 

study population. All percentage estimates from the survey have margins 

of error of plus or minus 6 percentage points or less, unless otherwise 

noted.

Appendix I: Methodology for Use of Survey 

Data Regarding Television Viewing 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 62 GAO-05-940R Digital Television Transition

Page 19 GAO-05-258T 

In addition to the reported sampling errors, the practical difficulties of 

conducting any survey introduce other types of errors, commonly referred 

to as nonsampling errors. For example, questions may be misinterpreted, 

some types of people may be more likely to be excluded from the study, 

errors could be made in recording the questionnaire responses into the 

computer-assisted telephone interview software, and the respondents’ 

answers may differ from those who did not respond. Knowledge Networks 

has been fielding versions of this survey for over 20 years. In addition, to 

reduce measurement error, Knowledge Networks employs interviewer 

training, supervision, and monitoring, as well as computer-assisted 

interviewing to reduce error in following skip patterns. 

For this survey, the 47 percent response rate is a potential source of 

nonsampling error; we do not know if the respondents’ answers are 

different from the 53 percent who did not respond. Knowledge Networks 

took steps to maximize the response rate—the questionnaire was carefully 

designed and tested through deployments over many years, at least five 

telephone calls were made at varied time periods to try to contact each 

telephone number, the interview period extended over about 8 weeks, and 

attempts were made to contact refusals and convert them into interviews. 

Because we did not have information on those contacted who chose not to 

participate in the survey, we could not estimate the impact of the 

nonresponse on our results. Our findings will be biased to the extent that 

the people at the 53 percent of the telephone numbers that did not yield an 

interview have different experiences with television service or equipment 

than did the 47 percent of our sample who responded. However, 

distributions of selected household characteristics (including presence of 

children, race, and household income) for the sample and the U.S. Census 

estimate of households show a similar pattern. 

To assess the reliability of these survey data, we reviewed documentation 

of survey procedures provided by Knowledge Networks, interviewed 

knowledgeable officials about the survey process and resulting data, and 

performed electronic testing of the data elements used in the report. We 

determined that the data were sufficiently reliable for the purposes of this 

report. 

Due to limitations in the data collected, we made several assumptions in 

the analysis. Number of televisions and number of people in the household 

were reported up to five; households exceeding four for either variable 

were all included in the category of five or more. For the purposes of our 

analyses, we assumed that households had no more than five televisions 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 63 GAO-05-940R Digital Television Transition

Page 20 GAO-05-258T 

that would need to be transitioned and no more than five people. Number 

of people in the household was only used in calculating poverty, but may 

result in an underestimate of those households in poverty. 

Calculations of poverty were based on the 2004 Poverty Guidelines for the 

48 contiguous states and the District of Columbia, published by the 

Department of Health and Human Services. We determined whether or not 

each responding household would be considered poor at roughly 200 

percent and 300 percent of the poverty guidelines. Income data were 

reported in categories so the determination of whether or not a household 

met the 200 percent or 300 percent threshold required approximation, and 

for some cases this approximation may have resulted in an overestimate of 

the number of poor households. In addition, income data were missing for 

24 percent of the respondents. To conduct the analyses involving poverty, 

we assumed that the distribution of those in varying poverty status was the 

same for those reporting and not reporting income data. Comparisons of 

those reporting and not reporting income data show some possible 

differences on variables examined for this report; however, the income 

distribution is very close to the 2003 income estimates published by the 

U.S. Census Bureau. 

To determine total numbers of U.S. households affected by the transition 

and total cost estimates for various transition scenarios, we used the U.S. 

Census Bureau’s Current Population Survey estimate of the total number 

of households in the United States as of March 2004. To derive the total 

number of households covered by the various scenarios, we multiplied this 

estimate by the proportions of households covered by the scenarios 

derived from the survey data. The standard error for the total number of 

U.S. households was provided by the Census Bureau, and the standard 

errors of the total number of households covered by the scenarios take 

into account the variances of both the proportions from the survey data 

and the total household estimate. All cost estimates based on the survey 

data have margins of error of plus or minus 16 percent or less. 

In addition, we contracted with Knowledge Networks to recontact a 

sample of their original 2004 survey respondents in October 2004. 

Households were randomly selected from each of three groups: broadcastonly television reception, cable television service without a set-top box, 

and satellite television service. For each group, 102 interviews were 

completed, yielding 306 total respondents (for a 63 percent response rate). 

To reduce measurement error, the survey was pretested with nine 

respondents, and Knowledge Networks employed interviewer training, 

supervision, and monitoring, as well as computer-assisted interviewing, to 
Enclosure II: GAO February 17, 2005, 

Testimony (GAO-05-258T)

Page 64 GAO-05-940R Digital Television Transition

Page 21 GAO-05-258T 

reduce error in following skip patterns. Due to the small sample size, the 

findings of these questions are not generalizable to a larger population. 

(543118) 
Page 65 GAO-05-940R Digital Television Transition

Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

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 10:00 a.m. EDT 

Wednesday, July 21, 2004 TELECOMMUNICATIONS

German DTV Transition 

Differs from U.S. Transition 

in Many Respects, but 

Certain Key Challenges Are 

Similar

Statement of Mark L. Goldstein, Director 

Physical Infrastructure Issues 

GAO-04-926T 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 66 GAO-05-940R Digital Television Transition

www.gao.gov/cgi-bin/getrpt?GAO-04-926T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Mark L. 

Goldstein at (202) 512-2834 or 

goldsteinm@gao.gov. 

Highlights of GAO-04-926T, a testimony 

before the Subcommittee on 

Telecommunications and the Internet, 

Committee on Energy and Commerce, 

House of Representatives 

July 21, 2004

TELECOMMUNICATIONS

German DTV Transition Differs from U.S. 

Transition in Many Respects, but Certain 

Key Challenges Are Similar 

The German television market is characterized by a central role of public 

broadcasting and is regulated largely at the state level. Although the federal 

government establishes general objectives for the telecommunications 

sector and manages allocations of the German radiofrequency spectrum, 15 

media authorities organize and regulate broadcasting services within their 

areas of authority. The two public broadcasters are largely financed through 

a mandatory radio and television license fee of 16 Euro ($19.68) per 

household, per month, or about 6 billion Euro ($7.38 billion) in aggregate per 

year. Today, only 5 to 7 percent of German households rely on terrestrial 

television. Most households receive television through cable service, which 

typically costs less than 15 Euro ($18.45) per month, or satellite service, 

which is free once the household installs the necessary satellite equipment. 

Berlin officials and industry participants engaged in extensive planning for 

the rapid DTV transition in the Berlin test market. In Germany, government 

officials and industry participants are implementing the DTV transition 

largely for the purpose of improving the viability of terrestrial television; 

officials do not expect to recapture radio spectrum after the transition. 

Several elements of the DTV transition apply throughout Germany. For 

example, Germany is implementing the transition within specified “islands,” 

which are typically larger metropolitan areas, because officials thought that 

a nationwide DTV transition would be too big to manage at one time. Also, 

the German DTV transition focuses exclusively on terrestrial television, not 

cable and satellite television. The Media Authority in Berlin specified other 

components of the DTV transition for the Berlin area, including a short (10 

month) simulcast period, financial and nonfinancial support provided to 

private broadcasters, subsidies provided to low-income households, and an 

extensive consumer education effort. 

Certain aspects of the DTV transition in Berlin and other regions of Germany 

are relevant to the ongoing transition in the United States because, even 

though the television market and the transition are structured differently in 

the two countries, government officials face similar key challenges. We 

found that much of the focus of government officials leading up to and 

during the brief simulcast in Berlin was on ensuring households who rely on 

terrestrial television received the necessary consumer equipment. In the 

United States, most television stations are providing a digital signal—that is, 

the United States is in the simulcast phase. Thus, the challenge facing the 

Congress and the Federal Communications Commission, as was the case in 

Berlin, is encouraging households to purchase set-top boxes or digital 

televisions. The key components of the Berlin DTV transition that enabled 

the rapid deployment of set-top boxes included (1) implementing an 

extensive consumer education effort; (2) providing subsidies to low-income 

households for set-top boxes; and (3) setting a relatively near-term, date 

certain that all stakeholders understood would be the shutoff date for analog 

television. 

In Berlin, Germany, the transition 

from analog to digital television 

(DTV), the DTV transition, 

culminated in the shutoff of analog 

television signals in August 2003. 

As GAO previously reported, the 

December 2006 deadline for the 

culmination of the DTV transition 

in the United States seems unlikely 

to be met. Failure to meet this 

deadline will delay the return of 

valuable spectrum for public safety 

and other commercial purposes. 

Thus, the rapid completion of the 

DTV transition in Berlin has 

sparked interest among 

policymakers and industry 

participants in the United States. 

At the request of this 

subcommittee, GAO examined (1) 

the structure and regulation of the 

German television market, (2) how 

the Berlin DTV transition was 

achieved, and (3) whether there are 

critical components of how the 

DTV transition was achieved in 

Berlin and other areas of Germany 

that have relevance to the ongoing 

DTV transition in the United States. 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 67 GAO-05-940R Digital Television Transition

Page 1 GAO-04-926T 

Mr. Chairman and Members of the Subcommittee: 

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

transition from analog to digital television, commonly referred to as the 

digital television (DTV) transition. The DTV transition offers the promise 

of more programming options, interactive services, and high-definition 

television (HDTV). To facilitate the transition, the Congress and the 

Federal Communications Commission (FCC) temporarily provided 

television stations nationwide with additional spectrum to simultaneously 

broadcast both an analog and a digital signal. This simulcast is mandated 

to end in December 2006, or when 85 percent of American households can 

receive digital broadcast signals, whichever is later. At that time, television 

stations will return valuable radio spectrum for public safety and other 

commercial services; however, as we reported in 2002, that deadline 

seems unlikely to be met.1

In Berlin, Germany, a DTV transition—referred to in that country as the 

DVB-T switchover—culminated in the shutoff of analog broadcast 

television signals in August 2003. The rapid completion of the DTV 

transition in Berlin has sparked interest among policymakers and industry 

participants in the United States. At the request of this subcommittee, we 

have examined (1) the structure and regulation of the German television 

market, (2) how the Berlin DTV transition was achieved, and (3) whether 

there are critical components of how the DTV transition was achieved in 

Berlin and other areas of Germany that have relevance to the ongoing DTV 

transition in the United States. In addition to information provided in this 

testimony, we are conducting additional work on the ongoing DTV 

transition in the United States and will provide a more detailed study for 

this committee in early 2005. 

To address these issues, we conducted a site visit in Germany and 

interviewed a variety of government, industry, and consumer 

representatives. In particular, we met with 

• two federal government agencies with responsibilities related to the DTV 

transition; 

1

See U.S. General Accounting Office, Telecommunications: Additional Federal Efforts 

Could Help Advance Digital Television Transition, GAO-03-7 (Washington, D.C.: Nov. 8, 

2002). 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 68 GAO-05-940R Digital Television Transition

Page 2 GAO-04-926T 

• two Media Authorities that are overseeing the DTV transition in their 

respective areas; 

• the Berlin Social Welfare Office, which assisted in providing subsidies for 

set-top boxes during the transition; 

• the two major public broadcasting station groups; 

• the two primary commercial station groups; 

• a cable television provider and a cable television association; 

• Deutsche Telekom, which is a primary owner of broadcast towers 

throughout Germany; 

• an official who works for association of electrical and electronic 

equipment manufacturers and is also the director of Deutsche TVPlattform, an organization of government and industry participants in the 

DTV transition; and 

• a German association of consumer groups. 

In addition to the meetings we conducted in Germany, we spoke by 

telephone with a German expert on digital television issues and 

representatives of a European satellite provider. We also met with officials 

at the German Embassy in Washington, D.C. The information that we 

gathered was sufficiently reliable for the purposes of our review. We 

conducted our work from April 2004 to June 2004 in accordance with 

generally accepted government auditing standards. 

We provided a draft of this testimony to FCC and the Department of State 

(State) for their review and comment. Staff from FCC and State provided 

technical comments that we incorporated as appropriate. 

My statement will make the following points: 

• The German television market is characterized by a central role of public 

broadcasting and is regulated largely at the state level. Although the 

federal government establishes general objectives for the 

telecommunications sector and manages allocations of the German 

radiofrequency spectrum, 15 media authorities organize and regulate 

broadcasting services within their areas of authority. Broadcasting in 

Germany is commonly characterized as a “dual system” in which public 

and private broadcasting coexist, with each market segment consisting of 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 69 GAO-05-940R Digital Television Transition

Page 3 GAO-04-926T 

two dominant broadcasting entities. The two public broadcasters are 

largely financed through a mandatory radio and television license fee of 16 

Euro ($19.68)2

 per household per month, which amounts to about 6 billion 

Euro ($7.38 billion) per year. Although terrestrial broadcasting—the 

transmission of television signals from towers to homes through the 

radiofrequency spectrum—was once the only means by which German 

households received television program signals, today only 5 to 7 percent 

of German households rely exclusively on terrestrial broadcasting. The 

remaining households obtain either cable service—which typically costs 

less than 15 Euro ($18.45) per month—or satellite service, which is free 

once the household has installed the satellite receiving dish and receivers. 

• Berlin officials and industry participants engaged in extensive planning for 

the rapid DTV transition in the Berlin test market. In particular, digital 

terrestrial transmissions were initiated in November 2002 and all analog 

signals were shut off in August 2003. In Germany, government officials and 

industry participants are implementing the DTV transition largely for the 

purposes of improving the viability of terrestrial television. Government 

officials do not expect spectrum to be returned after the transition. Several 

elements of the DTV transition were decided by federal authorities and 

will thus apply throughout Germany. For example, Germany is 

implementing the transition within specified “islands,” with each island 

defined as a specific metropolitan area. Additionally, the DTV transition 

focused exclusively on terrestrial television, and households that rely on 

cable and satellite service did not need to purchase equipment to continue 

to receive television service. The Media Authority in Berlin specified other 

components of the transition, such as the short simulcast period, the 

financial and nonfinancial support provided to private broadcasters, the 

subsidies provided to certain low-income households, and an extensive 

consumer education effort. While the Berlin DTV transition is generally 

viewed as successful, it is unclear whether a full DTV transition will occur 

throughout Germany. 

• Certain aspects of the DTV transition in Berlin and other regions of 

Germany are relevant to the ongoing transition in the United States 

because, even though the television market and the transition are 

structured differently in the two countries, government officials in both 

countries face similar key challenges for completing the transition. In 

particular, we found that much of the focus of government officials 

leading up to and during the brief simulcast in Berlin was on ensuring that 

2

Throughout this testimony, we use the July 13, 2004, exchange rate of 1.2302 to convert 

Euros into U.S. dollars. 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 70 GAO-05-940R Digital Television Transition

Page 4 GAO-04-926T 

terrestrial households received the necessary consumer equipment to 

support the switchover to digital. In the United States, most broadcast 

television stations are now providing a digital signal—that is, we are 

already within the simulcast phase. The concern today in the Congress and 

at FCC is how to coax consumers to purchase set-top boxes or digital 

televisions—the same objective of Berlin officials. The key components of 

the Berlin transition that enabled a rapid deployment of set-top boxes to 

terrestrial consumers and thereby enabled the switchover to DTV were (1) 

an extensive public information campaign; (2) subsidies for needy 

households to defray the set-top box costs; and (3) the setting of a nearterm, date certain for the cessation of analog broadcasts that all 

stakeholders understood must be met. 

Terrestrial television service—also known as over-the-air broadcast 

television—is transmitted from television towers through the 

radiofrequency spectrum to rooftop antennas or antennas attached 

directly to television sets inside of homes. With traditional analog 

technology, pictures and sounds are converted into “waveform” electrical 

signals for transmission, while digital technology converts these pictures 

and sounds into a stream of digits consisting of zeros and ones. Digital 

transmission of television signals provides several advantages compared 

with analog transmission, by enabling better quality picture and sound 

reception as well as other new services. In addition, digital transmission 

uses the radiofrequency spectrum more efficiently than analog 

transmission. This increased efficiency makes multicasting, where several 

digital television signals are transmitted in the same amount of spectrum 

as one analog television signal, and HDTV services possible. But, to 

implement digital transmission, upgrades to transmission facilities, such as 

television towers, are necessary, and consumers must purchase a digital 

television or a set-top box that will convert digital signals into an analog 

form for viewing on existing analog televisions. 

Both the United States and Germany have programs in place to complete 

the transition from analog to digital television. In the United States, the 

Congress and FCC provided television stations with additional spectrum 

to transmit both an analog and digital signal, and set a deadline for the 

shutoff of the analog signal at the end of 2006, or when 85 percent of 

households can receive the digital signal, whichever is later. In Germany, 

the federal government set a deadline of 2010 for the shutoff of analog 

signals and did not provide spectrum for an extended simulcast period. 

Each Media Authority (there are a total of 15 throughout Germany) 

decides on the specific timing of the terrestrial transition. The city of 

Background 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 71 GAO-05-940R Digital Television Transition

Page 5 GAO-04-926T 

Berlin, Germany, and its surrounding metropolitan area initiated digital 

terrestrial transmissions in November 2002 and shut-off all analog signals 

in August 2003. 

We were told that regulation of the German television market is primarily 

the responsibility of state government, with the federal government 

exercising only limited authority to regulate this market. Television 

broadcasting in Germany is commonly characterized as a “dual system” in 

which public and private broadcasting coexist, with each market segment 

consisting of two dominant broadcasting entities. Both segments are 

subject to the broadcasting laws passed by the respective German states. 

Although terrestrial broadcasting was once the only means by which 

German households received television program signals, today only 5 to 7 

percent of these households rely on terrestrial broadcasting, with the 

remainder using cable or satellite service for the reception of television 

signals. 

The federal government exercises important but limited authority in 

regulating television broadcasting, leaving the state (called Länder) 

governments with the primary responsibility for broadcasting regulation. 

At the federal government level, the Ministry of Economics and Labour is 

responsible for establishing and advancing general objectives in the 

telecommunications sector, such as the promotion of new technologies 

and innovation, and ensuring competition among providers of 

telecommunications services. In the context of the DTV transition, the 

Ministry led the effort in Germany to develop and recommend a strategy 

for the transition from analog to digital radio and television broadcasting. 

A separate federal entity, the Regulatory Authority for 

Telecommunications and Posts (RegTP), established in 1998, is 

responsible for technical aspects in the provision of telecommunications 

services, including management of Germany’s radiofrequency spectrum 

allocations, the development of standards for the distribution and use of 

telecommunications systems, and testing of electronics equipment. RegTP 

is playing a key role in the DTV transition in Germany by establishing 

procedures for and assigning frequency allocations to roll out digital video 

broadcasting service. 

Federal and state government officials told us that the authority to directly 

organize and regulate broadcasting services rests with each of the regional 

governments as part of their jurisdiction over educational and cultural 

matters. In each of the German states, a “Media Authority” serves as the 

German Television 

Market Is 

Characterized by 

Central Role of Public 

Broadcasting and Is 

Regulated Largely at 

the State Level 

Federal and State 

Government Agencies 

Have Important Roles in 

Television Regulation 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 72 GAO-05-940R Digital Television Transition

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primary regulatory authority over radio and television broadcasting 

services.3

 Charged with implementation of their respective state-enacted 

broadcasting laws, the 15 Media Authorities are independent agencies and 

are not considered to be part of the state government administrations. 

Among the most important functions of the Media Authorities is the 

establishment of procedures for assigning broadcast frequencies allocated 

by RegTP to public and private broadcasters.4

 The Media Authorities also 

have a significant role in overseeing the transition to digital television. 

Broadcasting laws and regulations in Germany are affected to some extent 

by actions of the European Union (EU). Although Germany and other EUmember states manage their own broadcasting policies, rules and 

guidelines are set at the EU level on matters that involve common 

interests, such as open borders, fair competition, and a commitment to 

public broadcasting. In the EU’s Action Plan to stimulate advanced 

services, applications, and content, EU member states are encouraged to 

have a strategy for the DTV transition with an assessment of market 

conditions, a date for the switchoff of analog terrestrial broadcasting, and 

a platform-neutral approach that takes into account the competing cable, 

satellite, and terrestrial delivery platforms. 

Terrestrial, or over-the-air, television in German is commonly 

characterized as a “dual system” in which public and private broadcasting 

coexist, with each market segment consisting of two dominant 

broadcasting entities. Public broadcasting corporations are the creation of 

the states, but operate largely as self-regulated entities. At the regional 

level, the German states have formed regional public broadcasters that 

operate their own television channels with regional-specific programming. 

The regional public broadcasters also formed a national network in 1950 

known as ARD. ARD provides a nationwide broadcast channel (Channel 

1), with some of its programming supplied by these regional broadcasters. 

A second nationwide public broadcasting channel, ZDF, was formed 

directly by the German states in 1961 as an independent, nonprofit 

3

The states of Berlin and Brandenburg have jointly formed a single media authority. 

4

Because broadcasting frequencies do not respect state jurisdictional boundaries, an 

“Interstate Agreement on Broadcasting” was entered into by the states to harmonize 

disparate provisions of state broadcasting laws. The treaty addresses matters related to the 

protection of children, advertising content and sponsorship, and specific aspects of public 

broadcasting and private broadcasting. 

German Television Market 

Dominated by Two Public 

Stations Groups and Two 

Commercial Stations 

Groups
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

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corporation. In addition to their own channels, ARD and ZDF jointly 

operate four additional public television channels that are broadcast in 

various parts of Germany. We were told that approximately 40 percent of 

television viewing in Germany is of the various public channels provided 

by ARD and ZDF. 

The public broadcasters are given one frequency each by the Media 

Authorities for the terrestrial broadcast of their programming channel. 

Their primary source of revenue derives from a compulsory monthly fee 

paid by owners of radios and television sets.5

 The amount of the fee is set 

jointly by the states, based on a recommendation of an independent panel, 

and is set at 16 Euro ($19.68) per month for each household.6

 We were told 

that this amounts to about 6 billion Euro ($7.38 billion) annually. ARD 

receives slightly less than two-thirds of the fee revenues and allocates 

shares among its regional broadcasters, while ZDF receives about onethird of the total fee revenues. Two percent of the total fee revenue is 

distributed to the 15 Media Authorities. ARD and ZDF generate additional 

revenues from limited on-air advertisements. However, they are restricted 

to a maximum of 20 minutes of advertising per day before 8:00 p.m. and 

are precluded from any advertising on Sundays and holidays. 

The introduction of private television broadcasting in Germany is a 

relatively recent development. In the early 1980s, additional spectrum 

frequencies were made available for the opening of private television 

broadcasting. Today, two broadcasting groups—RTL Group and 

ProSiebenSat.1 Media—dominate this segment of the television 

broadcasting market, each operating multiple channels. Unlike their public 

broadcasting counterparts, private broadcasters must obtain licenses from 

relevant Media Authorities. Because frequencies are limited, not all private 

broadcasters operate nationally, and with the growth of cable and satellite 

systems, some have chosen not to renew terrestrial licenses in all 

locations. In particular, private broadcasters often do not provide 

terrestrial service in rural areas. Private broadcasters generate all of their 

revenues from advertising and receive no payments from the fees paid by 

owners of radios and television sets. 

5

The fee may be waived for welfare recipients and low-income households. Collected by a 

special agency known as GEZ (Gebuhreneinzugszentrale), the fee is based upon a treaty 

entered into by the German states. 

6

We were told that the 16 Euro ($19.68) fee is in some cases assessed for a second or third 

television set in a home if an adult child in the home owns the television. 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 74 GAO-05-940R Digital Television Transition

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Although terrestrial broadcasting as described above was once the only 

means by which German households could receive television program 

signals, there are currently three methods for television delivery—

terrestrial broadcasting, cable television service, and satellite service. 

Terrestrial broadcasting, in fact, is now the method least relied upon by 

German television households for receiving program signals—only about 5 

to 7 percent of German households rely exclusively on terrestrial 

television. Some German households that receive their primary television 

signals by satellite or cable may have a second or third set in the 

household that is used only for terrestrial reception. Households relying 

on analog terrestrial broadcasting receive between 3 to 12 channels, with 

an average of 5 to 6 channels. The primary transmitter networks that 

transmit television broadcast signals from various towers throughout the 

country are owned and operated by Deutsche Telekom. Broadcast stations 

pay Deutsche Telekom to transmit their terrestrial signals. ARD also owns 

a network of terrestrial broadcast towers for its own operations. 

Introduced in the early 1980s, cable television service is now the dominant 

method for the delivery of television programming in Germany: about 60 

percent of the households subscribe to a cable system. Like terrestrial 

broadcasting in Germany, the 15 Media Authorities regulate cable 

television service in their respective areas. The state media laws set forth 

the must-carry requirements in each region, which specify the broadcast 

stations that cable providers are required to carry on their systems.7

 We 

were told that these regulations vary considerably by region, with some 

areas requiring cable systems to carry nearly all public and private 

stations, and other areas imposing significantly fewer must-carry 

responsibilities on cable systems. To be carried by a cable operator, 

however, public and private broadcasters must pay a carriage fee to the 

cable operator, which is negotiated directly between the parties. Typical 

cable systems in Germany were constructed for the provision of analog 

service, provide about 30 to 33 channels of analog programming, and cost 

7

These must-carry requirements can apply to stations that are broadcast terrestrially and 

stations that are not broadcast terrestrially. 

German Television Is 

Available on Three 

Platforms: Terrestrial, 

Cable, and Satellite 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 75 GAO-05-940R Digital Television Transition

Page 9 GAO-04-926T 

subscribers less than 15 Euro ($18.45) per month. It is often the case that 

this fee is included in the household’s rent.8

The third method of distribution of television programming is through 

satellite service, which today is received by an estimated 35 percent of 

German television households. According to RegTP, to provide satellite 

television service in Germany, a license to use the necessary spectrum is 

required by the agency. Also, any broadcast station that wants to be 

carried on a satellite system must obtain authorization to do so from one 

of the Media Authorities. The predominant provider of satellite television 

service in Germany is ASTRA, a Luxembourg-based company that 

provides satellite service throughout Europe. In order for a broadcast 

channel—whether a public station or a private station—to be carried by a 

satellite provider, a contractual agreement is reached between the 

broadcaster and the satellite provider that gives the right to the satellite 

provider to rebroadcast the signal, but requires the broadcast station to 

pay a fee for that carriage. For viewers, satellite service is available free of 

charge; however, viewers must purchase the equipment needed in order to 

receive programming. In addition, they must be able to situate the satellite 

dish toward the southern sky to receive the transmission signal from the 

geostationary satellite. The costs for a satellite dish and related equipment 

are estimated at less than 200 Euro ($246.04). Satellite television service 

provides viewers in Germany with approximately 125 channels, about 60 

of which are in German. 

8

The ownership of German cable systems is somewhat more complex than in the United 

States. While in the United States, there is only one entity that distributes programming 

from the cable headend to customers, more than one entity may own portions of the cable 

infrastructure in Germany. That is, one cable company may own the infrastructure and 

transmit signals from the headend into neighborhoods, but another may own the 

distribution network within an apartment building—in which a much higher percentage of 

Germans live compared with the United States. Although there is only a limited number of 

companies in Germany that own the portion of the cable infrastructure from the headend 

into neighborhoods, we were told there are thousands of entities that own facilities that 

reach individual households. 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 76 GAO-05-940R Digital Television Transition

Page 10 GAO-04-926T 

In Germany, government officials and industry participants are 

implementing the DTV transition to improve the viability of terrestrial 

television in the face of a low and declining share of households that rely 

solely on terrestrial television. Several elements of the DTV transition will 

apply throughout Germany, including an island based approach, where the 

DTV transition will occur separately in different metropolitan areas, and 

the adoption of standard-definition digital television.9

 In Berlin, extensive 

planning facilitated the rapid DTV transition. Important elements of the 

Berlin DTV transition included a short simulcast period, financial and 

nonfinancial support provided to private broadcasters, subsidies provided 

to eligible low-income households for set-top boxes, and an extensive 

consumer education effort. While the Berlin DTV transition is generally 

viewed as successful, it is unclear whether a full DTV transition will occur 

throughout Germany. 

A primary rationale for the German DTV transition was to preserve 

terrestrial television in the face of a low and declining share of households 

that rely solely on this method of television reception. As mentioned 

previously, fewer than 10 percent of German households rely solely on 

terrestrial television, and the share has been rapidly declining in recent 

years. Since broadcasters reach over 90 percent of German households 

through cable and satellite service, concerns arose about the continued 

costs associated with the transmission of terrestrial television relative to 

the number of viewers. By increasing the number of television channels 

delivered terrestrially, the DTV transition was seen as a means to improve 

the viability of terrestrial television. Because there was concern that 

terrestrial viewership would continue to decline, German regulators 

decided that any DTV transition would need to occur relatively quickly. 

Some industry participants in Germany suggested that a switch-off of 

terrestrial television might be the better course. These parties argued that 

terrestrial television is costly and that German households have both cable 

and satellite as alternatives. Further, cable service is offered at reasonably 

low prices and satellite service is completely free of charge once the 

9

As mentioned previously, DTV functions through the transmission of pictures and sounds 

in streams of digits consisting of zeros and ones, which reduces interference, improves 

picture and sound quality, and makes new services possible. HDTV is a type of DTV that 

provides significantly enhanced picture and sound quality, with up to 1,080 lines of 

resolution compared with 480 in analog television. We refer to standard-definition digital 

television to identify digital television that is not of the high-definition variety. 

Berlin Officials and 

Industry Participants 

Engaged in Extensive 

Planning for the Rapid 

DTV Transition in the 

Berlin Test Market 

German DTV Transition 

Was Largely Designed to 

Preserve Terrestrial 

Television 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 77 GAO-05-940R Digital Television Transition

Page 11 GAO-04-926T 

satellite dish and receiver have been installed. Ultimately, however, 

German regulators decided to proceed with a DTV transition. 

The transition provided benefits for both consumers and broadcasters. For 

consumers, the presence of digital terrestrial television ensures that 

consumers maintain a choice of three mechanisms to receive television 

service. We were told that this choice is important in cities such as Berlin, 

where many people cannot receive satellite service and, without terrestrial 

television, would be dependent on cable service. Further, one consumer 

group noted that digital terrestrial television allows consumers to avoid 

paying a fee for cable service while receiving a similar number of channels 

as they would with cable service. For broadcasters, the presence of 

terrestrial television provides a third mechanism for the transmission of 

their signals. We were told that this helps keep the fees that broadcasters 

must pay to cable companies to carry their signals lower than would be 

the case if broadcasters were reliant solely on cable and satellite for the 

transmission of their signals. 

In Germany, the Digital Broadcasting Initiative (the Initiative) establishes a 

nationwide framework for digital broadcasting. The federal government 

established the Initiative in 1997, and the federal Ministry of Economics 

and Labour and the Länder (or states) chair and deputy chair, respectively, 

the Initiative. Other members of the Initiative include representatives of 

the federal and state governments; public and private broadcasters; 

content providers; cable, satellite, and terrestrial operators; equipment 

manufacturers; and consumer groups. The Initiative develops strategies 

for digital broadcasting, including terrestrial television and radio, cable, 

and satellite service. The Initiative set a deadline for the DTV transition of 

2010; this date is a strategy or recommendation, and not set forth in 

German law. 

The Initiative developed different strategies for television and radio, cable, 

and satellite service, and the DTV transition occurring throughout 

Germany at this time only focuses on terrestrial television. Thus, only 

households that rely solely on terrestrial television—about 160,000 in 

Berlin—were required to purchase equipment in order be able to continue 

to receive terrestrial television service on their existing analog televisions. 

Households that rely on cable or satellite service were unaffected by the 

DTV transition because cable and satellite providers converted the signals 

to ensure that households receiving their service could continue to view 

the signals without any additional equipment. Although, households that 

Certain Decisions about 

the DTV Transition Will 

Apply Throughout 

Germany 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 78 GAO-05-940R Digital Television Transition

Page 12 GAO-04-926T 

receive cable or satellite service would require equipment for televisions 

in their homes that are not connected to the cable or satellite service. 

The Initiative determined that the German DTV transition would occur 

through an island-based approach, in which each island will transition 

independently to digital terrestrial television. Each island is a major 

metropolitan area, such as Berlin or Munich. Figure 1 illustrates the 

various islands in Germany and the actual or planned year for the DTV 

transition. We were told that Germany adopted this approach because the 

DTV transition could not be achieved throughout the entire country 

simultaneously; officials thought that a nationwide DTV transition would 

be too big to manage at one time. Additionally, by adopting the island 

approach, German officials gained experience with the DTV transition, and 

thereby were able to assess whether the public would accept terrestrial 

digital television. Several officials told us that the islands will eventually 

grow together, and the DTV transition will encompass the entire country. 

However, we were also told that had the Berlin DTV transition not been a 

success, the transition in other areas may have been reevaluated and may 

not have gone forward. 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 79 GAO-05-940R Digital Television Transition

Page 13 GAO-04-926T 

Figure 1: Actual and Planned Start Date for German DTV Islands 

Note: Primary refers to areas with reception via room antenna, and secondary refers to areas with 

reception via outside antenna. 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 80 GAO-05-940R Digital Television Transition

Page 14 GAO-04-926T 

In addition to the island-based approach, Germany decided to adopt 

standard-definition digital television, instead of high-definition digital 

television.10 The government and industry officials with whom we spoke 

cited several advantages of standard-definition digital versus highdefinition digital for Germany.11 First, the equipment that consumers must 

purchase for standard-definition digital is generally less expensive than the 

equipment necessary for high-definition digital.12 Second, with highdefinition digital, broadcasters must install more costly equipment and 

incur higher transmission costs than would be the case with standarddefinition digital. Finally, German officials believe that terrestrial 

television with a standard-definition digital signal is more competitive with 

cable and satellite than it would be with a high-definition digital signal. 

These officials noted that the increase in competitiveness of terrestrial 

television derives from its mobility and the increased channels available 

with standard definition digital. In particular, officials we spoke with 

noted that standard-definition digital technology allows multiple channels 

to be shown with the same amount of spectrum that was previously used 

to transmit one analog terrestrial channel. Thus, terrestrial television in 

Berlin now offers nearly as many channels to viewers as they receive on 

their cable systems. This greater number of channels combined with the 

mobility of terrestrial television—a feature not available with cable or 

satellite that enables consumers to take their television to their boats and 

garden homes—was seen as a factor that would make terrestrial television 

more attractive relative to cable or satellite service.13

Finally, German officials did not plan for the return of spectrum following 

the DTV transition. Germany has allocated a limited amount of spectrum 

for terrestrial television, and all the analog frequencies have been 

dedicated to digital television. As previously mentioned, broadcasters 

10The digital standard that Germany adopted supports both standard-definition and highdefinition digital television. However, Germany decided to implement standard-definition 

digital television. 

11The advantages of high-definition digital primarily relate to the picture quality. Highdefinition digital provides roughly twice as many lines of resolution, creating a television 

picture that is much sharper than analog television. Further, high-definition digital is in 

wide-screen format, with display screen ratios similar to a movie theater. 

12Consumer groups generally opposed the introduction of high-definition television because 

of these higher costs and the fact that high-definition digital only provides benefits with 

large-screen televisions. 

13The German digital standard also permits indoor reception. Thus, households in the 

central areas of the islands do not need to modify or install a rooftop antenna. 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 81 GAO-05-940R Digital Television Transition

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intend to use the spectrum for multiplexing—providing four digital 

channels in the same amount of spectrum that they previously provided 

one analog channel. However, if all multiplexes are not used, some 

spectrum could be returned to the government. But, it is not clear that this 

spectrum could or would be assigned to a different use, such as mobile 

telephone or Internet access. 

mabb, the Media Authority that regulates radio and television in the states 

of Berlin and Brandenburg, made several key decisions about how the 

DTV transition would occur in the area under its authority. 

When to undertake the DTV transition. Each of the 15 Media Authorities 

throughout Germany made decisions about when to undertake the DTV 

transition within their region. Berlin was the first of Germany’s islands to 

undertake the DTV transition.14 We were told that Berlin had several 

characteristics that made it favorable to serve as a test market for the DTV 

transition. First, the percent of households that rely solely on terrestrial 

television is relatively low in Berlin. Since the DTV transition in Germany 

requires only equipment modifications for terrestrial televisions, the 

number of households affected was relatively small—only about 160,000 

households—and the transition more manageable. Second, Berlin had 

more spectrum dedicated to television because spectrum that had been 

used by both East and West Berlin was all still allocated to terrestrial 

television use. Third, because Berlin is not near other major cities, no 

signal interference concerns arose in the area, as they might for cities such 

as Bonn or Cologne, which are near other cities and the German border 

with other countries. Finally, Berlin also has fairly simple topography—it 

is basically flat—enabling easier transmission of television signals. 

Length of Simulcast. mabb and industry participants implemented the 

DTV transition in the Berlin area with a short simulcast period. The DTV 

transition agreement negotiated between mabb and the broadcasters 

specified a three-phase simulcast process: 

• On November 1, 2002, the simulcast period commenced as digital signals 

for some of the stations of both public and commercial broadcasters 

began to be transmitted. Berlin officials dedicated two additional channels 

14By the end of 2004, eight islands plan to have digital terrestrial television, including Berlin, 

Cologne and Bonn, Düsseldorf and Ruhrgebiert, Hannover, Bremen, Frankfurt, Hamburg 

and Lübeck, and Kiel. 

mabb and Industry 

Participants Engaged in 

Extensive Planning for the 

Berlin DTV Transition 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 82 GAO-05-940R Digital Television Transition

Page 16 GAO-04-926T 

for the simulcast, with each of these channels carrying four multicast 

digital stations. Thus, eight of Berlin’s eleven analog stations were initially 

simulcast. 

• On February 28, 2003, five previously analog channels were converted to 

digital channels, with each channel carrying multiple stations. Thus, the 

digital signals of more stations were turned on, including stations that 

were not previously available terrestrially in Berlin. The analog 

transmission of all national private broadcasters stopped, and public 

broadcasters transitioned their analog signals to lower-power analog 

frequencies. 

• On August 8, 2003, all analog transmission stopped. 

The government and industry officials with whom we spoke with cited 

several reasons for the short simulcast period. First, Germany does not 

have enough spectrum dedicated to television service to implement a long 

simulcast period while also providing additional stations; the spectrum 

used for analog transmission is the same spectrum that will be used for 

digital transmission. Second, an extended simulcast period is costly for 

broadcasters, who, as mentioned earlier, must pay for terrestrial 

transmission. Third, a quick and certain shutoff date provides an incentive 

for households to purchase the necessary set-top boxes. German federal 

officials and other Media Authorities are generally encouraged by the 

success of the short simulcast period in Berlin. In the state of North-Rhine 

Westphalia, the Media Authority intends to implement a 6-month simulcast 

period for public broadcasters, with no simulcast period for private 

broadcasters, in the state’s two islands. 

Private broadcaster support. mabb made the decision to provide financial 

and nonfinancial support to private broadcasters. Public broadcasters 

were able to finance their transition costs through the radio and television 

license fee they receive. Private broadcasters, on the other hand, do not 

receive license fees, but were viewed as important participants in the DTV 

transition. Therefore, mabb decided to provide support to private stations, 

which consisted of three elements. First, for 5 years, mabb will pay the 

broadcasters’ incremental costs associated with digital transmission (i.e., 

mabb will pay the difference between the broadcasters’ former analog 

transmission costs and their digital transmission costs). In return, the 

private broadcasters agreed to provide digital terrestrial television for at 

least 5 years. Second, as incumbent broadcasters, the private broadcasters 

received authority to provide multiplexed service. That is, the private 

broadcasters were allowed to increase the number of terrestrial channels 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 83 GAO-05-940R Digital Television Transition

Page 17 GAO-04-926T 

they provide in Berlin using the spectrum they were already assigned.15

Third, one broadcaster told us that in return for participating in the DTV 

transition in the Berlin island, it received favorable must-carry status 

throughout the region that mabb regulates—that is, mabb will require that 

its stations be carried on cable systems in the region. At this time, it is not 

clear whether and to what extent the other Media Authorities plan to 

provide similar support for private broadcasters’ DTV transition in other 

regions.16 One private broadcaster told us that it would be unwilling to 

participate in the DTV transition in other islands if it does not receive the 

multicast authority. 

Subsidy of set-top box for needy households. In addition to supporting 

private broadcasters, mabb provided support to certain households for the 

purchase of set-top boxes. According to mabb, the overriding principle 

was that households must pay for the set-top boxes necessary to watch 

terrestrial digital broadcast signals. However, mabb made contingencies 

for low-income households. Households that were entitled to government 

aid could apply to the Social Welfare Office for assistance. If the 

household met the income eligibility criteria and relied solely on terrestrial 

television (i.e., the household did not receive cable or satellite service), the 

household received a voucher for a free set-top box. Qualifying 

households received their set-top box either from specified retailers, or 

the box was delivered to their home, whichever means was least costly. 

During the DTV transition period, mabb paid 75 percent of the subsidy 

cost and the Social Welfare Office paid the remaining 25 percent of the 

subsidy cost. mabb funded its share of the subsidy through the portion of 

the radio and television license fee that it receives, while the Social 

Welfare Office funded its share of the subsidy through its regular budget. 

Following the transition period, the Social Welfare Office began paying the 

entire cost of the subsidy, up to 129 Euro ($158.70). According to mabb, a 

total of 6,000 set-top boxes were provided to needy households with a 

total cost of 500,000 Euro ($615,100). 

Extensive consumer education. mabb and industry participants 

conducted an extensive consumer education effort. One official told us 

that a primary concern with the DTV transition is making sure that 

15Public broadcasters were also allowed to provide multicast service. 

16The private broadcasters that we spoke with told us that they do not anticipate receiving 

financial support in Germany’s northern states, since the anticipated digital transmission 

costs will be similar to the existing analog transmission costs. 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 84 GAO-05-940R Digital Television Transition

Page 18 GAO-04-926T 

households that rely solely on terrestrial television understand that they 

must do something to be able to continue receiving television. In Berlin, 

two important consumer education mechanisms were messages on 

terrestrial-only television signals and information sessions with retailers. 

On television signals received by terrestrial television, households saw a 

rolling scroll that informed them about the DTV transition. Deutsche TVPlattform and the Berlin Chamber of Commerce also held information 

sessions with retailers. Other consumer education mechanisms included a 

direct mailing to every household, a consumer hotline, flyers and 

newsletters, an Internet Web site, and advertisements on buses and 

subways.17 One primary concern with the consumer education effort was 

to avoid confusing cable and satellite subscribers. Because the DTV 

transition only affected households relying solely on terrestrial television, 

the consumer education effort focused on means that would target only 

these households, and not households subscribing to cable and satellite 

service. We were also told that a short consumer education period was 

best for informing households about the DTV transition; in Berlin, the 

consumer education effort lasted approximately 4 weeks and cost 

approximately 800,000 Euro ($984,160).18

Relatively few consumer complaints and problems arose during the Berlin 

DTV transition. For example, a consumer organization that we spoke with 

told us that there were very few complaints, and that most complaints that 

did arise concerned the cost of the set-top box, which they said was 

approximately 100 to 125 Euro ($123.02 to $153.78).19 We were also told 

that there were minor technical problems and few reception problems. An 

mabb official with whom we spoke thought that reception had improved 

following the DTV transition, because the agency ensured a strong digital 

signal and because digital transmission is superior to analog transmission. 

The technical and reception problems that did arise included difficulties 

installing and using the set-top box; reception problems in some multipledwelling units, particularly ground-floor units and buildings with rooftop 

antennas and boosters; and interference problems for some cable 

subscribers because of the strength of the digital signal. 

17We were told that the direct mailing was expensive and not very effective. 

18This figure does not include the value of commercial time that broadcasters devoted to 

the DTV transition. 

19This consumer organization did mention that the DTV switchover could be expensive for 

households with multiple televisions, as each television would need a separate set-top box. 

The Berlin DTV Transition 

Is Generally Viewed as 

Successful, but Full DTV 

Transition May Not Occur 

in Rural Areas 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 85 GAO-05-940R Digital Television Transition

Page 19 GAO-04-926T 

During the Berlin DTV transition, some households changed the 

mechanism through which they receive television service. We were told 

that between one-third and one-half of households that previously relied 

solely on terrestrial television switched to either cable or satellite service, 

rather than purchase the set-top box. An official with mabb told us that the 

percent of households switching from terrestrial television to cable and 

satellite was less than they had expected. On the other hand, more set-top 

boxes—over 200,000—were sold than the number of former terrestrialonly households, indicating that some households purchased multiple 

boxes, and that some cable and satellite households also purchased settop boxes for a second or third television that only received terrestrial 

service. We were also told that relatively few cable subscribers switched 

to terrestrial television following the DTV transition. As previously 

mentioned, cable payments are often included in the household’s rent 

payment and some cable contracts are long-term in nature, thereby 

reducing the incentive and flexibility that some households have to switch 

away from cable service. Some industry officials told us, however, that 

they expect some cable subscribers to switch to terrestrial service in the 

longer term. 

The government, industry, and consumer representatives with whom we 

spoke mentioned several factors as contributing to the success of the 

Berlin DTV transition. These factors include the following: 

• The DTV transition provided enhanced consumer value for Berlin 

households. The number of channels available through terrestrial 

television increased from approximately 11 to 27 and included an 

electronic program guide. 

• The government and broadcasters did not have to finance the new 

programs. The new channels available through terrestrial television 

following the DTV transition already existed on cable and satellite 

systems. 

• There was good cooperation between the government officials and 

broadcasters, which helped ensure that consumers received additional 

channels.

• The transition affected a relatively small percentage of Berlin households; 

only households that relied solely on terrestrial television—less than 10 

percent of Berlin households—had to take action to avoid losing their 

television service. 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 86 GAO-05-940R Digital Television Transition

Page 20 GAO-04-926T 

• The set-top boxes were relatively inexpensive, and the price fell 

throughout the transition period. 

• There was a scheduled time line for the DTV transition and a firm shutoff 

date.

• There was good communication to consumers about the DTV transition. 

While the Berlin DTV transition appears successful, a full DTV transition 

might not extend throughout Germany. Government and industry officials 

with whom we spoke said that private broadcasters will most likely not 

provide digital service in rural areas outside the islands, but that public 

broadcasters will provide digital service in these areas. This is not entirely 

different than the current situation with analog television, where the 

private broadcasters do not provide terrestrial television in all areas of the 

country. However, it does raise the possibility that a full DTV transition, 

including the digital terrestrial transmission of both public and private 

broadcasters, might not occur throughout Germany. 

Finally, some groups we spoke with identified problems with the Berlin 

DTV transition. The cable television industry in Germany mentioned 

several problems. Cable industry officials with whom we spoke objected 

to the use of the radio and television license fee for the DTV transition. 

These officials told us that all German households pay the license fee, but 

only terrestrial households in the islands benefit from the DTV transition. 

In fact, the cable industry has petitioned the European Commission about 

the use of the license fee for the DTV transition. Other problems noted by 

the cable industry officials with whom we spoke include cable subscribers 

purchasing set-top boxes by mistake and the expense and problems cable 

operators incurred to upgrade their headend facilities to receive the digital 

signal. Regarding the set-top box subsidy, the Social Welfare Office 

thought that the process could have been handled a little better. In 

particular, it found that approximately 20 percent of the applications for 

subsidies were not handled adequately, most often because they were 

incomplete or missing signatures. 
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 87 GAO-05-940R Digital Television Transition

Page 21 GAO-04-926T 

Based on our examination of the DTV transition in Berlin and other areas 

of Germany, it is clear that the manner in which DTV is to be rolled out is 

considerably different than in the United States. Nevertheless, we found 

that much of the focus in Berlin leading up to and during the simulcast 

period was on making sure that consumers who receive television solely 

through terrestrial means obtain the necessary set-top boxes so that they 

would be able to view DTV signals once the analog signals were turned off. 

Since the DTV transition in the United States is already in a simulcast 

phase—that is, most digital broadcast television signals are already being 

transmitted—the phase of encouraging consumers to adopt DTV 

equipment is upon us. FCC has yet to fully determine how cable and 

satellite households will count toward the 85 percent threshold. 

Ultimately, the Congress and FCC will need to turn their attention to 

providing information, incentives, and possibly assistance to those who 

need to purchase equipment in order for the transition—and the return of 

valuable spectrum—to be completed. Ensuring that consumers 

understand the transition, how they will be affected by it, and what steps 

they need to take is critical not only for ensuring the transition moves 

forward, but for ensuring that consumers do not unexpectedly lose 

television reception or incur costs beyond what is necessary to 

successfully transition to digital television. 

The Berlin experience highlights a few factors, which relate to consumers’ 

purchase of set-top boxes, that were very important for the success of the 

DTV transition in that city: 

• Information provided focused a great deal on need for set-top box and 

benefits of completing the transition. The Berlin authorities and 

broadcasters provided extensive information to the public, the media, and 

retailers about what the transition would entail, what consumers needed 

to do, how they would benefit by transitioning to digital television, and 

where to get assistance if there was confusion about what equipment was 

necessary or if there were problems with equipment or reception. This 

effort was planned and coordinated among many parties, adequate 

resources were dedicated to the information campaign, and nearly 

everyone we spoke with told us it a critical factor to the success of the 

rapid DTV transition in Berlin. 

• Set-top boxes were subsidized for needy households. Subsidies were 

provided to certain households that might have had difficulties affording 

the necessary set-top boxes. In particular, low-income households that 

rely on terrestrial television could apply for financial assistance for the 

purchase of a set-top box. Because of the low penetration of terrestrial 

Need for Set-Top Box 

Deployment Is Key 

Challenge in Germany 

and in the United 

States
Enclosure III: GAO July 21, 2004, Testimony 

(GAO-04-926T)

Page 88 GAO-05-940R Digital Television Transition

(543109)

Page 22 GAO-04-926T 

television, only about 6,000 households required this subsidy at a cost of 

about half a million Euro ($615,100). Nevertheless, this may have helped in 

the management of the transition by ensuring that the transition would not 

be an undue burden for lower-income households. 

• Near-term date certain for transition deadline made clear when set-top 

boxes would need to be in place. Finally, the Media Authority in Berlin set 

a date certain for the transition that required consumers to make decisions 

quickly about how they would adapt to the transition. This enabled all 

stakeholders to know what they needed to work toward: when set-top 

boxes needed to be available in the market; when education of consumers, 

hotlines, and TV scroll information would be required; and the date by 

which consumers needed to decide how to transition or lose their 

television service. 

To summarize my statement, Mr. Chairman, although the context of the 

transition differs considerably in Germany as compared with the United 

States, there may be interesting and helpful lessons for the Congress and 

FCC from the DTV transition in Berlin and other areas of Germany. This 

concludes my prepared statement. I would be happy to respond to any 

questions that you or other Members of the Subcommittee 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, Dennis Amari, 

and Michael Clements. 

GAO Contacts and 

Staff

Acknowledgments 

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