Digital Television Transition: Implementation of the Converter Box Subsidy Program Is Under Way, but Preparedness to Manage an Increase in Subsidy Demand Is Unclear
Published: 2008-09-16T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Digital Television Transition and Public Safety Act of 2005 requires all full-power television stations in the United States to cease analog broadcasting after February 17, 2009, known as the digital television (DTV) transition. The National Telecommunications and Information Administration (NTIA) is responsible for implementing a subsidy program to provide households with up to two $40 coupons toward the purchase of converter boxes. In this requested report, GAO examines (1) what consumer education efforts have been undertaken by private and federal stakeholders and (2) how effective NTIA has been in implementing the converter box subsidy program, and to what extent consumers are participating in the program. To address these issues, GAO analyzed data from NTIA and reviewed legal, agency, and industry documents. Also, GAO interviewed a variety of stakeholders involved with the DTV transition.
section_title: What GAO Found
paragraphs: Private sector and federal stakeholders have undertaken various consumer education efforts to raise awareness about the DTV transition. For example, the National Association of Broadcasters and the National Cable and Telecommunications Association have committed over $1.4 billion to educate consumers about the transition. This funding has supported the development of public service announcements, education programs for broadcast, Web sites, and other activities. The Federal Communications Commission (FCC) and NTIA have consumer education plans that target those populations most likely to be affected by the DTV transition. Specifically, they identified 45 areas of the country as high risk that included areas with at least 1 of the following population groups: (1) more than 150,000 over-the-air households, (2) more than 20 percent of all households relying on over-the-air broadcasts, or (3) a top 10 city of residence for the largest target demographic groups. The target demographic groups include seniors, low-income, minority and non-English speaking, rural households, and persons with disabilities. In addition to targeting these 45 areas of the country, FCC and NTIA developed partnerships with organizations that serve these hard-to-reach populations. NTIA is effectively implementing the converter box subsidy program, but its plans to address the likely increase in coupon demand as the transition nears remain unclear. Almost 19 million coupons have been issued by NTIA, but as of June 2008, only 9 percent of U.S. households had requested coupons. As found in GAO's recent consumer survey, up to 35 percent of U.S. households could be affected by the transition because they have at least one television not connected to a subscription service, such as cable or satellite. With a spike in demand likely as the transition date nears, NTIA has no specific plans to address an increase in demand; therefore, consumers might incur significant wait time before they receive coupons as the transition nears and might lose television service during the time they are waiting for the coupons. In terms of participation in the converter box subsidy program, GAO analyzed coupon data in areas of the country comprising predominantly minority and senior populations and found that households in both predominantly black and Hispanic or Latino areas were much less likely to redeem their coupons compared with households outside these areas. Additionally, GAO analyzed participation in the subsidy program in the 45 areas of the country on which NTIA and FCC focused their consumer education efforts and found coupon requests to be about the same for zip codes within the 45 targeted areas compared with areas that were not targeted. Retailers play an integral role in the subsidy program by selling the converter boxes and helping to inform their customers about the DTV transition and the program. GAO visited 132 randomly selected retail stores in 12 cities. Store representatives at a majority of the retail locations GAO visited were able to correctly state that the DTV transition would occur in February 2009 and explain how to apply for a converter box coupon.

section_title: Letter
paragraphs: Federal law requires all full-power television stations in the United States  to cease analog broadcasting and to broadcast digital-only transmissions  after February 17, 2009. This process is often referred to as the digital  television (DTV) transition. Currently, most television broadcasters  transmit over-the-air signals in both an analog and a digital format to U.S.   households. After the transition, consumers who rely exclusively on over- the-air television signals viewed on analog sets will not be able to view  broadcast programming, which could include important news information  or emergency alerts, unless they take action. Specifically, these consumers  could (1) purchase a television capable of processing digital signals;   (2) purchase a digital-to-analog converter box that converts the digital  signals to analog signals and enables their display on an analog set; or   (3) subscribe to cable, satellite, or other service.
The federal government and the private sector have taken several steps to  prepare for the DTV transition. The National Telecommunications and  Information Administration (NTIA), which is a bureau within the  Department of Commerce, created and implemented a digital-to-analog  converter box subsidy program to provide households with up to two $40  coupons toward the purchase of converter boxes that allow consumers to  continue viewing over-the-air signals on analog television sets.  Additionally, the government, the television broadcast industry, cable and  satellite providers, and other carriers of the broadcast signal have  established several educational efforts informing consumers about the  DTV transition and the subsidy program. However, the success of the DTV  transition and the subsidy program requires consumers’ understanding  about the transition and the steps needed to continue receiving a  television signal. In addition, consumers will rely on retailers to provide  information, as well as to supply eligible converter boxes.
You asked us to provide information on the progress of the DTV transition.  As part of our ongoing review of issues related to the transition, we  determined (1) what consumer education efforts have been undertaken by  private and federal stakeholders and (2) how effective NTIA has been in  implementing the converter box subsidy program, and to what extent  consumers are participating in the program.
To meet these objectives, we interviewed agency officials from the Federal  Communications Commission (FCC) and NTIA and reviewed their  consumer education documents, orders, rules, and proposed rules. We  also interviewed private sector stakeholders representing the  broadcasting, retailer, manufacturing, and cable industries and reviewed  publicly available information on their consumer education planning.  Furthermore, we discussed the effectiveness of consumer education  efforts with various advocacy groups identified as NTIA partners that  represent hard-to-reach populations. We also analyzed date-specific data  from NTIA on coupon applications, requests, issuance, redemptions, and  expirations and examined NTIA timeliness in issuing coupons from the  beginning of the converter box subsidy program in January 2008 through  June 2008. We conducted data reliability testing and determined that the  data used in this report were sufficiently reliable for our purposes. We also  conducted a “mystery shopper” study—that is, we discussed the transition  with randomly selected retailers without identifying ourselves as  government employees—to determine retailer preparedness for the  converter box subsidy program, including the level of retailer knowledge  about the program and the availability of converter boxes. In conducting  the mystery shopper study, we visited 132 store locations in 12 cities from  April to early May 2008. Appendix I contains a detailed discussion of our  objectives, scope, and methodology.
We performed our review from February 2008 to September 2008 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our review objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
subsections: section_title: Background
paragraphs: The DTV transition will require citizens to understand the transition and  the actions that some might have to take to maintain television service.  For those households with subscription video service on all televisions or  with all televisions capable of processing a digital signal, no action is  required. However, households with analog televisions that rely solely on  over-the-air television signals received through rooftop or indoor antennas  must take action to be able to view digital broadcast signals after analog  broadcasting ceases. The Digital Television Transition and Public Safety  Act of 2005 addresses the responsibilities of two federal agencies—FCC  and NTIA—related to the DTV transition. The act directs FCC to require  full-power television stations to cease analog broadcasting by February 17,  2009. The act also directed NTIA to establish a $1.5 billion subsidy  program through which households can obtain coupons toward the  purchase of digital-to-analog converter boxes. In August 2007, NTIA  selected the International Business Machines Corporation (IBM) as the  contractor to provide certain services for the program. On January 1, 2008,  NTIA, in conjunction with IBM and in accordance with the act, began  accepting applications for up to two $40 coupons per household that can  be applied toward the purchase of eligible digital-to-analog converter  boxes and, in mid-February 2008, began mailing the coupons. Initially,  during the first phase of the program, any household is eligible to request  and receive the coupons, but once $890 million worth of coupons has been  redeemed, and issued but not expired, NTIA must certify to Congress that  the program’s initial allocation of funds is insufficient to fulfill coupon  requests. NTIA will then receive $510 million in additional program funds,  but households requesting coupons during this second phase must certify  that they do not receive cable, satellite, or any other pay television  service. As of June 24, 2008, in response to NTIA’s statement certifying  that the initial allocation of funds would be insufficient, all appropriated  coupon funds were made available to the program. Consumers can request  coupons up to March 31, 2009, and coupons can be redeemed through   July 9, 2009. As required by law, all coupons expire 90 days after issuance.  As unredeemed coupons expire, the funds obligated for those coupons will  be returned to the subsidy program.
Retailer participation in the converter box subsidy program is voluntary;  however, participating retailers are required to follow specific program  rules to ensure the proper use and processing of converter box coupons.  Retailers are obligated to, among other things, establish systems capable  of electronically processing coupons for redemption and payment and  tracking transactions. Retailers must also train their employees on the  purpose and operation of the subsidy program. According to NTIA  officials, NTIA initially explored the idea of setting requirements for  training content, but decided to allow retailers the flexibility of developing  their own training programs and provided retailers with sample training  materials. Certification requires retailers to have completed an application  form by March 31, 2008, and to attest that they have been engaged in the  consumer electronics retail business for at least 1 year. Retailers must also  register in the government’s Central Contractor Registration database,  have systems or procedures that can be easily audited and that can  provide adequate data to minimize fraud and abuse, agree to be audited at  any time, and provide data tracking each coupon with a corresponding  converter box purchase. NTIA may revoke retailers’ certification if they  fail to comply with these regulations or if any of their actions are deemed  inconsistent with the subsidy program. Converter boxes can also be  purchased by telephone or online and be shipped directly to a customer’s  home from participating retailers. At the time of our review, 29 online  retailers were participating in the converter box subsidy program. As of  July 23, 2008, there were three instances of retailers previously listed as  participating in the program that were no longer identified as participating  online retailers. Additionally, 13 telephone retailers were listed as  participating in the program, 2 of which are associated with national  retailers.
section_title: Private and Federal Stakeholders Have Undertaken a Myriad of Activities Aimed at Increasing the Public’s Awareness of the DTV Transition
paragraphs: Private sector stakeholders from the broadcast, cable, retail, and  consumer electronics industries have committed over $1 billion to  voluntary and required consumer education efforts to inform the public of  the DTV transition. Also, FCC and NTIA have ongoing consumer education  efforts targeting households that rely on over-the-air broadcasts and  targeting hard-to-reach populations, such as minority and non-English  speakers, seniors, and rural households. The government consumer  education plans generally follow key practices for consumer education  planning.
subsections: section_title: Private Stakeholders Have Established Education Efforts to Inform the Public about the DTV Transition
paragraphs: Private sector stakeholders, such as broadcasters, cable providers, and the  Consumer Electronics Association, have undertaken various education  efforts to increase public awareness about the DTV transition. NAB and  the National Cable and Telecommunications Association initiated DTV  transition consumer education campaigns in late 2007 at an estimated  value of $1.4 billion combined. NAB has produced six versions of a public  service announcement, including 15-second and 30-second versions in  both English and Spanish and close-captioned versions. Private sector  stakeholders have also produced DTV transition educational programs for  broadcast and distribution, developed Web sites that provide information  on the transition, and engaged in various other forms of outreach to raise  awareness. Examples of outreach by some private stakeholders include  attending and distributing information at industry events and conferences,  such as speakers’ bureaus and road shows, and initiating an educational  contest to find the oldest working television that receives over-the-air  broadcasts. Additionally, most of the national retailers participating in the  NTIA converter box subsidy program are providing materials to help  inform their customers of the DTV transition and the subsidy program.
Examples of these materials include informational brochures in English  and Spanish, educational videos and in-store displays in English and  Spanish, informational content on retailer Web sites, and information  provided in retailer advertising in Sunday circulars. Some of the national  retailers with whom we spoke are also engaging in partnerships with other  organizations. For example, one national retailer is partnering with local  broadcasters to run DTV television spots and with print media outlets and  magazines to help inform the public about the transition. The private  sector has also conducted surveys to gauge consumer awareness. For  example, NAB, the Consumer Electronics Association, Consumers Union,  and Best Buy Company, Inc., have all surveyed consumers nationwide  regarding their level of understanding and awareness of the DTV  transition.
section_title: Federal Government Education Efforts Target Hard-to-Reach Populations, and Plans Generally Follow Key Practices for Consumer Outreach
paragraphs: FCC and NTIA also have ongoing DTV consumer education efforts, which  target populations most likely to be affected by the DTV transition.  Specifically, they focused their efforts on 45 areas of the country that have  at least 1 of the following population groups: (1) more than 150,000 over- the-air households, (2) more than 20 percent of all households relying on  over-the-air broadcasts, or (3) a top 10 city of residence for the largest  target demographic groups. The target demographic groups include  seniors, low-income, minority and non-English speaking, rural households,  and persons with disabilities. According to NTIA, its consumer education  efforts will specifically target these 45 areas by leveraging partnerships  and earned media spots (such as news stories or opinion editorials) to  better reach the targeted populations. FCC indicated that while its  outreach efforts focus on the targeted hard-to-reach populations, the only  effort specifically targeting the 45 locations has been to place billboards in  these communities. According to FCC, contracts exist for billboards in 26  of the 45 markets, and it is working to place billboards in the other 19  markets. Furthermore, FCC and NTIA have developed partnerships with  some federal, state, and local organizations that serve the targeted hard-to- reach populations. FCC and NTIA believe the partners can serve as trusted  voices to inform the targeted populations about the DTV transition. As  shown in table 1, there have been outreach efforts to all targeted  populations. A few of the partners we contacted indicated that while they  agreed to help inform the populations they serve, they had very little  funding to support widespread dissemination of this information, and that  they would like monetary support from the government to do so. We also  found one instance of an organization listed as a partner by NTIA that had  not agreed to disseminate DTV information because it could only focus on  its primary mission.
We previously reported on nine key practices for consumer education  planning: defining goals and objectives, analyzing the situation, identifying  stakeholders, identifying resources, researching target audiences,  developing consistent and clear messages, identifying credible  messenger(s), designing the media mix, and establishing metrics to  measure success. We analyzed FCC’s and NTIA’s consumer education  plans and found that they reflect almost all of the key practices that we  previously identified for overcoming potential challenges in such planning.  For example, NTIA has defined four primary objectives, including   (1) increasing awareness of the converter box subsidy program,   (2) generating requests for coupons, (3) engaging partners to disseminate  information about the subsidy program, and (4) providing media  information and tools needed to report on the program. FCC has made  consumer outreach one of its primary goals for the DTV transition and has  set goals for distributing publications; participating in events and  conferences; and coordinating with federal, state, and local entities.  Furthermore, NTIA and FCC conducted audience research on targeted  populations and identified geographic areas most likely to be affected. The  NTIA contractor for the subsidy program completed a study of both  general consumers and those who fall into the target audiences to help  develop the message and materials for the program. This process included  developing, testing, and refining the message, with the goal of exploring  the target audiences’ reactions to the message. For additional information  on the key practices and the FCC and NTIA consumer education plans, see  appendix II.
section_title: NTIA Is Effectively Implementing the Converter Box Subsidy Program, but Concerns Exist about NTIA’s Ability to Manage a Potential Spike in Coupon Demand
paragraphs: NTIA has processed and issued coupons to millions of consumers, but a  sharp increase in demand might affect NTIA’s ability to respond to coupon  requests in a timely manner. With relatively low participation rates to date,  a spike in demand leading up to the transition is likely and, given the  processing time required in issuing coupons, NTIA’s preparedness to  handle volatility in coupon demand is uncertain. Coupon requests and  redemptions by the targeted hard-to-reach populations have varied  compared with participation in the rest of the country, with some  populations having higher request rates but redeeming the coupons at a  lower rate. Retailers play a crucial role in the converter box subsidy  program, and the national retailers we contacted have taken steps to  inform their consumers and train their employees about the subsidy  program.
subsections: section_title: NTIA Has Implemented Systems to Process Requests and Issue Coupons, but NTIA’s Ability to Respond to Volatile Coupon Demand Is Uncertain
paragraphs: NTIA and its contractors have implemented comprehensive systems to  administer the converter box subsidy program. The contractors working  with NTIA—IBM and its subcontractors—have implemented systems   (1) to process coupon applications, (2) to produce and distribute coupons  to consumers, and (3) for retailers to process coupons and receive  reimbursement for the coupons from the government. Millions of  consumers have requested converter box coupons, and most of the  requested coupons have been issued. Through June 2008, households had  requested almost 19 million coupons. NTIA had issued over 92 percent of  all coupon requests, for more than 17 million coupons. Of those coupons  issued, about 4.9 million (28 percent) had been redeemed and 13 percent  had expired. At the time of our review, consumers were not eligible to  reapply for coupons that expired before they were used. Rather, funds  obligated for expired coupons were to be returned to the subsidy program.  According to NTIA, it had anticipated and budgeted for the distribution of  additional coupons as funds from expired coupons are returned to the  program, and it is working closely with its contractor to ensure that as  many coupons as possible can be distributed.
After an initial spike at the beginning of the program, coupon requests  have remained steady and have averaged over 103,000 requests per day.  Coupon redemptions, since coupons were first issued in February 2008,  have averaged over 36,000 per day. Figure 1 illustrates the cumulative  requests, issuances, redemptions, and expirations of coupons, from the  inception of the subsidy program (January 2008) through June 2008.
In our recent consumer survey, we found that 35 percent of U.S.  households are at risk of losing some television service because they have  at least one television not connected to a subscription service, such as  cable or satellite. However, through June 2008, only 9 percent of U.S.  households had requested converter box coupons, and less than 3 percent  had redeemed these coupons. As the transition date nears, there is the  potential that many affected households that have not taken action might  begin requesting coupons. Our consumer survey found that of those at risk  of losing some television service and intending to purchase a converter  box, most will likely request a coupon. In fact, in households relying solely  on over-the-air broadcasts (approximately 15 percent), of those who  intend to purchase a converter box, 100 percent of survey respondents  said they were likely to request a coupon.
Consumers have incurred significant wait times in the processing of their  coupon requests, but NTIA’s processing time from receiving requests to  issuing coupons is improving, as shown in figure 2. NTIA requires that 98  percent of all coupon requests be issued within 10 days, and the remainder  be issued within 15 days from the date the coupon applications are  approved. From February 17 through June 30, 2008, our analysis shows  that the average duration between coupon request and issuance is over 19  days. In aggregate, 36 percent of all coupon requests have been issued  within 10 days, and 54 percent of all coupon requests have been issued  more than 15 days after being requested. From May 1 through June 30,  2008, the average processing time from coupon request to issuance was 9  days.
Throughout the course of the subsidy program, NTIA has increased its  capacity to issue coupons, at times issuing as many as 500,000 coupons per  day. However, the number of coupons issued per day varies greatly and, as  shown in figure 3, has declined since peaking in early May 2008.
Given the processing time required in issuing coupons, NTIA’s  preparedness to handle volatility in coupon demand is unclear.  Fluctuation in coupon requests, including the potential for a spike in  requests as the transition date approaches, could adversely affect  consumers. When NTIA faced a deluge of coupon requests in the early  days of the converter box subsidy program, it took weeks to bring down  the deficit of coupons requested to coupons issued. According to NTIA, it  expects a similar increase in requests around the transition date, and such  an increase may cause a delay in issuing coupons. As a result, consumers  might incur significant wait time before they receive their coupons and  might lose television service during the time they are waiting for the  coupons. NTIA told us it has discussed options to address the increase in  requests, such as downloadable coupons. NTIA interprets the statute,  however, as requiring it deliver all coupons using the U.S. Postal Service.  While NTIA and its contractors have demonstrated the capacity to process  and issue large numbers of coupon requests over short periods, they have  yet to establish specific plans to manage a potential spike or a sustained  increase in demand leading up to the transition.
section_title: Participation in the Converter Box Subsidy Program by Hard-to-Reach Populations Varies
paragraphs: We analyzed data to compare areas of the country that comprise  predominantly minority and elderly populations with the rest of the U.S.  population and found some differences in the coupon request, redemption,  and expiration rates for Hispanic, black, and senior households compared  with the rest of the U.S. population. For example, zip codes with a high  concentration of Latino or Hispanic households had noticeably higher  request rates (20 percent) compared with non-Latino or non-Hispanic zip  codes (8 percent). However, households in predominantly black and  Latino or Hispanic zip codes were less likely, compared with households  outside these areas, to redeem their coupons once they received them. As  shown in table 2, the overall rate of redemption for the converter box  subsidy program is 28 percent, but only 19 percent of coupons have been  redeemed in predominantly Latino or Hispanic areas. In predominantly  black areas, 22 percent of coupons have been redeemed.
Furthermore, we found that in areas of the country with a high  concentration of seniors, fewer coupons were requested (7 percent)  compared with areas of the country that did not have a high concentration  of seniors (9 percent). Redemption rates for the senior population were  similar to the redemption rates in the rest of the country. Regarding  coupon expirations, we found a wide variance between minority and  senior populations compared with the population as a whole. For  example, the areas comprising Latino or Hispanic households only  allowed 4 percent of their coupons to expire, while areas with  predominantly senior populations allowed 21 percent of their coupons to  expire.
The higher coupon request rates for Latino or Hispanic households  compared with the non-Latino or non-Hispanic areas might be due to the  consumer education efforts of the Spanish speaking broadcasters. An  advocacy group representing Hispanics told us that the outreach efforts of  Spanish speaking broadcasters, such as Univision, Telemundo, and Azteca  America, have been effective in educating their viewers on the DTV  transition. While the advocacy group had high praise for these  broadcasters, it and another advocacy group representing minority  populations that we contacted expressed concerns about certain aspects  of the consumer education and outreach efforts by federal and private  sector stakeholders. Specifically, these groups expressed concerns about  the lack of funding for outreach to targeted vulnerable populations, the  possibility of misinformation being provided by retailers to consumers, a  lack of technical assistance to the targeted populations (such as assisting  the elderly with connecting the converter boxes to their televisions), and  the absence of rapid response planning to assist the targeted populations if  funds for the converter box subsidy run out. Furthermore, these advocacy  groups stated they believe the current transition messaging is very general  and not targeted toward at-risk populations. As such, one group believes  current messaging does not lead the at-risk populations to being fully  aware of what they may need to do to prepare for the transition. Another  group stated that targeted outreach efforts to its member organizations  and populations are very general, and that outreach efforts on the  transition and converter box subsidy program have not resonated with  their communities.
To determine participation in the converter box subsidy program in the 45  areas of the country receiving targeted outreach by NTIA and FCC, we  analyzed NTIA coupon data (including requests, redemptions, and  expirations) in the 45 areas compared with the rest of the country not  targeted by NTIA and FCC. We found participation levels were about the  same in the targeted areas compared with the rest of the country. As we  have previously mentioned, the 45 areas were targeted for the level of at- risk households, including households relying on over-the-air television.  Therefore, the portion of the population in those 45 areas requiring action  to continue viewing television broadcasts should be higher than in other  areas of the country. However, we found that in the 45 targeted areas, 8.8  percent of households have requested coupons compared with 9.4 percent  for the rest of the country not targeted by NTIA and FCC. We also found  similarities between the 45 targeted areas and the rest of the country when  looking at the coupon redemption and expiration rates. According to  NTIA, similarities in request, redemption, and expiration rates between the  45 targeted areas and the rest of the country is viewed as a success.
section_title: Retailers Are Participating in the Converter Box Subsidy Program, but Lacked Guidance from NTIA at the Time of Our Review
paragraphs: As the sellers of the converter boxes, retailers play a crucial role in the  converter box subsidy program and are counted on to inform consumers  about it. To do so, many national retailers are using in-store video  programming, signage, and brochures to inform consumers. At the time of  our review, seven national retailers were participating in the subsidy  program. Three national retailers participating in the program told us  they display programming about the transition on televisions at their store  locations. One of these stores said it developed two consumer education  videos, which run along with other programming on in-store displays.  These videos provide information in both English and Spanish on the DTV  transition, consumers’ options for maintaining television service after the  transition, and information about how to set up digital-to-analog converter  boxes on analog televisions. Additionally, all of the retailers we spoke with  indicated that signs and informational pamphlets about the DTV transition  would be part of their in-store education campaigns. Retailers wanting to  participate in the converter box subsidy program must become certified  and are obligated to, among other things, train employees on the purpose  and operation of the subsidy program. All of the retailers with whom we  spoke told us they were training employees on the DTV transition and the  subsidy program, although the retailers varied in which staff must  complete training. For example, one retailer told us that all employees  working in sales, customer service, call centers, and facilities handling  warranties and service must complete DTV transition-related training.  Another retailer told us that although it provides some training to its sales  staff, most of the training is focused on employees working at cash  registers.
As part of our work, we conducted a “mystery shopper” study by visiting  132 randomly selected retail locations in 12 cities across the United States  that were listed as participating in the converter box subsidy program. We  did not alert retailers that we were visiting their stores or identify  ourselves as government employees. During our visits, we engaged the  retailers in conversation about the DTV transition and the subsidy  program to determine whether the information they were providing to  customers was accurate, and whether individual stores had coupon- eligible converter boxes available. While not required to do so, some  stores we visited had informational material available and others had signs  describing the DTV transition and the subsidy program. The informational  materials included retailer-produced brochures and fliers, NTIA-produced  fliers, and converter box subsidy applications. We also determined  whether the information that retailers were providing to customers was  accurate, and whether individual stores had coupon-eligible converter  boxes available. At most retailers (118) we visited, a representative was  able to correctly identify that the DTV transition would occur in February  2009. Additionally, nearly all (126) retailers identified a coupon-eligible  converter box as an option available to consumers to continue watching  television after the transition. Besides coupon-eligible converter boxes,  representatives identified other options to continue viewing television  after the transition, including purchasing a digital television (67) or  subscribing to cable or satellite service (77). However, in rare instances,  we heard erroneous information from the retailers, including one  representative who told us that an option for continuing to watch  television after the transition was to obtain a “cable converter box” from a  cable company and another representative who recommended that we buy  an “HD tuner.” Since participating retailers are obligated to train their  employees on the purpose and operation of the subsidy program, we  observed whether the representative was able to explain various aspects  about the program. As table 3 shows, a vast majority of the representatives  were able to explain how to receive or apply for a coupon and the value of  the coupon, while a similar number were able to explain the converter  boxes eligible for the subsidy program and who needs a converter box.
Although we could obtain information from the majority of the stores that  we visited and that were listed as participating in the subsidy program, in a  few instances, we were not able to ask questions and observe whether the  information provided was accurate. In two instances, there was no retailer  at the store location listed as a participating retailer on NTIA’s Web site  (https://www.dtv2009.gov/VendorSearch.aspx). In another instance, the  location listed was under construction and had not yet opened. In two  additional instances, the locations listed were private residences—one  was an in-home electronics store, and the other was a satellite television  installer working from a house. We asked NTIA how it ensured the  accuracy of the list of participating retailers on its Web site, and according  to NTIA, ensuring the accuracy of the list is the responsibility of the  retailers. NTIA said it provides a list of locations to each retailer prior to  placing the list on the Web site, and retailers can update addresses or add  new listings as warranted.
At the time of our review, retailers told us that it would be useful to have  guidance from NTIA on how to handle the refunds of converter boxes  purchased with a government coupon. Some retailers said that they were  tracking returns in their own systems and awaiting guidance from NTIA on  how to return funds to the government from returned boxes. As part of  NTIA’s final rule on the converter box subsidy program, consumers may  not return a coupon-eligible converter box to a retailer for a cash refund  for the coupon amount. Therefore, if a customer returns a converter box  purchased with a coupon, the retailer can only refund to the customer the  amount paid for the converter box above the value of the coupon, and the  retailer must refund the value of the coupon to NTIA. One of the retailers  told us that it had developed an in-house accounts payable system to track  converter boxes that are returned because it had no guidance from NTIA  on how to return funds to the government. In July 2008, NTIA provided  guidance to the retailers on how to handle the returns of coupon-eligible  converter boxes. According to the guidance, retailers must have agreed to  the terms by August 15, 2008, or face deactivation from the subsidy  program.
section_title: Conclusions
paragraphs: NTIA estimates that it will see a large increase in the number of coupon  requests in the first quarter of 2009. In addition, our analysis confirms that  a spike in coupon requests is likely as the transition nears. However, NTIA  has not developed a plan for managing that potential spike or sustained  increase in coupon demand. The time required for processing coupons has  improved from when consumers incurred significant wait times to receive  their coupons at the beginning of the program, but, until recently, NTIA  fell short of its requirement for processing coupons within 10 to 15 days  from the date the coupon applications were approved. Given the relatively  low participation rates to date and the amount of time it took to process  the spike in coupon requests in the early days of the program, NTIA’s  ability to handle volatility in coupon demand without a plan is unclear.  Consequently, consumers face potential risks that they might not receive  their coupons before the transition and might lose their television service  after February 17, 2009.
section_title: Recommendation for Executive Action
paragraphs: To help NTIA prepare for a potential increase in demand for converter box  coupons and so that consumers are not left waiting a lengthy amount of  time for requested coupons, we recommend that the Secretary of  Commerce direct the Administrator of NTIA to develop a plan to manage  volatility in coupon requests so that coupons can be processed and mailed  within 10 to 15 days from the day the coupon applications are approved,  per NTIA’s stated requirement.
section_title: Agency Comments
paragraphs: We provided a draft of this report to the Department of Commerce (which  contains NTIA) and FCC for their review and comment. In response,  Commerce did not state whether it agreed or disagreed with our  recommendation, but the department did say that it shares our concern  about an increase in coupon demand as the transition nears. Commerce  believes that NTIA has monitored coupon demand throughout the  program, has effectively responded to those demands, and will adjust the  program’s operation as necessary to address consumer demand as the  transition date approaches. Furthermore, Commerce’s letter stated it is  committed to doing all that it can within its statutory authority and  existing resources to ensure that all Americans are ready for the DTV  transition. In its letter, FCC noted consumer outreach efforts it has taken  related to the DTV transition, some of which were announced after we  concluded our audit work at the commission. For example, FCC stated  that in 81 markets, the Chairman, a commissioner, or FCC senior staff  would hold a public event, such as a town-hall meeting, workshop, or  roundtable discussion, to highlight the steps consumers need to take to be  prepared for the DTV transition. See appendixes IV and V for written  comments from Commerce and FCC, respectively.
We are sending copies of this report to interested congressional  committees, the Secretary of Commerce, and the Chairman of FCC. We  will make copies available to others upon request. In addition, the report  will be available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staffs 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. Key contributors to this report are listed in  appendix VI.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objectives of this report are to provide information on issues  surrounding the digital television (DTV) transition, specifically, (1) what  consumer education efforts have been undertaken by private and federal  stakeholders and (2) how effective the National Telecommunications and  Information Administration (NTIA) has been in implementing the  converter box subsidy program, and to what extent consumers are  participating in the program.
To obtain information on consumer education efforts, we reviewed federal  agency consumer education planning documents, agency orders, rules,  proposed rules, and testimony statements from the Federal  Communications Commission (FCC) and NTIA. We analyzed and  compared federal consumer education plans with key practices for  consumer education planning that were developed by an expert panel in  our previous work on the DTV transition. This analysis was used to  determine the extent that federal consumer education plans incorporated  the key practices for effective consumer education planning. We also  reviewed publicly available information on private sector consumer  education planning and consumer awareness surveys conducted by  industry groups, such as the Consumer Electronics Association (CEA), the  National Association of Broadcasters (NAB), and Consumers Union. In  addition, we spoke with government and private sector stakeholders  involved in the transition, including FCC and NTIA officials. We also spoke  with representatives from the broadcasting, retailer, manufacturing, and  cable industries, including NAB, the Community Broadcasters Association,  the Consumer Electronics Retailers Coalition, the North American Retailer  Dealers Association, CEA, and the National Cable and  Telecommunications Association. Lastly, we contacted all national  retailers participating in the NTIA converter box subsidy program and  spoke with six of the seven national retailers, including Best Buy  Company, Inc.; Circuit City Stores, Inc.; Kmart (a subsidiary of Sears  Holdings Corporation); Radio Shack Corporation; Sears Holdings  Corporation; and Target Corporation about their consumer education  efforts. Only one national retailer, Wal-Mart Stores, Inc., declined the  opportunity to speak with us about its DTV consumer education efforts.
To determine how effective NTIA and its partners have been in  implementing the converter box subsidy program, we analyzed coupon  data on request, redemption, and expiration rates. To examine NTIA’s  timeliness in issuing coupons, we analyzed data for each day of the  subsidy program, beginning on January 1, 2008, through June 30, 2008.  Operating under the assumption that all coupons were issued in the order  the requests were received, we calculated the average daily processing  time for applications received. Furthermore, we analyzed date-specific  data from NTIA on coupon applications, requests, issuance, redemptions,  and expirations. To determine participation by the targeted hard-to-reach  populations, NTIA provided us with a list of zip codes for the 45 areas of  the country identified in FCC and NTIA consumer education plans. We  analyzed the NTIA data by zip codes to draw comparisons across  demographic differences. To do so, we merged the NTIA zip code data  with data from the 2000 Census SF-3 summary file Zip Code Tabulation  Areas. From the census data, we grouped zip codes into urban and rural  categories and looked at coupon requests, redemptions, and expirations  for zip codes that were over 50 percent black or Hispanic/Latino.  Furthermore, we discussed the effectiveness of the consumer education  with advocacy groups representing hard-to-reach populations, including  AARP, the National Hispanic Media Coalition, Leadership Conference on  Civil Rights, the American Association of People with Disabilities, and  National 4-H Headquarters. To assess the reliability of these data, we  reviewed related documentation and conducted manual testing of certain  source databases. We also interviewed knowledgeable agency officials  about the quality of these data. As a result, we determined that these data  were sufficiently reliable for the purposes of this report. We also  conducted a “mystery shopper” study to determine the extent of retailer  preparedness for the converter box subsidy program, including (1) retailer  knowledge about the subsidy program, (2) the availability of converter  boxes, and (3) whether retailers were attempting to up-sell to consumers  who were interested in the program. We conducted the mystery shopper  study from April 14, 2008, to May 2, 2008. The sample of retail stores that  we visited was generated and randomly selected on April 11, 2008, from  the list of participating retail stores identified on the NTIA Web site  (https://www.dtv2009.gov/VendorSearch.aspx). Our sample was limited to  store locations within a 15-mile radius of each GAO field office’s and GAO  headquarters’ 5-digit zip code. For the study, we visited 132 store locations  in 12 cities—Atlanta; Boston; Chicago; Dallas; Dayton; Denver; Huntsville;  Los Angeles; Norfolk; San Francisco; Seattle; and Washington, D.C. The  results of this study are not representative of retailer preparedness across  the nation and are only applicable to the locations that we visited.  However, our sample was sufficient to make basic statistical generalities  and collect anecdotal evidence on the general level of retailer  preparedness at that point in time. Additionally, the time frame in which  the study was conducted limited our sample to retailers that were  participating in the converter box subsidy program at that time (which  included national retailers Best Buy Company, Inc.; Circuit City Stores,  Inc.; Radio Shack Corporation; and Wal-Mart Stores, Inc.).
We conducted this review from February 2008 to September 2008 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient  and appropriate evidence to provide a reasonable basis for our findings  and conclusions based on our review objectives. We believe that the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
section_title: Appendix II: Comparison of Federal Consumer Education Plans to Key Practices for Consumer Education Planning
paragraphs: In our previous work on the DTV transition, we convened an expert panel  to discuss consumer education issues applicable to the transition. These  issues included potential challenges that may obstruct efforts and the key  planning components of a consumer education campaign that will help  overcome some of those challenges. As shown in table 4, we analyzed  FCC and NTIA consumer education plans and compared them with the  key practices for consumer education planning. We found that the federal  plans address nearly all of the key practices. (See detailed discussions of  these practices following the table.)
Key Practice 1: Define goals and objectives. Both FCC and NTIA defined  the goals and objectives of their consumer education plans. The FCC  plan’s stated goal is to identify channels and outreach activities not yet  utilized to ensure that the American public is made aware of the DTV  transition so they can benefit from it and, if necessary, take action to be  prepared for the transition. The NTIA plan’s stated goal is to educate U.S.  residents who receive over-the-air broadcasts on analog television about  the DTV transition and the converter box subsidy program. The objectives  of the NTIA plan are to (1) increase awareness of the subsidy program as  one option available to consumers; (2) generate requests for coupons  through various request methods, such as toll-free numbers, Web site  visits, or written or faxed correspondence; (3) engage program partners to  disseminate information about the subsidy program; and (4) provide  media information and the tools needed to report on the program.
Key Practice 2: Analyze the situation. Both FCC and NTIA analyzed the  situation related to market conditions, including competing voices or  messages, and constraints on timing. For example, FCC’s plan provides an  analysis that determined the segments of the population most vulnerable  to the transition (i.e., over-the-air viewers). Included in this analysis is the  general resistance and skepticism to change beyond the public’s control;  the challenge to ensure accurate, consistent, and coordinated information  between public and private sector stakeholders; and the potential for the  news media to pursue new angles and issues related to the DTV transition.  The NTIA plan addressed situation analysis in two primary ways, including  (1) media environment and (2) partner environment. The media  environment analysis assessed keeping the media interested and engaged  at critical times, recognizing that the consumer education campaign would  be in operation in a “crowded media environment” competing with the  2008 presidential elections and the holiday season for public attention.  Additionally, NTIA assessed that different organizations would be engaged  in its transition outreach activities, and that NTIA would be challenged  with engaging partners that are in a position to carry messages most  effectively and efficiently to target audiences, and ensuring they deliver  accurate information about the subsidy program.
Key Practice 3: Identify stakeholders. Both FCC and NTIA identified and  engaged stakeholders that would be involved with communication efforts,  including the roles and responsibilities of each stakeholder. For example,  the FCC plan emphasizes and recommends the use of various stakeholders  to be involved in consumer outreach, such as broadcast outlets; media  services, such as radio, print, and online news services; and other direct- to-consumer methods of outreach, including outdoor and transit public  service advertising and outreach through grocery store chains. The NTIA  plan also identifies various organizations as partners, such as the major  broadcast networks and other federal agencies. In addition to  identification, NTIA has developed a tiered approach to partnerships with  other organizations. The tiered partner system identifies the level of  impact and communication capability a partner may have on outreach  based on the organization’s ability to reach the program’s target  populations. The NTIA plan also outlines the minimum level of  commitment from the tiered partner and the amount of support the  partner would receive from NTIA.
Key Practice 4: Identify resources. Short-term and long-term budgetary  resources and other resources were not identified or available in the  planning documents used for our comparison of FCC and NTIA consumer  education plans to the key practices for consumer education planning.  However, FCC had $14.5 million in allocated and reprogrammed funds for  consumer education in fiscal year 2008, and also requested an additional  $20 million for fiscal year 2009. NTIA was allocated $5 million for  consumer education.
Key Practice 5: Research target audiences. Both FCC and NTIA  conducted audience research to determine needs, preferences, and  characteristics as well as possible audience-specific obstacles, such as  access to information. FCC and NTIA identified the target audiences who  would be hard to reach, most unaware of the transition, and most reliant  on over-the-air broadcasts (i.e., minorities, rural residents, persons with  disabilities, seniors, and low-income individuals). NTIA prioritized its  outreach efforts to 45 market areas that have high concentrations of  households most likely to be reliant on over-the-air broadcasts. FCC also  used NTIA’s geographic prioritization data to focus its outreach efforts.
Key Practice 6: Develop consistent, clear messages. FCC and NTIA  developed clear and consistent messages based on audience research and  goals. For example, FCC’s consumer education plan messaging is divided  into three timeline phases that determine the type of information outreach  efforts emphasized and is focused on providing clear and simple  information to consumers that is accessible to all target populations  through a variety of formats and languages. The phases described in the  FCC plan are (1) transition basics (February to April 2008)—consumers  need to know the transition is happening and may need to take action;   (2) transition detail (May to October 2008)—consumers receive more  specific information, such as how to choose a DTV, the need for an  antenna, how to get a coupon and converter box, and how to hook up a  converter box; and (3) transition urgency (September 2008 to February  2009)—consumers need to act now and take action to avoid losing their  television viewing signal if they are affected. NTIA has also developed and  tested campaign messaging that resonates with target audiences and  changes over time to suit the needs of the converter box subsidy program.  The NTIA plan divides messaging into two phases: (1) awareness/educate  and (2) action/participate. During the first phase, campaign messaging  focused on the digital transition, what the converter box subsidy program  is, why it exists, the benefits of the transition and the converter box,  options for consumers to navigate the transition, and how to participate in  the program. Phase two provides the same information, but the emphasis  shifts to taking action to avoid the loss of television signals and taking  advantage of the subsidy program.
Key Practice 7: Identify credible messenger(s). FCC and NTIA identified  in their consumer education plans partners who would be delivering the  messages and ensuring they are credible with audiences. Specifically, the  FCC plan identifies (1) the national media, such as the broadcast  networks, national radio, cable networks, online outlets, magazines, and  industry trade publications; (2) over-the-air markets, including local  television and radio stations and major daily newspapers; and (3) target  population media services and sources, which are based on the media  habits and preferences of the vulnerable populations, as credible  messengers. NTIA identified two broad groups of credible messengers,  including earned media and partners. Earned media messengers fall into  three categories, which consist of (1) the national media, including the  major broadcast networks, cable networks, online outlets, magazines, and  industry trade publications; (2) geographically targeted media consisting  of local television and radio stations and major daily newspapers; and   (3) demographically targeted media based on the media habits and  preferences of the target populations.
Key Practice 8: Design media mix. Both FCC and NTIA identified in their  consumer education plans methods and frequency of messaging to reach  target audiences. The FCC and NTIA plans present various types of media  services, such as satellite and radio media tours, background briefings,  editorial meetings, online chats, over-the-air market outreach, and radio  advertisements that will be used to generate media coverage and as  methods of outreach to inform target groups. In addition, the FCC plan  recommends direct-to-consumer initiatives, such as outdoor and transit  public service announcements and outreach through grocery store chains.  FCC also includes a timeline that denotes by month when it will engage in  outreach by messaging phases.
Key Practice 9: Establish metrics to measure success. FCC and NTIA  have established process metrics to measure the success of their  consumer outreach, but only NTIA has created outcome metrics. Process  metrics track the quantity, quality, and timeliness of work and have been  established by both FCC and NTIA. For example, FCC and NTIA have  measures tracking the distribution of materials, which enables them to  report on the quantity of materials mailed and the audience receiving the  materials. In addition, both FCC and NTIA will track media coverage,  including earned media and media coverage, of other DTV transition  stakeholders. NTIA has also implemented outcome metrics—which  evaluate how well a consumer education campaign influenced attitudes or  behaviors to determine if the target populations were adequately receiving  the message. For example, according to NTIA, it tracks coupon requests  and redemptions of over-the-air households for the purpose of measuring  the impact of its consumer education. NTIA said it reviews coupon request  data every 2 weeks and compares the coupon requests by over-the-air  households with the estimated number of over-the-air households in major  geographic areas of the country. According to NTIA, if an area exists  where less than 20 percent of the over-the-air households in a market have  ordered coupons, NTIA will increase its outreach efforts in that area. NTIA  also indicated that it uses coupon request data to monitor the 45 targeted  areas and uses these data to determine if it is reaching the hard-to-reach  populations. Furthermore, NTIA indicated that it would use publicly  reported consumer awareness survey information from industry  participants and others to track progress in consumer awareness for other  populations. NTIA states in its plan that these measures will indicate the  success of its education efforts and highlight areas that need additional  focus. The use of monthly coupon application and redemption data in  comparison to over-the-air households measures the effect of consumer  education efforts on the population as a whole, but does not determine  whether the targeted hard-to-reach populations have been influenced and  have applied for and redeemed converter box coupons.
section_title: Appendix III: Federal Communications Commission DTV Consumer Education Order
paragraphs: FCC adopted a final DTV consumer education order in February 2008,  which requires broadcasters, cable and satellite providers, certain  telephone service providers, and certain consumer electronics  manufacturers to provide a minimum level of DTV transition consumer  education. For example, commercial broadcasters are required to choose  one of two education options, and noncommercial broadcasters must  select one of three education options. These options determine the  number of public service announcements, crawls, or other on-air  consumer education programming they must air and report to FCC per  quarter. FCC officials told us that FCC has collected the required report  filings for broadcasters for the first two quarters since the FCC order took  effect. Cable and satellite providers are required under the order to  provide information on the DTV transition in billing notices to their  customers. Consumer electronics manufacturers are required to include  information with certain television-related devices that explain what  effect, if any, the DTV transition will have on the devices’ use. FCC also  requires telephone companies that participate in the Low Income Federal  Universal Service program to provide information on the transition to their  Life-line and Link-up customers, either as part of the billing notice or in a  stand-alone mailer, such as a postcard. According to FCC, it has sent  compliance surveys to the nine largest cable and satellite providers and  the nine largest telephone companies, and it intends to send compliance  letters to the nine largest electronics manufacturers to assess their  consumer education efforts. Furthermore, FCC stated that its  Enforcement Bureau is working with NTIA to spot-inspect retailers that  are participating in the converter box subsidy program. The purpose of the  spot inspections is to detail and assess retailer employee training and  consumer education plans and efforts. FCC Enforcement Bureau  personnel, as of July 31, 2008, have visited 1,335 stores and conducted  1,291 interviews in 49 states and in Puerto Rico. According to FCC  testimony, it has found that the majority of store managers are well- informed about the DTV transition and the converter box subsidy  program.
section_title: Appendix IV: Comments from the Department of Commerce
section_title: Appendix V: Comments from the Federal Communications Commission
section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, other key contributors to this  report were Sally Moino, Assistant Director; Colin Fallon; Simon Galed;  Eric Hudson; Bert Japikse; Aaron Kaminsky; Michael Pose; and Andrew  Stavisky.
section_title: Related GAO Products
paragraphs: Digital Television Transition: Broadcasters’ Transition Status, Low- Power Station Issues, and Information on Consumer Awareness of the  DTV Transition. GAO-08-881T. Washington, D.C.: June 10, 2008.
Digital Television Transition: Majority of Broadcasters Are Prepared for  the DTV Transition, but Some Technical and Coordination Issues  Remain. GAO-08-510. Washington, D.C.: April 30, 2008.
Digital Television Transition: Increased Federal Planning and Risk  Management Could Further Facilitate the DTV Transition. GAO-08-43.  Washington, D.C.: November 19, 2007.
Digital Television Transition: Preliminary Information on Progress of  the DTV Transition. GAO-08-191T. Washington, D.C.: October 17, 2007.
Digital Television Transition: Preliminary Information on Initial  Consumer Education Efforts. GAO-07-1248T. Washington, D.C.:  September 19, 2007.
Digital Television Transition: Issues Related to an Information  Campaign Regarding the Transition. GAO-05-940R. Washington, D.C.:  September 6, 2005.
Digital Television Transition: Questions on Administrative Costs of an  Equipment Subsidy Program. GAO-05-837R. Washington, D.C.: June 20,  2005.
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.: February 17, 2005.
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.
Telecommunications: Additional Federal Efforts Could Help Advance  Digital Television Transition. GAO-03-7. Washington, D.C.:   November 8, 2002.
Telecommunications: Many Broadcasters Will Not Meet May 2002  Digital Television Deadline. GAO-02-466. Washington, D.C.: April 23, 2002.