Shapiro to Obama: DTV Transition Should Remain on Feb. 17

January 12, 2009
Mr. John Podesta
Co-Chair
Obama-Biden Presidential Transition Team
Transmitted via Electronic Mail

Dear Mr. Podesta:

On Thursday, January 8, 2009, the Office of the President-Elect issued a letter urging Congressional leaders to take action to ensure the effective transition to digital television (DTV). The letter further suggested that, given the current state of the DTV converter box coupon program, Congress should consider whether to postpone the transition date for some period of time.

On behalf of the 2,200 manufacturers and retailers represented by the Consumer Electronics Association (CEA), I write to you to provide a status update on the state of the transition and some suggestions on how the success of the transition can be ensured. CEA shares your concerns about the current operational status of NTIA’s coupon program and believes that Congress can take specific steps to address that issue. CEA will support the new Administration and Congress to ensure a consumer-friendly DTV transition and implement any necessary changes needed to make the transition a success.

CEA is sympathetic to concerns about disenfranchising consumers, especially the most vulnerable Americans, but extending the transition date has ramifications which should be considered. First, over 95 percent of Americans are already prepared for the transition and millions have taken action because their government told them to do so. These Americans subscribe to a multichannel video provider like cable or satellite, they have purchased a digital television (more than 63 percent of U.S. households have a digital television today), or they have purchased a converter box. A change in the date could engender skepticism, confusion and distrust the next time government asks them to undertake specific actions in anticipation of a major event.

Second, changing the date in and of itself will simply confuse Americans while doing little to promote a successful transition to digital television. Government, industry and hundreds of consumer groups have cooperated and spent the last two years and hundreds of millions of dollars to make Americans aware of the transition. With awareness now close to 100 percent, any change will be confusing and difficult to explain.

Third, a delay will require significant unbudgeted expenditures from the public and private sectors. Resources would have to be found for a new national public education campaign centered on the new date. NTIA would incur ongoing administrative costs to oversee the coupon program. Broadcasters would be forced to extend leases on their analog towers (to the extent extensions are even possible) and power their analog transmitters at a cost of up to tens of thousands of dollars per month, per station.

Fourth, a delay will not solve any perceived problems with box availability. Retailers have ordered and manufacturers have produced most of the converter boxes they planned for based on a February 17 transition date. Given the manufacturing and distribution cycle, any short term change in the date will not cause any new boxes to be ordered, produced or distributed, and could indeed suppress the present demand for boxes, leaving retailers with surplus inventory and removing any incentive to order and warehouse boxes for another date, which could also be viewed as changeable.

Finally, the public interest is served by the return of analog spectrum to be used by carriers that have already invested nearly $20 billion in spectrum auctions and have promised deployment of innovative new next-generation wireless broadband services. More, our nation’s first responders need and deserve the spectrum that has been set aside for improving emergency communications.

CEA believes that CE manufacturers and retailers are ready for the DTV transition on February 17. Manufacturers and retailers anticipated a spike in demand for converter boxes close to the February 17 transition date and have planned accordingly. More than 180 converter box models are certified by NTIA for the coupon program and boxes are currently available from 34,000 retail outlets nationwide. Since the inception of the DTV converter box coupon program, consumers have purchased some 19 million DTV converter boxes using a coupon. CEA estimates that retailers have between 6 and 12 million converter boxes currently in stock, not including additional boxes in the retail pipeline. This means that retailers are currently holding stock of converter boxes equal to between one-third and one-half of the total number of boxes sold – an unheard of level of inventory in an industry that abhors the risk inherent in such high stock levels.

CEA research finds that only nine percent of U.S. households (approximately 10 million households) are “antenna only” households and thus need to take some action by February 17. More, our research finds that 63 percent of antenna-only households intend to buy a DTV converter box and continue using their analog TV after February 17 (the remainder reported that they will either buy a DTV, subscribe to cable, or do nothing). This represents 6.7 million U.S. households. Based on CEA’s finding of an average of 1.9 TVs per antenna-only household, that reflects total converter box demand of 13 million boxes from antenna-only households. Any other purchases of converter boxes using the government’s coupon program are by households that do not actually need a converter box to continue watching television after February 17.

Prior to taking the serious and potentially disruptive step of changing the transition date, CEA believes Congress should explore the following steps:

(1) A fix of the accounting issues such as the anti-deficiency rules that are preventing NTIA from sending out coupons despite available funding. Only 19 million of the 33.5 million available coupons have been redeemed.

(2) Examine total funding for the coupon program and explore any need for additional funding, for example, to send coupons out via first class mail to eliminate three week delivery delays.

(3) Elimination of the 90-day expiration date on coupons, which would put more coupons into use.

(4) Explore additional funding for government call centers and funding to local grassroots groups to answer questions about the DTV transition.

(5) Should the government determine that the supply of converter boxes will not meet demand, examine permitting use of converter box coupons to purchase access to digital television either through pay service (cable, satellite or fiber) or credit toward purchase of a limited feature or low cost digital television.

CEA will continue its tireless efforts, in partnership with industry and government groups, to make the transition to digital television on February 17 a success. We look forward to assisting you and the new Congress in making the transition happen.

Respectfully submitted,

Gary Shapiro
President and CEO
Consumer Electronics Association