NTIA DTV Coupon Comments

The Consumer Electronics Retailers Coalition (“CERC”) respectfully submits these Comments in response to the National Telecommunications and Information Administration (“NTIA”) Notice of Proposed Rulemaking and Request for Comment in the above referenced matter.^[1] CERC members include specialist retailers Best Buy Co., Inc., Circuit City Stores, Inc., and RadioShack Corporation; general retailers Target Corporation and Wal-Mart Stores, Inc.; online retailer Amazon.com; and the North American Retailer Dealers Association (NARDA), the National Retail Federation (NRF), and the Retail Industry Leaders Association (RILA). NTIA’s proceeding is conducted pursuant to the assignment of certain responsibilities to NTIA in the Digital Television Transition and Public Safety Act of 2005, enacted as Title III of the Deficit Reduction Act of 2005 (“DRA”).^[2]

NTIA’s rulemaking, as required and circumscribed by the terms of the DRA, relies exclusively on the efforts of consumer electronics and general retailers, in storefronts and on-line, to fulfill the objectives of a program for which up to $1.5 billion has been set aside. Yet this program, as outlined by the Congress and proposed by NTIA, poses very daunting challenges for any participating retailer and its vendors:

· The level of demand for the subsidized converter box product (“Converter”) as described in the NPRM has been controversial and remains uncertain.

· Even with the best public education efforts, the actual level of demand may emerge suddenly and late in the program’s life. This danger is aggravated by the statutory requirement that any coupon must be used within 90 days of issuance. If, as is often the case with consumer electronics products, the subsidized prices of initial Converters are perceived by the press and consumers as likely to come down later, consumers may be reluctant to order their allotted coupons sufficiently early in the program -- fearing that their coupons would expire while prices remain high.

· Demand for Converters seems likely to vanish even more suddenly than it emerges, when the last subsidy coupon expires in mid-2009.

· Any program for handling coupons that will be both efficient and free of fraud seems likely to require participating retailers to make expenditures, including sunk costs, applying only to a single product, that can be recovered only during the extraordinarily short period between the emergence of the demand for the subsidized Converters, and the drop back toward zero, perhaps only months later.

· These circumstances are daunting, as well, for Converter vendors to retailers, and for their own component suppliers, who must attempt to predict the breadth and timing of this demand well in advance of manufacturing and retail delivery dates.

· There is no analog or direct precedent for this program in any past or present commercial retail practice of which CERC members are aware.

· CERC also requests an opportunity for additional input once there is public information as to the tools potentially available to the NTIA from vendors, the specific costs and requirements for any such tools, and how and by whom these costs might be absorbed. Without specific awareness of the available tools, no set of comments, including ours, can be considered authoritative.

CERC recognizes that the Congress faced difficult choices in agreeing on and designing this program, and that the NTIA now faces very difficult questions, to which there are no perfect answers, in administering this program in a way that is both efficient and fair to all. CERC’s comments and proposals are not intended to be critical of the NTIA or its NPRM, or of the Congress.^[3] Rather, we seek to share perceptions and concerns about the challenges that are likely to face those who do choose to participate. We recommend solutions with an eye toward attracting the broadest possible spectrum of consumer electronics retail participants.^[4]

CERC’s principal recommendations, as explained and amplified in its answers to the specific questions posed in the NPRM, are:

(1) The subsidy coupons should be Electronic Coupon Cards (“ECCs”) for one-time use per Converter purchase, that include features common to debit cards, gift cards, and / or credit cards. A paper coupon cannot perform the matching and database management tasks necessary to a viable program, cannot support both storefront and on-line selling, cannot adequately resist fraud, cannot pay the retailer promptly, and cannot avoid severe paper storage, accounting, and verification challenges. The Electronic Coupon Cards should contain a unique serial number, in both machine-readable and human-readable form, so as to enable both in-store and on-line transactions.

(2) Codes for Converter models eligible for subsidy should be matched electronically to data on the ECCs. In no other way can mistakes, confusion, and consumer unhappiness be minimized. Retailers should be encouraged to indicate to consumers which Converters are eligible for the subsidy, but should not be legally sanctioned for mistakes or inaccurate information on the part of their sales associates or Converter vendors.

(3) The 90-day expiration of ECCs should occur electronically and automatically, and the expiration date should be evident on the face of the ECC as well. Any mismatch between the facial expiration date and its electronic expiration would cause controversy and confusion.

(4) Retailers (and their vendors) should not be subject to sanction for an inability to predict or meet demand. Few retailers or vendors have experience with products the demand for which can be expected to peak in the millions and then drop toward zero, all within a period as short as 90 days. In no such case would commercial vendors be legally sanctioned for failing to meet demand. At the end of the subsidy period, any excess inventory may be unsellable at any price, either by the retailer or any of its vendors. Under such circumstances, the goal of “honor[ing] all valid coupons” cannot reasonably, and should not be, one to which any legal sanction applies if it implies providing Converters that are not reasonably available.

(5) All legal obligations imposed on participating retailers should be clearly spelled out in advance. The NPRM’s formulation as to the potential legal liability that might be incurred by those retailers who come forward to participate in the subsidy program is too broad and vague to allow retailers adequately to assess the legal risk that participation would pose.

(6) The eligibility of any person to obtain or use a coupon should not be left to the retailer to determine, assess, or ascertain. Retailers cannot feasibly make judgments on consumer qualification or eligibility, nor should they be asked to do so.

(7) Different categories of retailers should be treated equitably with respect to opportunities to participate and the costs of doing so. There should be no inherent advantages, apart from normal commercial considerations, based on size, or storefront vs. on-line status; or additional charges or fees based on size or status.

(8) Non-confidential information in proposals submitted by potential vendors who have responded to the “RFI” should be made public by NTIA as expeditiously as is possible and further expeditious public input should then be requested. No potential retail participant can make authoritative comments on this program without knowing what systems or technologies might be used to implement the program. As this undertaking is without commercial precedent, CERC and others need to be aware of the vendor tools available to NTIA, and the potential costs to qualified retail participants or the public of deploying such tools, before these or any other comments or proposals should be considered authoritative or final.

(9) Conversely, NTIA’s final regulations and systems need to be in place on a more ambitious schedule than the one predicted to RFI participants, so necessary retail hardware, software, and systems can be installed and tested before the holiday shopping season begins in September, 2007. Once into the holiday shopping season, it would be very difficult for retailers to modify their point of sale and other hardware and software systems so as to be ready by January 1, 2008.

CERC includes the most prominent specialty merchants of consumer electronics products, the most prominent general merchants that sell consumer electronics, and one of the most prominent on-line merchants. CERC members have expertise in accepting virtually all forms of non-cash payment for goods, including debit cards, credit cards, stored value cards (including but not limited to their own gift cards), paper coupons, checks, and food stamps. They have experience in dealing with the vendors who design and maintain the support systems for these means of payment, and with the associated databases, bookkeeping, and fraud prevention tools. On the product side, they have experience in ordering, managing, and merchandizing their product inventories.

Despite the comprehensive commercial experience of CERC’s members with every current means of merchandizing and selling consumer electronics, neither they nor anyone else can claim any experience, on either the product or fulfillment sides, with the specific product inventory and Point of Sale requirements that appear to be posed by a program such as the one outlined by the Congress and now being planned by the NTIA. Nor do CERC members or any other retailers have access at this writing to the suite of vendor proposals that were due to be received by the NTIA as of September 15.^[5] Accordingly, while CERC attempts to make its comments as specifically advisory as possible, CERC also must request an opportunity for additional input once there is public information as to the tools potentially available to the NTIA from vendors, the specific costs and requirements for any such tools, and how and by whom these costs might be absorbed.

CERC assumes that the NTIA will adopt retailer qualification provisions capable of being met not only by CERC’s corporate members, but also by large numbers of other specialist and general retailers that form the constituency of CERC’s association members. The number and nature of those who step forward to participate in NTIA’s Converter subsidy program is likely to depend, as in the case of any business, on the potential costs and benefits of so doing. Therefore, on behalf of all of its members, CERC urges the NTIA to keep this calculus in mind. We urge NTIA not to settle on a program that poses long-term fixed costs and potential legal expense, for a single product, to be weighed against short term and questionable benefits. We do not believe such an approach would serve either public policy or the consuming public.

In these Comments, CERC hopes to apply its members’ experience and expertise so as to assist NTIA in formulating a program with long-term public benefits and only short-term costs to those who participate. To achieve this result, we advise the NTIA to make maximum use of the electronic commercial channels and techniques that today are open to virtually all retailers who stock and sell consumer electronics products through storefronts or on-line. In addition to maximizing efficiency (hence, we would hope, participation), an approach that integrates these tools will also serve as a reasonable and non-discriminatory qualification metric for establishing the qualifications to participate of those merchants who are interested.

CERC’s recommendations for the specific integration of tools and techniques are spelled out in its answers to the questions posed in the NPRM.

Consumer Eligibility. NTIA proposes that consumer eligibility to receive subsidy coupons be constrained to only those consumers who presently rely exclusively, in their entire households, on over-the-air television signals received through an antenna. CERC is opposed to such an interpretation as inconsistent with the plain terms of the DRA. Even though a metric such as NTIA proposes might turn out to be an appropriate measure of potential demand,^[6] CERC cannot find anything in the DRA or its legislative history that would support or justify NTIA’s imposition of such a constraint on the availability of coupons or the participation of citizens. CERC is concerned that, if such a constraint were to be imposed by NTIA as a regulatory measure, legal challenges could emerge creating an aura of uncertainty over the entire program, which would not be conducive to market planning by any participants. Accordingly, CERC opposes any such interpretation of the DRA by the NTIA, and similarly would oppose any further innovation, not agreed to or instructed by the Congress, such as means testing or on-the-fly adjustment of eligibility requirements.

In addition to appearing to CERC to be contrary to the DRA, the imposition of eligibility factors would seem impractical and inherently unfair. Would a member of a household become ineligible to subscribe to a cable or satellite service the day after another member of the household requested a coupon? Would citizens requesting coupons have to pledge not to decide to subscribe to an MVPD service, and if so, for how long? Would MVPD services be required to assure themselves that new subscribers have not requested coupons?

Leaving such issues to the marketplace, by letting those citizens who believe that they need a Converter apply for a coupon to get one (unless their statutory two-coupon eligibility has been fulfilled) seems a vastly superior approach.^[7] Similarly, coupons should not be tied on their face or electronically to personal or household identity.^[8] Relatives and friends, for example, should be able to help the elderly or infirm, or people with disabilities, to obtain Converters without having to pretend they reside in the same household. The objective should be to avoid adding complication, bureaucracy, confusion, and expense to the process.

NTIA responsibility. Whatever NTIA decides with respect to consumer eligibility:

· NTIA needs to assume sole responsibility for determining who may receive and use coupons; and

· Retailers or other third parties should not be required to determine or assess the eligibility of any person who presents a valid coupon for purchase of a covered Converter.

In this area as well as others, unless the coupon can be processed by solely electronic means, the program will be doomed to failure. Asking sales associates with other responsibilities to quiz consumers over their eligibility to possess and use coupons is a recipe for confusion, controversy, and ultimate failure.

CERC agrees with NTIA’s perception that the tracking and validation of coupons requires their serialization. CERC also agrees that, consistent with the DRA and its objectives, coupons should not be able to be combined for the purchase of Converters, and should not be refundable for cash or exchangeable for a product other than a Converter. The mechanics of the acceptance and use of coupons, and of dealing with consumers equitably and in line with their expectations, is vital to the program’s credibility and success, and to the good will of those who choose to participate. Therefore, as CERC has noted, it is vital that potential participants have an opportunity to discuss the particular “toolkits” potentially available to NTIA.

Electronic Coupon Cards. Most fundamentally, CERC believes that a viable coupon program needs to be executed via coupons with the following basic attributes:

· Based on currently available information, CERC recommends that the “coupon” should be an electronic card via which value is stored (an Electronic Coupon Card, or “ECC”), the $40 per value per transaction of which is both entirely conveyed and entirely exhausted upon use.

· The $40 coupon value (or, if requested and feasible, the value for two separate $40 coupon transactions) should be stored on the ECC.

· The ECC should bear a “use by” date on its surface, and should be coded to expire after the time indicated on its surface, at which time its value reduces to zero, so that an expired card will not be successfully submitted for verification.

· The ECC should carry a unique serialized number that can be transmitted to a central database immediately upon submission for on-line verification, so that any subsequent transaction involving the same number will not be verified by the database. The number should be both encoded in a magnetic strip and printed in human-readable form on the card, to facilitate on-line transactions in which the card cannot be “swiped” by a retail merchant.

· When the ECC is processed by a storefront or an on-line retailer, the “SKU” and model number in the retailer’s own system should be matched electronically to the list of certified model numbers and SKUs as maintained in the central database, to ensure that the ECC is not applied to the purchase of an ineligible product.

· As it has been assumed by the Congress and otherwise that the retail price of the Converters is likely to exceed the value of the ECC, ^[9] there will also need to be some means to identify electronically, to the POS systems maintained by an on-line retailer as well as a storefront retailer, (1) that the payment conveyed is from an ECC, (2) that such payment is not tendered as the entire payment for the Converter, and (3) that a supplemental payment will be made by other means. Existing commercial systems now supported by commonly used payment regimes and software are not configured to convey such information and cannot be expected to do so unless new hardware and /or software applications are added, possibly at considerable expense. Again, it is difficult to assess system needs and costs without knowing who the potential service providers are and the particulars of their systems.

· While this particular program poses unique challenges, the essential tools are likely to be found as “off the shelf” items from some vendors. CERC believes that the program will have the best chance of success if NTIA chooses systems that are most closely related to those in use in existing consumer electronics channels of commerce, and vendors that have specific experience in working with retailers on and over such channels.

Novel nature of enterprise. CERC members, who include the nation’s most prominent general and specialist retailers, have sufficient experience with ECCs, their uses, and their vendors, to know that while detailed questions with respect to cost and implementation need to be answered, these basic requirements are both feasible and essential. CERC members do not have experience with any paper-based system with such attributes, or that could meet the goals identified in the NPRM.

The appeal of a paper coupon is superficial at best, and its drawbacks manifold. Even if a storefront retailer were to confiscate a simple paper coupon upon use, there is no way to know – without the same extensive electronic database system required by use of an ECC -- that it has not already been presented to and accepted by an on-line retailer. Moreover, such coupons are likely to be subject to easy physical duplication. There is also no feasible way to store value on such a coupon and have that value expire upon use rather than upon a printed date. Accordingly, it seems likely that a “paper” regime would involve extensive storage, warehousing, and auditing of potentially millions of pieces of paper, scattered over thousands of locations, before a retailer can reliably expect to be reimbursed for Converters it has already bought from vendors. This makes a sale via this program both more costly and more risky than a sale in the open market.

Use of existing electronic tools. By contrast, an ECC may be comparable in initial expense^[10] to a serialized paper coupon that has any protection against fraud, but the ECC has several advantages. ECCs are better tied into the relevant retail tender acceptance systems than are paper coupons. Although both an ECC and a serialized paper coupon could be verified and exhausted of value (when a retailer “swipes” the card in a terminal or when the consumer in an on-line sale or a retail sales associate punches in the card identification number – a time-consuming and error-prone process), CERC hopes that a transaction involving an ECC can automatically match the “coupon” to the product identifiers in the central database, as well as being more durable, harder to duplicate physically, and more efficiently processed at the register.

Burden on participating retailers. Whether an ECC system, or any system, will be affordable for a participating retailer to implement, given the projected short lifetime for this program, will depend on (1) the tools available to NTIA, and (2) whether NTIA will, out of the funds allocated for the program or for its administration, pay its vendor for the provision of the necessary software or system to participating retailers, rather than expecting the retailers to make an investment in one-time, special purpose software and systems usable for only one of their thousands or tens of thousands of products.

Equitable treatment of consumers. For understandable reasons related to potential abuse and system simplicity, NTIA posits that, once purchased, Converters should be exchangeable via even exchange only for the identical product. While such a limitation might be necessary in a paper coupon environment, CERC believes that some additional flexibility may (depending on the specifics of vendor proposals) be possible, so as to avoid disappointing consumers in a number of circumstances. Therefore, consistent with its favored ECC approach, CERC suggests that the following more customer-friendly rules may prove feasible:

· It should be possible for a purchased Converter model to be exchanged for another Converter model.^[11]

· In the event that the retailer that originally sold the Converter does not carry the model now sought by the consumer, a refund may be feasible by (1) refunding to the consumer any amount he or she paid in excess of the ECC, and (2) “re-loading” the $40 value onto the ECC and updating the central database so that this amount is again available for one-time use via the same ECC.^[12]

· Whatever NTIA finally decides to be the rule governing customer returns and exchanges, the rules should be spelled out clearly and succinctly to consumers on the ECC “card carrier” or other materials provided with the card and, preferably, on the card itself. Avoiding consumer frustration and disappointment is likely to be a key consideration for any retailer considering participating in the program.

CERC believes that the approach taken in the NPRM adds more requirements than are called for by the DRA. This level of constraint, even if allowable, is not advisable.

Consumer certifications. CERC believes that requiring a certification by a consumer that a household receives only over-the-air television signals and no-one else in the household will apply is neither consistent with the DRA nor practical or fair. Nor should there be any ancillary requirement, such as that there must be only one (or indeed, any) NTSC-only television in the house.

Other procedures. CERC has no disagreement with the other procedures, involving electronic requests and fulfillment by U.S. mail, as laid out in the NPRM. CERC notes, however, that the potential for fraud and abuse in obtaining coupons will be greatly minimized in the absence of artificial filters such as a certification of non-MVPD subscription. The one control that is mandated by the DRA -- the two per household limit – can be complied with by the simple electronic means of not allowing the system to allocate more than two coupons to any specific household address. Any additional measure, such as requiring a consumer certification, is likely to be puzzling to the consumer and therefore commonly made falsely via mistake or misunderstanding. Hence it will add little or nothing, except possibly confusion, to the administration of the program.

As is indicated above, CERC agrees that an “invalid after” date must be printed on the surface of each ECC, and believes that this date must also be self-executing electronically. While CERC believes that the 90-day limit on coupon use is counter-productive, this limit is mandated by the DRA so must be implemented. If it proves too difficult to date and mail these ECCs daily, NTIA or its vendor might issue them in weekly batches all bearing the same physical and electronic “invalid after” date. CERC believes that congressional intent would best be served by factoring a reasonable mail delivery period into the calculation of the “invalid after” date.

Product features. NTIA, consistent with the terms of the DRA, defines a Converter as a device that should be able to receive, render and display usable (standard definition) pictures from HDTV as well as standard definition digital sources, accompanied by high quality sound. NTIA cites these as essential functions:

(i) appropriately processes all ATSC radio frequency (RF) signals provided to the antenna-only input and then provides output signals in standard definition video for display on an NTSC television receiver/monitor;

(iii) delivers Channel 3 or 4 switchable (NTSC) RF output for television receivers;

(iv) complies with FCC requirements for Closed Captioned, Emergency Alert System (EAS) and the required parental controls;

NTIA would specify that the Converter have only one input, an “F” connector for an external antenna. CERC suggests that, additionally, an option for a SMART antenna be allowed, so as to better allow consumers to adjust for propagation characteristics and set capabilities. This may minimize consumer disappointment and post-sale product exchanges.

NTIA should also consider approving Converters that have, as optional features, program guides and the capability to process PSIP data. Such features may be of assistance to consumers that are inexperienced in finding and tuning digital channels, and might efficiently be included because the components and software are commonly included in the manufacture of televisions.

As to outputs, while analog TVs do by definition all receive channels 3 & 4, most also have composite video inputs. Therefore, it might save expense for the “RF modulator” component to be an optional rather than necessary feature on certified Converters.

Retailers should not have any legal requirement to inform consumers which Converters are eligible via displays or advertising. Such a requirement would place retailers in an impossible crossfire in the event that a manufacturer’s assertion is not matched by an actual certification, or in the event of a vendor’s failure to inform a retailer about a Converter that has been certified.^[13] It is far better and less confusing to have a single, hence unambiguous, indicator in this respect: the electronic verification of the transaction at retail.

Product certification. With respect to the conformance certification of Converters, CERC expects that a self-verification program that includes conformity assessment by the Federal Communications Commission will be recommended by other Commenters, including the Consumer Electronics Association (CEA), and it joins in this recommendation.

Energy consumption. CERC believes that a single and beneficial national standard with respect to Converter energy consumption is essential, and that this standard should prevail over any state or local regulation. In this respect CERC also endorses the position taken by CEA.

Initial qualification. CERC agrees that retailer participation must be voluntary. CERC agrees that there should be a certification process for participating retailers and that this should entail representations by such retailers that they have “established production and distribution channels and who have demonstrated that they can redeem coupons expeditiously and efficiently.” CERC believes that any such demonstration, however, to be meaningful and predictive, must be in the specific context of a program that relies on the use of ECCs as is outlined herein. Additional reference to ordinary metrics as to staff, training, capacity to carry inventory and to order and take delivery of Converters through ordinary commercial channels is also important.

Compensation for costs of participation. CERC disagrees with NTIA’s proposal that retailers “not be compensated by NTIA” for the costs entailed in participating in this program. As CERC noted at the outset, the Converter is a unique, limited occasion product that is likely to be subject to unique laws of supply, demand, and subsidy. As a matter of public policy, there are simply too many novel costs and risk factors, and imponderables, for NTIA to place these investments, expenses, and risks solely on the backs of retail vendors who come forward to participate in this program:

· Any system, even if an Electronic Coupon Card as CERC recommends, is almost certain to require an investment in point of purchase hardware, software, personnel, and training in order for a storefront or on-line retailer to participate.

· It seems unlikely that any participating retailer will be able to derive any benefit from these investments other than for this one product, out of thousands or tens of thousands of products, and only during the relatively brief period during which coupons can be applied to Converter purchases. Nor can the degree of benefit be weighed against sunk costs and expenses via any means by which retailers presently have commercial experience.

More specifically, it appears to CERC that, whether the coupon is electronic, paper, or otherwise, present commercial channels cannot support all of the functions necessary for this program to be fair, efficient, and free of fraud.^[14] It appears that, based on one or more of the proposals received from its vendors, NTIA will have to select a system that will require specific investments by retail participants and others, to add unique and specific capabilities. Therefore, it appears to CERC that, unless anticipated and accounted for in the process by which NTIA’s vendors are funded, any otherwise acceptable solution would impose very significant fixed and variable costs on retailers. In view of the very limited product scope, time period, and purpose for which these costs would be occasioned, it seems unrealistic to impose them on program participants. Indeed – although CERC cannot know and thus cannot and will not make any prediction or indication as to who can or might participate – the imposition of such costs alone might become a gating factor working against participation.

The DRA sets aside $100,000,000 for “administration” of the Converter program, and also provides up to an ultimate $1.5 billion dollars for its overall fulfillment. CERC believes that it would be a prudent use of these funds for the NTIA’s contract(s) with its vendor(s) to provide – in light of the apparent inadequacy of existing commercial channels -- for the distribution of the necessary software and other system support to participating retailers as an included cost of the program.

Obligation to honor coupons. NTIA suggests that as part of a retailer certification program, retailers must accept “obligations to honor all valid coupons that are tendered in the authorized manner.” CERC strongly opposes any such provision if it is interpreted as including an obligation to acquire, keep in inventory, or sell a Converter to any customer who presents a coupon, even if the retailer is out of stock or inventory. In other words, any such provision should be understood as obliging a qualified retailer to honor any valid coupon if the retailer is offering subsidized Converters for sale at the time the coupon is presented by the consumer.

While honoring coupons on some other basis may or may not be feasible at some points during the program, it is unlikely to be feasible toward its onset and toward its end. Toward the onset, vendors may encounter delays in manufacturing and shipping Converters, yet consumers will be showing up in stores or on-line with coupons that are about to expire. Moreover, at any time during the program, it will also be extremely difficult for vendors, and for their own third party suppliers of components, to calculate, months in advance, what the final demand for this product will be before it starts quickly trending toward zero.^[15] Converter vendors to retailers , and their own component suppliers, might therefore be expected to be cautious in their decisions. To expect a retailer to promise to offer to sell a product that might no longer be in its own inventory or in the inventory of any of its vendors is unrealistic, and again could become a gating factor on participation or even on the ability of any retailer, no matter how resourceful, to assert, subject to sanction, that it is “qualified.”

Threat of legal sanctions against voluntary participants. The open-ended statements in the NPRM with respect to prospective “rights and responsibilities” need to be clarified and made specific as to the potential for legal sanction against any participating retailer. Any interested retailer would reasonably want to be fully aware of the potential for liability, to third parties as well as to the government, before agreeing to participate. As these are predicted but not spelled out in the NPRM, CERC believes there should be a further opportunity to comment before retailers are presented with a binary choice of accepting or not accepting such risks. CERC and its members are concerned about formulations such as an obligation to “advise” consumers about the program “subject to penalty of perjury” as insufficiently vague to offer guidance yet daunting in their possible consequence. Any obligation with potential criminal or civil consequences for participants needs to be stated much more clearly and succinctly. If the resulting rule is not reasonable or is not enforceable on a consistent basis, the obligation should be stricken.

Protection of sales data. CERC believes that an efficient and workable program will be self-auditing: the record of the electronic transactions via which Converters are sold to consumers and the retailers are paid for Converters will be self-evident. This, in CERC’s view, is far preferable to the warehousing of coupons and transactions for an audited matching process later.

No matter what the audit procedure, the NTIA and / or its vendor(s) will be receiving sales data, pertaining to individual retailers and manufacturers, that ordinarily would be held confidential by these entities. Accordingly, it will be necessary to protect the non-aggregate sales data of particular retailers and their vendors, as highly confidential. This should be a core assurance given any retailer that steps forward for voluntary qualification.

CERC has long advocated voluntary public education measures and has implemented several:

** CERC’s Consumer Guide, “What You Need To Know About The February 17, 2009 ‘DTV Transition’,” available at http://www.ceretailers.org/dtv-flyer2006.pdf, and associated single-page informative material and consumer notices

CERC is a member of the Coalition for A Successful DTV Transition and a signatory of the Coalition’s letter, of this date, that pledges cooperation in a “comprehensive, coordinated and harmonized national consumer education effort.” CERC and its members will work with other Coalition members, the NTIA, and the FCC to help assure that the public education effort is both wide-ranging and coherent.

The challenge given to the NTIA by the Congress is both significant and daunting. CERC applauds the NTIA for seeking input on a broad range of questions in this NPRM, and for seeking a broad range of tools and proposals in its “RFI.” CERC believes that the next step should be to share with the public, in a way that protects the confidential information of RFI participants, the full panoply of the potential “toolkit” that is available, and, without delaying its scheduled decisions and processes, to seek further informed input. By seeking such input, specifically on issues of program administration, NTIA can better avail itself of the enormous store of commercial experience and expertise available from CERC members and other commercial entities that wish this program to succeed.

919 18^th Street, NW, Suite 925

^[1] Implementation and Administration of a Coupon Program for Digital-to-Analog Converter Boxes, Notice of Proposed Rulemaking and Request for Comment, 71 Fed. Reg. 42,067 (July 25, 2006) (“NPRM”).

^[2] See Title III of the Deficit Reduction Act of 2005, Pub. L. 109-171, 120 Stat. 4, 21 (Feb. 8, 2006) (“DRA”).

^[3] In its congressional testimony CERC took no position on whether there should be a subsidy program or who should be eligible for one. We recognized that these were difficult issues with no easy solution.

^[4] As an incorporated nonprofit association that includes direct competitors, CERC cannot and will not address whether any of its members, or any other commercial entity, would or will participate in this or any other market.

^[5]Request for Information: Reference-Number-noaa73106, published July 31, 2006, entitled “REQUEST FOR INFORMATION - MARKET RESEARCH FOR IMPLEMENTATION OF Digital-to-Analog CONVERTER BOX COUPON PROGRAM.” CERC has filed a Freedom of Information Act request in an attempt to get timely access to the nonconfidential elements of the vendor proposals.

^[6] As noted, the potential demand for Converters was highly controversial during congressional consideration of the legislation, and remains so.

^[7] Cable operators commonly report that only about half of their subscribers obtain set-top boxes. Therefore it seems unlikely that many consumers will want an additional box connected to their television if they don’t need it.

^[8] CERC believes that NTIA’s system vendors should be able to assure, in the serialization process, that mistakes in inputting data will not result in the value of another household’s coupon being exhausted by mistake.

^[9] See, e.g., The Digital Television Transition (Part I): Hearing Before the S. Commerce, Science and Transportation Committee, 109^th Cong. (July 12, 2005) (Discussion between Sen. Allen and Mr. Edward Fritts.). CERC does not and cannot offer any specific predictions as to future retail prices of Converters or any other product.

^[10] Again, this is an area in which non-confidential data from the “RFI” submissions seems essential to a fully informed comment.

^[11] If the after-subsidy price of the second product is more expensive, the consumer of course should be expected to pay the difference, and if it is less expensive, the consumer should receive a refund of the difference.

^[12] Any such return policy should also be subject to the retailer’s customary policies with respect to product returns. The feasibility of this consumer benefit is one of several issues that CERC and its members believe could be more specifically addressed in Comments once the electronic suites of tools potentially available for this program can be assessed and commented upon publicly.

^[13] Those retailers who have chosen to attain qualification, of course, can be expected to advise customers of products to which a subsidy applies.

^[14] For example, as is noted above, the systems that support the usual commercial channels for use of debit and credit cards assume that the first form of payment that is tendered is intended to be the same as the price of the product. These systems also are not configured to limit the use of such cards to particular products.

^[15] Availability from NTIA or its vendor of coupon-ordering data may be useful for retailers but may be too late to aid manufacturers and their own component vendors in production and acquisition decisions.

919 18th Street, NW, Suite 925

919 18th Street, NW, Suite 925

919 18^th Street, NW, Suite 925

919 18^th Street, NW, Suite 925