A primary goal of the DTV transition is for the federal government to  reclaim spectrum that broadcasters currently use to provide analog  television signals. Most  television stations throughout the country are now providing a digital  broadcast signal in addition to their analog signal. For example,  prior to implementing a subsidy program, various determinations need to  be made, including (1) which federal entity will administer a subsidy  program, (2) whether a rulemaking process is necessary to fully determine  and stipulate how the subsidy program will be structured, (3) who will be  eligible to receive a subsidy, (4) what equipment will be covered, (5) how  information about the subsidy will be communicated to consumers and  industry, and (6) what measures, if any, will be taken to limit fraud. Several stakeholders  noted that any product that enables consumers to receive digital broadcast  signals does the job of ensuring that there is no loss in television service  when the transition occurs. A Successful Subsidy Program Will Require an Effective Information Campaign about the DTV Transition and Subsidy

To successfully implement a DTV subsidy program, eligible recipients will  need to understand that a subsidy is available, how to obtain it, which  equipment the subsidy can be used for, and where they can obtain the  equipment. Following is a description of  and stakeholders’ views on four DTV subsidy options: a refundable tax  credit, government distribution of equipment, a voucher program, and a  rebate program. As we noted above, we take no position on whether a  subsidy should be implemented, or whether, if a subsidy program is  established, it should be implemented in any particular way. Refundable Tax Credit Program: One method that could be used to  administer a subsidy program for DTV equipment would be a refundable  tax credit, administered as part of the federal individual income tax. For the DTV transition, the government could directly provide the  necessary equipment to individuals, but we found there would be a  number of challenges to implementing and administering such a program,  and, based on discussions with state social service agencies, it appears  that this would be an unwieldy way to administer a DTV subsidy. While a government distribution program would not require households to  pay for equipment in advance of receiving the subsidy, which would be  beneficial to low-income households, the program could present other  challenges to those eligible to participate. Several Government Programs Have Employed Rebates or Vouchers to Provide Subsidies

We identified several government programs that have used or are using  rebates or vouchers to subsidize consumers’ purchase of products. While  aspects of these programs might provide insight into the establishment of  a DTV subsidy, we found, overall, that the programs we reviewed differed  in many respects from what might be undertaken for a DTV subsidy. In reviewing various other aspects of the programs, such as  eligibility determinations and what products were subsidized, we found  that differences existed between the voucher and rebate programs that  might also provide some insight for a DTV subsidy. For example, for all of  the voucher programs we reviewed, benefits were targeted to low-income  individuals, and eligibility was specifically defined. We also found differences in the types of  products subsidized for the rebate and voucher programs that we  reviewed. Other Efforts Necessary for the Completion of the DTV Transition Are Ongoing

If a subsidy program is implemented, it will pose many challenges for the  implementing agency and industry. However, there are other aspects of  the DTV transition not related to the implementation of possible subsidy  program that are ongoing and will take time to complete or may pose their  own challenges. Another challenge that may be posed by the DTV transition relates to  antenna reception of digital over-the-air broadcast signals.
Why GAO Did This Study

The digital television (DTV) transition offers the promise of enhanced television. At the end of the transition, radiofrequency spectrum currently used for analog broadcast television will be used for other wireless services and for critical public safety services. To spur the digital transition while preventing any loss of television service to households, some industry participants and experts have suggested that the government subsidize DTV equipment to enable households to view digital broadcast signals. This testimony provides information on (1) some challenges to administering a subsidy program for DTV equipment, (2) some administrative options for implementing a DTV subsidy, (3) examples of government programs that make use of rebates or vouchers to provide subsidies, and (4) other efforts necessary for the completion of the DTV transition. We discussed administrative challenges to and options for a DTV subsidy with federal and state government officials, electronics manufacturers and retailers, and experts in product promotion. As in our previous work, we take no position on whether a subsidy should be implemented or not, or whether, if a subsidy program is established, it should be implemented in any particular way. While policies other than a subsidy might help promote the DTV transition, any other such approaches were not part of this investigation.

What GAO Found

We found that several administrative challenges might arise in implementing a subsidy for DTV equipment. One of several key challenges we identified would be determining those eligible to receive a subsidy. If the subsidy were restricted to low-income households or to households that rely exclusively on over-the-air television, methods to identify these households would need to be developed and may prove to be challenging. Another key challenge would be ensuring that eligible recipients understand the availability of a subsidy, how they could obtain it, and what equipment would be subsidized. Effectively communicating this information will likely first require that information about the DTV transition itself is successfully communicated to the public. Several administrative options could be used to provide a government subsidy to help households obtain DTV equipment, including a refundable tax credit, government distribution of equipment, a voucher program, and a rebate program. The suitability of any of these methods depends on aspects of the subsidy's design, such as which entity is most appropriate to administer the subsidy and who would be eligible to receive the benefit. Various government programs make use of rebates or vouchers to subsidize consumers' purchase of products. We reviewed three rebate and three voucher programs that might provide insight for the development of a DTV subsidy and found that differences existed between these types of programs. We observed that eligibility for the voucher programs was specifically defined and the benefits were targeted to low-income individuals, whereas eligibility for the rebate programs was not based on income. Overall, however, we found these programs differed with respect to what might be undertaken for a DTV subsidy. In addition to the administrative challenges of a subsidy program, there are other aspects of the DTV transition that are ongoing and will take time to complete or may pose their own challenges. For example, the channel election process, which will determine each television station's channel placement for its digital signal, will not be final until sometime in 2007, according to the Federal Communications Commission. Another issue that might arise relates to antennas used to receive digital broadcast signals. Although many stakeholders believe that antennas used for analog reception will work well for digital signals, we were also told that reception of digital signals may vary on the basis of a household's geography and other factors.