Cash for Rabbit Ears: Feds Propose Rules for TV Subsidy

by on July 26, 2006 · 2 comments

Remember the digital TV subsidy? Last year, as part of the price for establishing a firm date for broadcasters to return their old (now) analog frequencies by 2009, making them available for new uses, Congress set up a program to subsidize converter boxes for those that don’t already have digital TV sets. More precisely, it ordered the Department of Commerce to set one up. It has now started that process–proposing rules on exactly who will will get money and how.

The total cost authorized for the program was $990 million–with an automatic extension up to $1.5 billion if Commerce so requests. That’s much less than the $3 billion at one time being considered by Congress, but still real money.

The good news is that Commerce is proposing some sensible rules to limit costs. Eligibility will be limited to households that rely only on over-the-air TV, estimated at about 15% of all households. (Thus, households with cable, but an unconnected old set in the basement, won’t be eligible). Each such household will be eligible for up to two $40 coupons toward the purchase of converter boxes. The coupons can’t be combined–thus you can’t use two coupons to buy an $80 converter. If you only have one TV, you only get one coupon. There are also a number of safeguards to discourage fraud–the coupons will have serial numbers, and will expire after three months.

If all 17 million some eligible households claimed two coupons each, the total cost would be $1.36 billion–bringing the total (with administrative expenses) to almost exactly the maxmimum figure of $1.5 billion allowed. But the goal shouldn’t be to spend the total amount possible–Commerce should aim at the initial $990 million figure, or even less. Of course, Commerce points out far fewer coupons will likely be claimed–not all households have two TVs, and many will opt not to claim them. Many more will have DTV sets by the deadline. All plausible, but its still disconcerting that no one knows for sure what the total will be. And such programs have a tendency to come in well above–not below–expectations.

Commerce raises one further possibility to control costs–establishing a needs test. Why after all, should taxpayers pay for converter boxes for wealthy families? Its one thing to cover costs for those who can’t afford to stay tuned in, but entirely another to pay for those who can, but have chosen not to. (Some will complain that the coupons are just compensation for the costs of transitioning, and thus shouldn’t be based on need. But viewers have no right to the existing TV technology any more than they did to vinyl records or Beta video recorders.) The Commerce proposal does mention the possibility of limiting the subsidy to those below the poverty line. That would be a good step.

All in all, Commerce’s proposed rules, written within the constraints set out by Congress, are sensible. Or at least as sensible as paying a billion or so dollars for TV subsidies can be.

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